Property sales in Dubai have fallen “off a cliff”, a leading market watcher has said, after war in the Middle East forced a dramatic slowdown in one of the world’s most expensive real estate markets.

Sales in the city dropped 19% in May compared with the previous month, accelerating from a 4% drop in April, the researcher ValuStrat found.

Transactions are now below half their level compared with the same point last year, it said.

“The ready homes market has not recorded an annual decline of this magnitude since the pandemic,” said Haider Tuaima, head of real estate research at ValuStrat, a Dubai-based consultancy which has been tracking the city’s property market since 2014.

A separate study from the Dubai-based research firm Reidin found that property worth 22.5bn dirhams ($6.1bn/£4.5bn) was sold in May, 42% below the April figure. It was about half the 46.6bn dirhams in the month before the conflict began, according to the figures, which were first reported by Bloomberg.

Dubai, which is on the eastern side of the Arabian peninsula, had had a frenzied trade in property in recent years, boosted by a wave of high-earners attracted to the city’s zero income tax policy.

But the outbreak of war in the Middle East in late February has rocked the market, with an Iranian missile hitting the five-star hotel in Dubai’s famed Palm Jumeirah area in March.

It remains unclear how quickly the market may recover if a peace deal between the US and Iran holds firm.

Sellers of luxury villas and flats in the city have wiped tens of millions of pounds off asking prices, according to property agents.

Yasin Valimulla, a buying agent in Dubai who specialises in properties worth at least $10m (£7.5m), said that the few home sales still going through were at a 20%-25% discount to their value before the conflict.

“We have sold to super-high-net-worth guys in the last year and a half – every single one them has now left Dubai,” he said.

“There was a lot of panic in March and there is still not much clarity to this day,” he said. “Western European buyers are now more reluctant to buy properties here. I think they want to wait out maybe a year, even two years. It depends on how things play out.”

It marks a sharp correction for Dubai, which was the busiest city in the world last year for luxury real estate. The international estate agent Knight Frank found that more homes worth $2.5m to $10m were bought in Dubai than any other city in the world in at the end of 2025 – ahead of London, New York, Los Angeles and Hong Kong.

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

But the market is now correcting itself, Valimulla said. “The numbers were so high to begin with, especially in the last two years. The market at that level was not sustainable anyway.

“There is going to be a correction in pricing, we just do not know the impact of that correction until we have [geopolitical] clarity.”

In the meantime, the nomadic super-rich class are turning to other international hubs, such as Milan, London and Singapore.

Richard Waind, of the real estate group Cencorp, added that several brokers in Dubai’s once booming property market would now be forced to close.

“The war has been a black swan event that was huge and swift,” he said. “The slowdown in sales is putting pressure on those smaller agencies that set up in a frothy market. There were about 1,000 brokers in the market a decade ago – now it’s about 10,000. That is going to fall.”