2025: A Year of Challenge and opportunity?

Attempting to survey the landscape for the year ahead is complex.  If 2024 was a year characterised by economic and political volatility, will 2025 be the calming antidote? And overall in real estate markets, what are the global challenges and opportunities that lie ahead?

We know the appetite for property from investors remains strong. The Wealth Report 2024 showed that around 22% of UHNWIs planned to invest in residential property and 19% in commercial property in the 12 months ahead. Liquidity is the issue. The key to unlocking the next level of growth is for interest rates to fall and their stickiness in 2024 is one reason why, around the world, markets are slowing and tipping to favour buyers.

Despite that, this year began with many positive indicators: Wall Street was thriving, stock markets were firing and crypto was booming, ensuring that money is there to invest in real estate. As we turn the corner on a year characterised by uncertainty, where will investors focus their sights in 2025?

Looking globally, the market fundamentals in Dubai remain good and continued strong demand means there’s still room for measured growth. We project an annual price increase in the Emirate of +5%, well below the +40% levels seen in recent years but still in positive territory. It’s a similar story of tempered capital growth in Miami.  Prime prices in the Florida city grew by +84% over the past five years but we expect that to be curtailed in the coming year. In Geneva, Paris and London we forecast growth of between +2% and +3%, and after three years of underperformance, the New York market is on the move again. We expect growth at +3% growth. As Liam Bailey, Global Head of Research, illustrated in his New Year round-up, compared with prime Palm Beach prices, New York is looking like a “buy”.

As ever, emerging markets have a pivotal role to play. Our Asia Pacific team tip Malaysia and Vietnam as ones to watch, the former as a credible alternative to Singapore for many investors and the latter as a rapidly modernising market seeing a notable surge in investment from international hotel groups and resorts. And while Bangkok is not an emerging market, it’s certainly one in high demand.

Look too for the continued expansion of branded residences, the best of which offer quality assurance, convenience and hassle-free ownership, key criteria among today’s evermore mobile wealthy individuals.  Branded residences also feed into a notable and growing desire among developers, brands and private members’ clubs to build an affluent, like-minded community for their clients. Never an easy thing to achieve but nonetheless, a goal that appeals to many buyers.

Sustainability will continue to be a dominant theme in 2025. Commercial real estate has firmly embraced the need for sustainable development, something the corporate occupier sees as non-negotiable. Corporates want green space, and that demand has brought about a significant shift in investor behaviour. An interesting result of that is the amount of secondary commercial space which falls short of occupiers’ sustainable requirements but presents opportunities for retro fitting or conversion to alternative space. Last year’s trend of private capital occupying a record share of all commercial property investment globally is one that shows no sign of subsiding.

It’s a different story for the consumer housing market where even the luxury level has been slower to embrace sustainability. I expect to see that change this year, albeit not at pace, thanks to innovative, future-thinking developers and ESG legislation. The Living Sector will remain popular with investors, whether they choose healthcare, student accommodation, PRS or any of its many parts.

Finally, as governments worldwide implement the various new tax and visa legislation introduced last year, there’s little doubt that global mobility will continue to be on the agenda for wealthy individuals. It has been a notable trend for some time and one that I referenced regularly last year.

We will monitor all these trends throughout the year, examining the implications for property investments and the opportunities they provide. Last year was challenging, bringing with it a higher degree of uncertainty than expected, and as we move to calmer times, it’s clear from conversations with clients that there’s a pressing desire to move forward decisively with property decisions, whether for lifestyle or investment reasons. The Private Office team are on hand to help and advise at every step.