Global Real Estate Shake-Up: High Rates, Big Deals & Hints of Recovery (Oct 7–8, 2025 Roundup)

Global Macroeconomic Backdrop: Rates, Inflation & Economic Crosswinds

Around the world, high interest rates and inflation have been the defining macro story impacting real estate in 2025. After aggressive rate hikes over the past two years to tame inflation, central banks are now charting different paths:

Overall, the macro backdrop is one of tentative transitions: from tightening to (selective) easing, from pandemic-era volatility to more normalizing conditions. Slower economic growth in 2025 is a concern – the IMF projects global growth around 3.3%, below the 3.7% average of 2000–2019 – but not a crash. Many economies are avoiding recession, and this modest growth along with cooling inflation is exactly what real estate markets need to find their footing. The upshot: borrowing costs should gradually come down over the next year in many regions (with North America and Europe a bit behind Asia and LatAm in the cycle), providing a tailwind for property markets, if inflation stays under control.

North America: Housing Recession Lingers, Commercial Markets Repricing

United States – Housing: The U.S. housing market continues to feel the chill of high interest rates. Through early October, 30-year fixed mortgage rates are hovering around 7%–7.5%, levels not seen in two decades, which have sidelined many would-be buyers. Home sales volume has accordingly been stuck near record lows – roughly 4 million annualized sales, down sharply from the pandemic boom. “The housing market is in a slow rebalancing phase,” explains Selma Hepp, chief economist at property data firm Cotality, noting that sales activity remains at multi-decade lows cotality.com. With buyers scarce, price appreciation has flatlined: national home prices rose only about 1.3% in the past year (Aug 2024 to Aug 2025) cotality.com, which after inflation means real prices actually fell. In many formerly hot markets (from the Sun Belt to Mountain West), prices are down year-on-year, while a few markets in the Northeast and Midwest still see modest gains.

On the supply side, inventory of homes for sale has ticked up from extreme lows, giving buyers a bit more choice. The median U.S. home price has even edged down slightly to $400,000 cotality.com. That, combined with a recent dip in mortgage rates from their peak, has improved affordability “to its most favorable level since 2022,” says Hepp cotality.com. She notes this “provided much-needed relief” and has led to a tentative increase in mortgage applications and buyer interest cotality.com. Essentially, some buyers are re-entering the market as they adjust to the new normal of 7% mortgages. Homes are sitting on the market longer and sellers are cutting prices more frequently to make deals happen – giving remaining buyers a bit more negotiating leverage this fall (a stark change from the frenzied seller’s market of 2021).

Still, the overall mood is cautious. Many homeowners are “locked in” to ultra-low mortgage rates from prior years and are unwilling to sell and buy anew at higher rates, which keeps inventory constrained. New construction has helped supply a little, but homebuilders are also grappling with expensive financing and construction costs. Expert forecasts reflect the sobering reality: J.P. Morgan projects the U.S. housing market will remain largely frozen through 2025, with only subdued price growth (≈3% or less) and persistently weak sales rfsadvisors.com. In other words, a broad-based recovery in U.S. housing may not arrive until interest rates come down more significantly, which most expect in the latter half of 2025 or in 2026.

United States – Commercial: In commercial real estate, the U.S. is going through a painful repricing and restructuring, especially in the office sector. Remote and hybrid work have permanently reduced demand for office space, and the numbers are startling – the national office vacancy rate hit 20.7% in Q2 2025, the highest on record reuters.com. To put that in perspective, pre-pandemic office vacancies were around 12%. Major cities are hardest hit: San Francisco now has a 27.7% office vacancy rate (versus ~8% in 2019) reuters.com, and other business hubs like New York and Chicago also see 20%+ vacancies. This glut of empty offices is hammering landlord finances (rental incomes are down, while loans are harder to refinance at higher rates) and even hurting city budgets that rely on property taxes. As a result, there’s a wave of office building value write-downs, mortgage defaults, and developers walking away from aging office towers.

The industry response has been twofold: conversion and consolidation. Developers in some cities are racing to convert obsolete offices into apartments or other uses. A record ~150 million square feet of U.S. office space is in some stage of conversion to residential or mixed-use as of this year reuters.com reuters.com. It’s not easy – high costs and zoning hurdles mean only a fraction of buildings are suitable for conversion – but it’s one of few avenues to create value from stranded assets. The other trend is a “flight to quality”: companies that are leasing are concentrating in the newest, highest-quality buildings with great amenities. Older Class B/C office buildings are suffering disproportionate vacancies, while trophy Class A offices in prime locations are faring a bit better (some are even near fully leased). This bifurcation means modern offices and labs still command solid rents, whereas 1980s-era offices might sit empty without massive upgrades.

