The Gulf construction sector continues to demonstrate resilience amid regional conflict, anchored by substantial government infrastructure spending and large-scale megaprojects. Data highlights this stability, with the UAE currently overseeing 628 confirmed projects valued at $138 billion, while Saudi Arabia accounts for 421 projects worth $168 billion. However, contractors face severe margin compression due to surging building expenses. According to Matthews’ Q3 2026 update cited by S&P, UAE construction costs are projected to escalate by 7% to 12% in 2026—up from 1.8% last year—while Saudi Arabian costs are expected to rise between 5% and 8%. To avoid costly delays or contractor defaults, project owners and governments are anticipated to renegotiate fixed-price contracts.
Conversely, real estate developers face a softening outlook as geopolitical uncertainty weakens buyer sentiment and slows sales. Markets like Dubai and Qatar are particularly vulnerable given their heavy reliance on foreign investment and large expatriate populations, which make up 80% to 90% of their totals. Dubai’s residential market is already showing signs of deceleration: monthly property transactions averaged 12,887 between March and June 2026, dropping from 17,198 in the year’s first two months. Further downward price pressure is expected as JLL forecasts a 20% increase in Dubai’s residential supply by 2028, potentially dampening developer presales and spurring secondary market sales.
Regional market performance is expected to diverge based on local demographics and supply pipelines. Abu Dhabi’s constrained inventory is likely to insulate property values, while residential markets in Saudi Arabia and Oman remain more resilient due to higher domestic buyer demand. While high-end real estate remains sensitive to global capital flows, Dubai’s luxury tier held up through H1 2026 with record sales above $10 million. Nonetheless, S&P cautions that a prolonged conflict scenario—marked by sustained cost inflation, completion delays, and potential expat outflows—poses compounding risks to property valuations and developer stability across the GCC.
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