Iranian investment in the Dubai property market slipped by nearly a quarter to Dh1.5 billion (US$ 408.3 million) in the first six months of the year from a year earlier as sanctions squeeze buyers.

Buyers from Iran still represented the fifth-largest group of investors by nationality in the market, with 1,036 Iranians snapping up villas and apartments, data from the Dubai Land Department show.

But the investment was likely to have been higher if it were not for the impact of western sanctions against Iran, say people familiar with the property market. Iranians are facing difficulties getting approval from banks in the UAE for mortgages or to make down payments for properties, said Hossein Haghighi, an Iranian businessman living in Dubai who owns a villa in the Springs.

Iranians have been one of the backbones of investment in Dubai's property market for years because of their country's proximity to the emirate and traditionally close business ties. Appetite has stemmed both from the estimated 600,000 Iranian residents in the UAE and wealthy home-based Iranians.

But banks in the UAE have come under pressure in recent months to scale down their ties to Iran as a result of U.S., European Union and United Nations sanctions. In addition, Swift, the world's biggest electronic payment system, in March disconnected Iranian banks from its network.
Estate agents say the drying up of Iranian buyers is in contrast to the period up until January when many reported a frenzy of activity as people from the country sought a safe place to invest.

In the first six months of last year, Iranians were the fourth-biggest group of property purchasers after Indians, Britons and Pakistanis, with 1,124 buyers of properties valued at a total of Dh1.9bn, Dubai Land data show.

"It has completely slowed down," said Myles Bush, the managing director of Powerhouse Properties, which specializes in upmarket homes. "They seemed to come in dribs and drabs and now they've stopped."

The vacuum has been filled in part by investment from wealthy Greeks, Spaniards and Britons seeking to escape the fallout from the euro-zone debt crisis, he said.

"Some are looking towards Malaysia and the Iranian population in Malaysia has grown drastically."

Those Iranians still buying property in Dubai are finding alternative ways to pay. Investors transfer cash for down payments from Iran to the UAE using money brokers or exchange houses outside the formal banking sector, said Mr Bunker. The system, known as hawala, usually involves the transfer of cash in small batches.