Outside of offices, other commercial real estate segments in North America show a mixed picture. Multifamily apartment buildings had been very strong (surging rents, low vacancy) but rents have flattened in many cities as new supply finally catches up and landlords compete for tenants. Retail real estate (shopping centers, malls) is recovering unevenly – high-end retail streets and well-located suburban centers are doing alright as consumer spending is stable, but weaker malls continue to lose stores (the e-commerce effect). Industrial and logistics properties remain the standout: with the rise of e-commerce and strained supply chains, warehouses and distribution centers are in high demand. Even as economic growth has slowed, big logistics leases continue to be signed. For example, major deals this year include a nearly 1 million sq. ft. lease in South Carolina by a logistics firm, and a 885,000 sq. ft. warehouse lease in the UK – showing how robust the global appetite for industrial space is jll.com jll.com. Warehouse vacancy rates in the U.S. are still quite low, and rent growth for logistics facilities has been strong in key hubs (though it’s moderating as more warehouses are being built). This divergence within commercial real estate – weak offices, strong industrial, mixed retail, and steady apartments – is prompting investors to rotate their portfolios. Indeed, capital that fled the troubled office sector is being redirected into warehouses, apartments, life-science labs, data centers, and other segments with better prospects.

Canada: North of the border, Canada’s real estate market often mirrors U.S. trends with a few twists. Canadian housing saw an early 2025 slump as the Bank of Canada’s rapid rate hikes (which pushed mortgage rates over 5–6% in Canada) crimped affordability. By this autumn, national home prices are down roughly 3–4% year-on-year nesto.ca – a modest correction after the huge run-up during 2020–2022. Markets like Toronto and Vancouver, which were extremely overheated, experienced price declines and far fewer sales over the past year. However, with the Bank of Canada pausing rate increases and buyers adjusting, activity is picking up again in some markets. Vancouver’s average home price in September was essentially flat (+0.1% YoY) wowa.ca, suggesting the correction there may have bottomed out. Inventory in Canada is still tight (a chronic issue due to slow housing construction and high immigration), so if interest rates stabilize or fall in 2024, many analysts expect Canadian housing to rebound fairly quickly. In the meantime, renters are facing very low vacancy rates and soaring rents – pushing affordability concerns to the forefront of political debate in Canada.

On the commercial side, Canada’s office and retail sectors face the same headwinds as the U.S., though Canada’s major cities (Toronto, Vancouver, Montreal) have somewhat lower office vacancy rates than their U.S. counterparts. One differentiator: Canada’s big urban centers continue to attract population inflows (including international migrants), which supports demand for apartments and even downtown amenities. Industrial real estate in Canada is booming much like in the U.S., with Toronto and Vancouver each having less than 2–3% industrial vacancy – among the tightest in North America. Overall, investors see Canadian real estate as a tale of two worlds: residential and industrial properties remain relatively resilient and in demand, whereas office and older retail properties are under stress. Cap rates (investment yields) have risen across the board due to higher interest benchmarks, which has reduced property values on paper, but there is plenty of capital on the sidelines waiting for a clearer signal that rates have peaked to jump back into the market.

Europe: Glimmers of Recovery Amid High Rates and New Priorities

Sentiment Bottoming Out: Europe’s real estate market entered 2025 on a downbeat note – prices were soft in many countries, investment volumes had plummeted, and the surge in interest rates by the European Central Bank (ECB) (now at its highest in decades) dramatically cooled what was a red-hot market in 2021. However, as we move through October 2025, there are growing signs that Europe may have hit bottom and is starting to stabilize. At EXPO REAL – the continent’s largest real estate conference, held Oct 6–8 in Munich – a trend survey of thousands of industry participants found 44% now feel “optimistic” about the international real estate market going forward, versus 22% “cautious” and the rest neutral exporeal.net. Just a year ago, pessimism was far more widespread. “The current trend index shows that we have reached the bottom and confidence is gradually returning,” said Stefan Rummel, CEO of Messe München, which hosts the Expo, adding that despite ongoing challenges, the market appears to be slowly returning to normal exporeal.net.

