The Russia Ukraine war led to massive investment in the United Arab Emirates from Russian buyers who were trying to escape Western sanctions. However, the likelihood of a peace deal is not going to dent the banking sector of the country. The real estate market might notice a small dent but not by much, according to analysts at S&P Global Ratings.
The sudden influx of Russian money and citizens into the United Arab Emirates is not going to see a massive reversal.
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“The UAE’s business-friendly regulations, tax advantages, and stable environment remain compelling,” Damak said in a report, which looks at the UAE’s economic stability, robust liquidity cushions, and diversified non-oil development as key pillars of resilience.
Russian Investors love Dubai
At Nouba Real Estate experts also voiced optimism that the prospect of peace would not lead to an exodus of Russian funds from the country. Russian buyers have been playing a huge role in the UAE real estate market and the country has seen annual growth in terms of prices to the tune of double-digit growth.
However, experts point out that due to the long-term volatility of the global order, the fact that Dubai remains a neutral venue for businesses to be able to survive and thrive remains as important as ever.
This even as oil prices have come down to the 70 dollar per barrel range. The role of oil in the Emirati economy is shrinking. In Dubai, oil money plays a very small role if any role at all.
The banking system in the country also is likely to remain strong.
A critical focus of S&P’s analysis is the UAE banking system’s liquidity strength. While deposit inflows from Russian entities surged post-2022 they settled down the following years.. “Even if deposit outflows occur, banks have more than enough liquidity to manage without destabilising operations,” Damak said. He added that lots of Russians may keep UAE accounts for financial security, limiting their withdrawals.
Though residential property markets might cool slightly, S&P downplays overall risks. Also, most deals in the United Arab Emirates do not rely on loans. So even if the interest rates were to go up, the real estate market would have very limited exposure to the fallout.
Growing population to boost UAE real estate market
“Population growth, investor appetite, and constrained supply underpin this market,” Damak went on to say. “Even if some Russian investors divest, absorption capacity remains strong.” Big developers are likewise bolstered by healthy cash reserves, manageable debt, and solid revenue pipelines, ensuring resilience amid market fluctuations.
“We would not anticipate a significant disruption to the residential real estate sector, even if we were to see significant property divestments by Russians, given continuous strong demand and population growth. Dubai has witnessed an annual double-digit value increase since 2021, leading to significant capital gains for real estate owners. The market remains supportive as demand is still outpacing supply, a situation that we expect will continue in the next 12-18 months,” S&P analysts said.
They said that great yields and capital growth along with asset security could be an additional reason for Russians to continue to remain invested in the UAE. “In our base case, we expect UAE GDP growth to accelerate from 2025 and as such see limited risks to banks’ asset quality indicators. We also note that most real estate transactions are not financed by mortgages, which reduces banks’ exposure to real estate price risks.
“We also believe rated real estate developers will remain resilient, even if their operating environment weakened, thanks to solid revenue backlogs, reduced leverage, strong cash flow generation, and good liquidity buffers. Overall, we expect the UAE banking system will continue to display strong asset quality indicators and that the UAE central bank’s recent change to the provisioning rules will further increase non-performing loan coverage ratios — which were close to 100 per cent in 2024 — to levels comparable with some regional peers,” S&P analysts said.
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