Real estate deals in Dubai have plunged sharply, according to a top industry observer, after the Middle East conflict sparked a sudden slowdown in one of the planet's costliest housing markets.

Citywide sales fell 19% in May from the month before, worsening from a 4% decline in April, according to data compiled by the analyst ValuStrat.

Deal volumes now sit at less than half the level recorded at the same stage last year, the firm noted.

The ready homes sector has not posted an annual fall of this size since the pandemic period, said Haider Tuaima, head of real estate research at ValuStrat, a Dubai consultancy that has monitored the local market since 2014.

A separate analysis by the Dubai research company Reidin showed that properties valued at 22.5bn dirhams ($6.1bn/£4.5bn) changed hands in May, 42% less than the April total. The figure was roughly half the 46.6bn dirhams recorded in the month before fighting started, according to numbers first highlighted by Bloomberg.

Dubai, located on the eastern edge of the Arabian peninsula, had enjoyed a surge in property activity in recent years, fueled by an influx of wealthy individuals drawn by the city's policy of zero income tax.

Yet the start of regional conflict in late February has unsettled the sector, after an Iranian missile struck a five-star hotel in the Palm Jumeirah district during March.

It is still uncertain how fast the market could rebound if a peace agreement between the US and Iran remains stable.

Vendors of luxury villas and apartments have trimmed tens of millions of pounds from their asking prices, property agents report.

Yasin Valimulla, a Dubai buying agent focused on homes priced at $10m (£7.5m) and above, said the limited transactions still completing are occurring at a 20%-25% discount to pre-conflict values.

We have sold to super-high-net-worth individuals over the past year and a half, and every one of them has now departed Dubai, he said.

There was considerable panic in March and clarity remains limited even now, he added. Western European purchasers are more hesitant to acquire property here. They prefer to wait perhaps a year or even two years, depending on how events unfold.

The shift represents a notable reversal for Dubai, which ranked as the world's busiest city for luxury real estate last year. Research by the international agency Knight Frank showed that more residences priced between $2.5m and $10m were purchased in Dubai than in any other global city toward the end of 2025, surpassing London, New York, Los Angeles and Hong Kong.

In the $10m-plus category, Dubai recorded 9,050 sales compared with 6,577 in New York and 3,089 in London.

The market is now undergoing adjustment, Valimulla observed. The figures were exceptionally elevated to start with, particularly over the last two years. Activity at that scale was never going to last indefinitely.

A price correction is inevitable, though the full extent will only become clear once geopolitical stability returns.

In the interim, the mobile super-rich are shifting focus to other global centers including Milan, London and Singapore.

Richard Waind of the real estate firm Cencorp noted that several brokers in Dubai's previously thriving property sector will now be compelled to shut down.

The conflict has acted as a massive and rapid black swan event, he said. Reduced transaction levels are squeezing smaller agencies that launched during an overheated period. Roughly 1,000 brokers operated in the market a decade ago, whereas the count has reached about 10,000. That number is set to shrink.