What’s behind this tentative optimism? For one, property values have corrected significantly in Europe since 2022, especially in commercial real estate. In some markets, office and retail property prices have fallen 20% or more from their peak, and even “core” assets (like prime offices in Paris or Frankfurt) saw yields rise and prices fall by around 10–15%. This revaluation, though painful for owners, means a lot of the froth is gone – buyers and sellers can start to agree on pricing again. Indeed, transaction activity is expected to pick up from the drought of the past 12 months as opportunistic investors hunt for bargains. Another factor is the expectation that financing conditions will improve: Europe’s inflation has been trending down, and many believe the ECB is at or near its peak rate (currently deposit rate ~4%). If inflation keeps easing, the ECB could even cut rates in 2024. Furthermore, some European countries are providing targeted support – e.g. Germany has rolled out programs to subsidize home construction and green retrofits, and is discussing ways to reduce bureaucratic hurdles (a major gripe in the industry – 79% of Expo Real survey respondents called for “less bureaucracy” to help the market exporeal.net).

Winners and Losers – Asset Types: The European survey also highlighted where investors see the most opportunity going forward. For the second year, housing is the top-ranked asset class in terms of attractiveness exporeal.net. About 75% of respondents named residential (multifamily, etc.) as a key focus – reflecting Europe’s chronic housing shortage and the relative stability of housing assets even in downturns. Following housing, “care properties” (such as healthcare, senior living) and data centers were highly rated (over 60% each) exporeal.net, indicating growth sectors tied to demographic aging and digital infrastructure. Logistics/warehouses also scored well (47%). On the other hand, the traditional segments of hospitality, office, and retail are out of favor – each drew interest from only ~10% of respondents exporeal.net. This doesn’t mean those sectors are dead in Europe, but investors are very selective: new-generation offices (especially energy-efficient buildings with great amenities) in prime locations can still succeed, but older offices or malls are viewed warily.

Regional Differences: Europe is not monolithic – conditions vary by country and region. So far in 2025, Southern Europe (like Spain, Portugal) has held up relatively well; foreign investment in resorts, hotels, and rental apartments remained quite robust, aided by strong tourism and expats. Northern Europe (Scandinavia, Germany, Netherlands) saw a sharper correction, partly because these markets had big run-ups and a lot of highly leveraged investors who are now squeezed by rates. Notably, the Expo Real survey found confidence in the U.S. market has dropped among Europeans (only 45% now view the U.S. as important for future investment, down from 66% a year ago), while Europe itself remains the top choice and the Asia-Pacific region jumped to second place at 64% favorability exporeal.net. This suggests European capital may stay closer to home or even pivot to Asia rather than chasing deals in America’s uncertain market. Within Europe, Western Europe (France, Germany, UK, etc.) is still seen as the primary region (84% importance) over Central/Eastern Europe.

Challenges – Rates and Costs: The cautiously optimistic outlook doesn’t ignore the huge challenges still present. Virtually everyone in the industry agrees that interest rates are the number one issue. The Expo survey showed a whopping 94% of respondents called interest rate policy “very important” or “important” to the market’s prospects exporeal.net. Rates affect not just mortgage costs for homebuyers (dampening demand) but also the viability of new developments – many projects no longer pencil out with financing at 5%–6% instead of 1%–2% a few years ago. This has led to a severe downturn in construction activity. For instance, housing starts in Germany have fallen sharply in 2023–2025, and the country is bracing for a shortfall in its ambitious new housing targets. Developers across Europe are lobbying for help: when asked how to improve the situation, 79% said “reduce bureaucracy” (to speed up approvals), 64% wanted better access to capital (e.g. government loan guarantees), and many emphasized cutting construction taxes or standards to lower costs exporeal.net exporeal.net. Construction costs had spiked in 2021–22 due to supply chain issues and inflation; they’ve cooled somewhat, but building a project today in Europe is still significantly more expensive than a few years ago, so new housing supply is constrained right when it’s most needed.

