In Dubai, Abu Dhabi and Kuwait it is domestic investors who are calling the shots in real estate as British and US property buyers have refocused on other areas they see as cheaper and more competitive.
'Given current economic conditions, US and British investors and institutions are taking a lot of convincing to splash out in the Gulf,' said Fadi Moussalli, a director in Jones Lang LaSalle's Dubai-based International Capital Group.
'There is less enthusiasm for Gulf property because foreigners are busy dealing with crises elsewhere,' he added.
Before the credit crunch, Western property buyers were making good progress in opening up fledgling Gulf property markets. But the balance of power has shifted back to local investors and their fabulous wealth.
Citing data from emerging markets researcher REIDIN, Jones Lang LaSalle said less than a fifth of real estate purchases in Dubai in 2008 so far were made by European or US investors.
'A lot of people are still looking in the Middle East but it tends to be dominated by local capital,' said Charles Graham, of property fund manager Europa Capital.
'There is a lot of it investment cash and the return requirements are for the most part less demanding than our Europe,' Graham said, adding he wasn't tempted yet to break away from Europe's core markets to gain a foothold in the Gulf.
Capital constraints and worries at home are not the only issues driving western investors away from the Gulf. Some believe prices in hotspots like Dubai are close to peaking after years of sky-high growth, while others feel precious capital can earn higher yields closer to home.
'There are international investors who say they won't even consider Gulf property markets until market transparency, data and process becomes much more sophisticated,' said Rashad Yaqoob, director of Savills Capital Advisors.
There is also strong interest from investors in nearby countries. 'Four hundred thousand new people a year are coming into Dubai alone each year from nearby territories like Egypt, Syria and the Indian subcontinent. They need homes and they need commercial real estate,' said Christopher Steel, a director at property brokerage Hamptons International.