Bright Spots: Despite the headwinds, certain parts of Europe’s real estate are thriving. One example is the rental apartment sector in big cities. High interest rates have ironically increased demand for rentals (since fewer people can afford to buy), keeping occupancy and rents strong for professionally managed multifamily properties. In some German and French cities, rents hit record highs in 2025 even as purchase prices dipped. That makes residential investment attractive for long-term investors like pension funds. Logistics real estate is another bright spot: the shift toward e-commerce and the need for modern warehouses near population centers means vacancy rates for prime logistics space are extremely low (often under 5%), and developers are still seeing tenants line up for any new warehouse built. Pan-European logistics yields have compressed over recent years, but rental growth is offsetting some of the interest rate pain. Additionally, alternative sectors like life-science labs, student housing, and data centers in Europe are benefiting from structural demand drivers and are high on investors’ lists. A shortage of data center capacity, for example, has led to huge projects around London, Frankfurt, Dublin and other hubs; these properties often secure leases from Big Tech companies even before ground is broken.

Case in Point – UK and France: The UK, which started its rate hiking sooner and has had one of the steepest housing corrections among major economies, is showing tentative signs of stabilization. London home prices are down roughly 4–5% from a year ago, and more in real terms when accounting for inflation. Buyer inquiries are slowly rising as they expect the Bank of England is nearly done raising rates. Some forecasts suggest UK house prices will bottom out in 2024. Meanwhile, the rental market in the UK is extremely tight, leading the government to consider policies to boost rental supply and homebuilding. In France, property markets have been quieter – Paris saw slight price declines, and transaction volumes fell, but there hasn’t been a severe crash. However, new lending rules and higher rates have made it much harder for especially first-time buyers to get mortgages in France, putting pressure on the lower end of the market. The French government has responded with programs to assist buyers and to renovate old housing stock (France has a big push for energy efficiency upgrades, which in itself is driving a segment of real estate investment – retrofitting buildings to meet new standards).

One Unforeseen Event: A notable (and tragic) news development during this period was the collapse of a building in Madrid, Spain on October 7, 2025. The six-story structure, a 1960s office building that was being renovated into a luxury hotel, suddenly caved in on itself during construction, killing four people reuters.com reuters.com. The incident shocked Spain and raised questions about building safety and renovation oversight. Interestingly, the property was owned by a Saudi-based real estate fund (RSR) that specializes in high-end hotels in Spain and Portugal reuters.com. The Madrid city authorities revealed the building had failed prior inspections and was classified as having “unfavorable” structural conditions reuters.com. This event underscored two things: first, the risks in Europe’s push to refurbish and repurpose older buildings (a key part of rejuvenating city centers and meeting sustainability goals – but something that must be done carefully); and second, the continued influence of international investors (like Middle Eastern funds) in Europe’s property scene. While this tragic collapse is an outlier case, it has prompted developers and regulators across Europe to double-check the structural integrity of aging buildings undergoing transformation into new uses. It’s a sober reminder that real estate development carries safety responsibilities even amid the rush to modernize.

Looking ahead in Europe, the key narrative is one of adjustment and innovation. The market is actively searching for a new equilibrium in a higher-rate world. Experts predict that housing will lead the recovery once financing costs ebb – the demand from people who need homes is only growing, after all – but it might require government support and creative solutions (like more modular construction or public-private partnerships) to bridge the affordability gap. Commercial real estate will likely see a “survival of the fittest”: the best locations and properties will eventually recover value, while obsolete ones may need to be repurposed or will trade at heavy discounts. For now, Europe’s real estate players are cautiously optimistic, keeping a close eye on the ECB and inflation data, and many are positioning themselves for an upswing in late 2024 or 2025. As one industry veteran quipped at the Munich Expo: “It’s been a tough slog, but if you have dry powder and patience, the next year could present the buying opportunity of the decade.”

Asia-Pacific: China’s Woes, India’s Steadiness, and a Mixed Regional Bag

China – Struggling Giant: Nowhere is the real estate story in late 2025 more dramatic than in China, the world’s second-largest economy. China’s property market, which by 2021 had reached unprecedented scale (accounting for roughly a quarter of China’s GDP at its peak) reuters.com, remains in a protracted downturn. The trouble started with the liquidity crisis of major developers like Evergrande and Country Garden in 2021–2023, and has since spiraled into a broader loss of confidence among homebuyers. As of October 2025, new home prices in China are still slipping in many cities. A private survey showed prices in September rose only 0.09% from the prior month, slower than August’s increase, and resale (second-hand) home prices are still declining (~0.7% drop month-on-month) reuters.com. In short, there’s been no meaningful turnaround – prices and sales volumes are bumping along the bottom, and unsold inventory of new apartments remains very high in many regions.

The Chinese government and central bank have tried a slew of support measures: cutting mortgage rates, lowering down-payment requirements, easing purchase restrictions in big cities, and even launching an urban redevelopment program to absorb excess supply reuters.com. These policies have provided some temporary upticks (for example, after some big cities relaxed home purchase rules in September, there was a brief surge in inquiries and transactions), but the overall impact has been limited. Consumer sentiment is hard to repair after seeing developers halt construction on pre-sold homes and some firms default on their debt. Many Chinese households already own one or more properties and are now more focused on paying down debt than buying additional homes, especially as economic growth has slowed and youth unemployment is high.

Crucially, analysts now believe China’s housing recovery will take longer than previously thought. A Reuters poll of experts in late September found consensus that home prices won’t stabilize until at least the second half of 2026, or even 2027 reuters.com – which is around 6 months later than those same analysts predicted just a quarter earlier. That pessimistic revision shows how entrenched the malaise is. As property sales stay sluggish, land sale revenues for local governments are down, construction activity is anemic, and the knock-on effects are weighing on China’s broader economy. There are a few bright notes: Chinese authorities have stepped up stimulus in other ways (like infrastructure spending), and the World Bank recently revised China’s 2025 GDP growth forecast upward to 4.8% icis.com, partly on expectations that the worst of the property drag will abate by next year. And indeed, there are “mild signs of stabilization” – for instance, a private index of 100 cities showed a tiny 0.3% rise in home prices in May reuters.com, one of the first increases in over half a year. But these improvements are extremely fragile. As one economist put it, broad-based recovery is not expected in 2025 conference-board.org; at best, China might stop the bleeding in housing by late 2025 and see a gentle recovery thereafter, assuming more stimulus (like interest rate cuts or even some kind of bailout for troubled developers) is rolled out.

In response to this turmoil, Chinese homebuyers and investors have altered behavior. More people are favoring ready-built new homes (to avoid completion risk) or second-hand homes, rather than buying off-plan from developers with uncertain finances. The government has encouraged banks to extend loans to ensure stalled projects get finished, to rebuild trust. There’s also a notable shift in migration – some younger Chinese are choosing to rent or move to cheaper cities rather than stretch to buy in Tier-1 cities like Beijing or Shenzhen at current price levels. Luxury and high-end real estate in China, however, has held value better, especially in Beijing/Shanghai, where wealthy buyers are less affected by mortgage rate rises and still see property as a status asset.

Rest of Asia-Pacific: Outside China, Asia’s property markets show a wide spectrum:

Expert Commentary: A notable comment on Asia’s outlook came from a real estate forum where an analyst quipped, “Asia Pacific real estate is a two-track story: China in doldrums, rest of Asia holding up.” That seems apt: while China’s slump is a drag on regional sentiment (and has spillover effects like reduced Chinese property buyer flows to places like Hong Kong, Singapore, Vancouver), other Asian markets are generally more upbeat. Asia’s demographic and urbanization trends remain a powerful engine for real estate demand – e.g., India, Southeast Asia, even Japan’s city centers – and many global investors, from sovereign wealth funds to private equity, are increasing allocations to Asia-Pacific real estate, seeing this year’s uncertainty as a chance to buy assets at reasonable prices. A survey by a property consultancy noted that Tokyo, Singapore, and Sydney rank among the top targets for cross-border investment in 2025, thanks to their stability or growth potential, whereas Chinese cities have slipped in preference due to the ongoing uncertainties.

In sum, Asia-Pacific real estate at end-2025 is a study in contrasts. China is attempting to engineer a soft landing for its property bubble deflation (a monumental task still in progress), but elsewhere in Asia, markets are mostly resilient or quickly adapting. If China manages to stabilize in 2026, it could provide a big boost of confidence regionally. For now, investors are treading carefully – diversifying across markets, favoring sectors like logistics and data centers, and keeping an eye on central bank moves (like the Bank of Japan’s policy or China’s stimulus measures) that could shift the landscape.

Middle East: Investment Surge, Construction Boom, and Shifting Strategies

The Middle East, particularly the Gulf Cooperation Council (GCC) countries, has emerged in late 2025 as a hotspot of real estate activity – driven by both internal ambitions and an influx of global capital. High energy prices in recent years have filled government coffers, enabling extravagant development plans, while social and economic reforms are drawing talent and tourists, creating new real estate demand. The period of October 7–8, 2025 saw several major developments highlighting the region’s momentum:

Mega-Investments and Partnerships: One headline-grabbing deal is Blackstone’s partnership with Abu Dhabi’s Lunate to invest $5 billion in Gulf logistics properties reuters.com. Blackstone, the world’s largest alternative asset manager, sees opportunity in the Middle East’s growing need for warehouses and distribution centers – from e-commerce fulfillment to port logistics. The new platform (dubbed “GLIDE”) will focus on building and acquiring “high-quality warehouse assets” across the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) reuters.com. This is a strong vote of confidence by a major U.S. investor in the Gulf’s economic trajectory. “The profound economic transformation underway in the GCC… is creating powerful momentum for sectors like logistics,” noted Blackstone President Jon Gray, underscoring how pro-growth policies and diversification in the Gulf economies are boosting real estate demand reuters.com. Indeed, as countries like Saudi Arabia localize more of their supply chains and as trade within the region increases, the often-overlooked industrial real estate segment is booming. Vacancy rates for modern warehouses in Dubai or Riyadh are very low, and rents have been climbing, which likely attracted Blackstone to this venture.

On the luxury and mixed-use front, Saudi Arabia continues to make waves. In late September (just before our Oct 7–8 window), Saudi developer Dar Global announced a $1 billion project to build Trump Plaza in Jeddah reuters.com. During Oct 7–8, more details emerged: it will be a high-end development with premium residences, serviced apartments, office space, and even townhouses, plus a massive park modeled after NYC’s Central Park reuters.com. This is the second Trump-branded project in the kingdom, after a Trump Tower in Riyadh launched last year, signaling that the Saudi-U.S. business ties (at least at the corporate brand level) are growing. The Trump Organization (run by former U.S. President Trump’s family) has been expanding overseas, and the Middle East – with its appetite for Western brands and luxury – is a prime target. These developments also highlight how Saudi Arabia is opening up: a few years ago, such open branding might have been unusual, but now Saudi’s real estate market is full of international collaborations (from American entertainment districts to European-designed mega-projects).

Dubai and the UAE: The UAE, especially Dubai, has been a real estate success story of the 2020s. After a slump in the late 2010s, Dubai’s property market roared back during and after the pandemic as it became a haven for investors, remote workers, and wealthy individuals (thanks to business-friendly policies and successful Expo 2020). Property prices in Dubai have surged ~70% from their 2020 lows through end of 2024 reuters.com. Demand spans luxury villas, waterfront condos, and commercial real estate. In response, Dubai’s developers are ramping up construction at a blistering pace. As Reuters reported in August, major firms like Emaar, Damac, and others are even bringing more construction work in-house to speed up delivery and control costs reuters.com reuters.com. The city’s leadership has a strategic goal to double Dubai’s population to 7.8 million by 2040 reuters.com, which implies a need for vast new housing and infrastructure.

However, there are emerging concerns that Dubai might be heading for oversupply again. After the current euphoria, an unprecedented number of new units (estimated 200,000+ between 2025 and 2026) are slated for delivery, which is roughly double the pace of the last few years reuters.com. Analysts warn that if all these projects complete on time, home prices could face a double-digit decline to equilibrate the market reuters.com. Dubai’s history is cyclical, with booms and busts, so the government is trying to manage this by tightening rules on off-plan sales and monitoring speculative activity. For now, though, demand still seems to outstrip supply in key segments, and the rental market is extremely strong (rents up by 20-30% in the last year, adding appeal for investors buying to rent out). The UAE Central Bank’s interest rates mirror the U.S. (due to the dirham’s peg), so higher rates have made mortgages costlier for end-users, but a significant portion of Dubai transactions are cash buys (either by wealthy locals, foreign investors, or institutional funds). In fact, about a third of home sales in the UAE are all-cash – reflecting the region’s affluent buyer base and somewhat limiting the dampening effect of interest rate rises.

Saudi Arabia’s Homeownership Push: Saudi Arabia is in the midst of an ambitious drive to increase its homeownership rate to 70% by 2030 (from about 50% in 2016). This is part of the kingdom’s Vision 2030 reforms to improve quality of life and diversify the economy spglobal.com spglobal.com. Government initiatives like the Sakani program provide subsidies and affordable financing for Saudi citizens to buy homes. As a result, there has been a boom in residential construction – new suburban developments around Riyadh, Jeddah, and other cities are springing up rapidly. According to S&P Global, Riyadh’s residential market is expected to continue expanding, buoyed by these policies spglobal.com. Notably, demand is not just for budget housing; there’s also a surge in upscale developments as the affluent population grows. The Saudi government has partnered with local and international developers to build large master-planned communities, complete with malls, parks, and schools. This is creating opportunities across the housing spectrum – from affordable units to luxury villas.

Additionally, Saudi Arabia’s giga-projects are moving from drawing boards to execution. NEOM (the futuristic city in the northwest), the Red Sea Project (a luxury tourism zone of islands and resorts), and various “economic cities” are all employing thousands of construction workers. In October 2025, for example, NEOM’s developers showcased progress on “The Line” (a 170-km linear city) and other components, aiming to have the first sections inhabited by 2026. While these projects are unique and somewhat experimental, they reflect a massive construction boom that’s drawing in global architecture and engineering firms. Many of these developments blur categories – they’re mixed-use, combining residences, offices, tourism, and industry. For instance, the Trump project in Jeddah we mentioned is part of a larger trend of integrating branded residences with hospitality and office components, creating lifestyle destinations rather than single-purpose buildings.

Other Gulf States: Elsewhere in the GCC, real estate is also thriving. Qatar saw a post-World Cup slowdown in 2023, but activity is normalizing; it continues to develop infrastructure (stadiums being repurposed, new free zones) and offices, and the population growth from its expanding LNG sector supports housing. Bahrain and Oman are smaller markets but benefit from spillover investment and their own reforms (Bahrain has a new masterplan for its capital Manama, and Oman is developing beachfront tourism complexes). Kuwait is slower-paced due to more bureaucratic processes, yet there’s strong demand for housing among its young population, and the government is trying to clear a backlog of citizen housing applications by constructing “mega suburbs”.

Shifting Strategies: A notable shift in the Middle East is local developers tapping international capital markets and partnerships. For example, in October a UAE developer was rumored to be planning an IPO of its real estate arm reuters.com, aiming to unlock foreign investment. Middle Eastern sovereign funds themselves are investing big in global real estate (like Qatar buying landmark buildings in NYC or London), but increasingly, the flow is two-way – foreign investors are also keen on Middle East projects. The region’s relative political stability (with the major rift between Qatar and neighbors healed, and despite geopolitical tensions around, the GCC has been stable internally) and strong fiscal position make it attractive. This year saw Abu Dhabi developers launching projects in Dubai and vice versa, indicating a regional integration of sorts. Israel and the UAE have also started collaborations after normalization of relations – though the recent war flare-up (Gaza conflict) in October might pause some nascent partnerships.

Expert View: Middle Eastern real estate executives often express confidence that their markets can decouple from global woes. “Our growth is driven by fundamental demand and government vision, not speculative bubbles,” one Dubai developer claimed in a panel, pointing to genuine end-user demand from population growth. There is some truth to this: population and income growth in the Gulf (due to economic diversification bringing in expats and boosting employment) is real. However, observers caution that if global financial conditions tighten further or oil prices drop significantly, the Middle East could face a funding squeeze or demand dip. For now, though, the region is arguably in a sweet spot – high oil revenues, reform momentum, and an influx of talent – and it’s translating that into a real estate boom of a scale the world is watching with fascination.

In conclusion, the Middle East’s real estate scene in late 2025 is characterized by bold projects and bullish sentiment. From glitzy skyscrapers and resorts to much-needed middle-class housing, the cranes on the skylines of Dubai, Riyadh, Doha, and beyond signal a transformative period. As Blackstone’s big bet indicates, global investors see the Middle East as one of the few places offering growth and returns in an uncertain world. The region is not without risks (geopolitical shocks can occur, and overbuilding is a perennial worry), but at this moment, it’s full steam ahead for Middle Eastern real estate development.

Africa: Housing Challenges, Interest Rate Relief, and Investor Attention

Africa’s real estate landscape from October 7–8, 2025 reflects a continent of diverse markets, many with enormous long-term potential but also pressing short-term challenges. Key themes include an acute housing shortage in fast-growing cities, the impact of high interest rates (now starting to recede), and an uptick in interest from both local and international investors looking for growth frontiers.

Housing Crisis and Responses: A poignant story from this week comes out of Kenya, where a report highlighted thousands of families living on the streets of Nairobi due to the lack of affordable housing africanews.com africanews.com. Nairobi, like many African megacities, has seen explosive population growth that far outpaces formal housing construction. The result is sprawling informal settlements (slums) and homelessness for the most vulnerable. In Kenya, about 47% of urban residents live in informal housing, and nationally there’s a 2 million home deficit africanews.com. To tackle this, the Kenyan government has launched an Affordable Housing Programme, and as of October it is constructing 100,000 low-cost homes across the country africanews.com. These include apartment blocks in Nairobi and other cities, with units priced for low- to middle-income buyers. The government is also trying innovative financing—like a controversial housing levy (tax) on formal workers’ salaries to fund public housing, and seeking public-private partnerships to leverage private capital.

Kenya’s President William Ruto has been vocal about housing, even calling for a global approach: “The global housing crisis is too vast for any single country to resolve. We must harness the power of multilateralism to confront it,” Ruto urged in a speech africanews.com. This plea resonates beyond Kenya. Many African nations face similar housing gaps: Nigeria needs millions of homes for its growing population, Egypt has a housing shortfall despite building new cities, South Africa grapples with apartheid-era backlogs in housing, etc. Ruto’s idea hints at perhaps a coalition of governments, development banks, and investors collaborating to fund affordable housing on a large scale – something like a Housing Marshall Plan for the developing world. While that’s aspirational, on the ground African governments are taking various steps: Morocco subsidizes housing for low-income families, Nigeria is trying a national housing fund for workers, South Africa has long had an RDP housing scheme for free homes to the poor (though with mixed success).

The Kenyan case also underscores how housing ties into other issues: poverty, unemployment, and even policing (homeless Nairobians face harassment). Experts like Kenya’s Housing Director George Omondi emphasize that a “concerted effort” is needed – including social housing with heavy subsidies africanews.com – otherwise private developers alone won’t build for the poorest, as profits are slim there. Some progress: Kenya’s program, aided by institutions like the World Bank and EIB, has a few flagship projects underway (one near Nairobi’s CBD is almost complete, offering apartments for as low as $20,000, a fraction of market rates). Still, scale is an issue – tens of thousands of units are a start, but millions are needed continent-wide.

Interest Rates and Finance: African economies were hit hard by the global rate increases since 2022. Many central banks in Africa raised their own rates to combat inflation (often driven by higher import costs and currency depreciation). By mid-2025, however, inflation has started to moderate in a number of countries, allowing policymakers to ease up. For instance, South Africa’s Reserve Bank cut its repo rate by 25 bps to 7.00% in July 2025 reuters.com tradingeconomics.com, after inflation there fell back into the 3-6% target range. This was the first cut after a long hiking cycle that took rates from 3.5% in 2021 to 7.25% earlier in 2025. The cut is small but symbolically important – it was greeted as “good news for South African homeowners”, in the words of one property group CEO, because it means bond (mortgage) repayments won’t rise further and might even fall. South Africa’s housing market had slowed considerably under high rates, with price growth around 2% (below inflation) globalpropertyguide.com. The rate pause/cut stabilized things; by September and October there were hints of improved buyer interest, especially among first-time buyers who had been waiting on the sidelines. South African banks, which are well-capitalized, remain keen to lend to qualified homebuyers, and non-performing mortgage rates have stayed low, so the housing market could pick up if rates continue to drop gradually into 2026.

Elsewhere, Nigeria, Africa’s largest economy, provides a stark contrast: its central bank jacked up rates to an eye-watering 18.75% by mid-2025 to fight inflation and defend the currency. This made credit extremely expensive and real estate development financing very difficult (most Nigerian home purchases are cash as a result). However, in early October, the Central Bank of Nigeria (under new leadership after a change in government) signaled a shift by cutting the Monetary Policy Rate to 27% from 27.5% proshare.co (Nigeria’s MPR is defined differently, but effectively they eased slightly) and also lowering banks’ cash reserve requirements proshare.co. The immediate impact was seen in T-bill yields dropping – the one-year treasury yield fell to about 16.8% from 17.7% proshare.co – which is a notable move. This downward trend in yields implies borrowing costs might start to fall for businesses and consumers, albeit from very high levels. If Nigeria can sustain lower inflation (a big if, given subsidy removals and currency volatility recently), it could pave the way for interest rates to come down more, reviving things like mortgage lending (which is currently niche in Nigeria). Real estate in Nigeria has huge potential demand – population ~220 million, rapid urban growth – but financing is the bottleneck. Only an estimated ...