This article first appeared in City & Country, The Edge Malaysia Weekly on December 30, 2024 - January 12, 2025
When it comes to international real estate, the best people to ask are those on the ground and who have a strong understanding of the local market.
All international consultants polled talked about the continuing impact of the economy and interest rates on the property market in their countries. Similar to Malaysia, industrial properties are in great demand overseas while residential products continue to perform steadily.
Moreover, the lack of new supply in certain cities has helped maintain or increase house prices, resulting in potential buyers converting to renters.
However, uncertainty abounds as US president-elect Donald Trump comes into power next year, as well as the impact of the ongoing wars and rising inflation. Despite all this, there is optimism — albeit, cautious optimism — that the real estate market will do well in 2025.
Read on to find out more about each country’s overall real estate performance and outlook for the new year.
Vietnam
David Jackson
Principal and CEO
Avison Young Vietnam
Vietnam’s property market remains the best to invest in among Southeast Asian countries, with Hanoi and Ho Chi Minh City (HCMC) acting as pivots of growth despite global geopolitical and economic fluctuations. The revised Land, Housing and Real Estate Business Laws introduced in 2024 have paved the way for a new era of opportunities and confidence in the market.
Apartment supply grew with notable projects including Eaton Park and The Opus One in HCMC, as well as Lumi Hanoi and Vinhomes Smart City in Hanoi. By the end of 3Q2024, selling prices kept going up, averaging US$3,000 to US$5,000 per sq m in HCMC and US$2,500 to US$3,500 per sq m in Hanoi. Expansions into neighbouring provinces such as Ha Nam and Hung Yen in Hanoi, and Binh Duong, Dong Nai and Long An in HCMC, are reshaping the residential landscape.
Commercial real estate remained robust, with increasing Grade A office spaces that are environmental, social and governance (ESG) compliant offering competitive rents and terms. More industrial parks were approved and had started operation, supporting Vietnam’s growing role in the global supply chain diversification. Retail real estate thrived towards the end of the year, driving innovative shopping models to meet rising consumer demand in both cities.
Among regional cities, the Hanoi and HCMC markets will continue to be on the radar, especially for northeast Asian and domestic investors.
Going into next year, increased investment levels are anticipated, with more merger and acquisition deals or collaborations. Investors, increasingly active in the post-pandemic years, are encouraged by the new laws and Vietnam’s growth trajectory.
As legal obstacles are being removed, new housing supply is expected to improve from mid-2025, although escalating development costs and higher compliance requirements may influence pricing and segmentation. Besides Hanoi and HCMC, urban development will be expanded to industrial hubs, as seen in Hai Phong (Vingroup), Bac Ninh (Sun Group), Dong Nai (Novaland) and Binh Duong (CapitaLand, Gamuda Land). Improved sentiment will hopefully drive higher absorbance and liquidity rates in both primary and secondary markets.
Vietnam’s real estate is demand-driven in most segments. Residential properties will likely remain top of mind for investors in the coming years. High demand for housing — fuelled by the country’s young population of more than 100 million and rapid urbanisation — makes it a safe investment haven. Additionally, investors are drawn by attractive returns of price appreciation, averaging at 6% to 8% per quarter in early 2024, or 8% to 12% annually.
Commercial properties are less accessible to individual investors than to specialised organisations such as real estate funds or developers. However, institutional investors will continue to prioritise high-quality, sustainable income-generating properties in Vietnam, including industrial and logistics assets, office and hospitality real estate.
New laws and policies related to the real estate market have brought positive signals, but more time is needed to evaluate whether they are effective in regulating the market. Supply imbalance, hiking prices and economic uncertainties will keep homebuyers and investors cautious in the short term.
New York, US
Tan Wei Min
Licensed associate real estate broker
Castle Avenue Team, R New York
Until early November, 2024 had been a sideway year for the property market in Manhattan. Since mid-2022, the volume of property sales has been low as interest rates were doubled in an effort to tame inflation. This is because buyers who need financing have been sidelined due to the doubling of mortgage costs.
Supply has been low because sellers are holding off on selling as they would rather keep their existing 3% mortgage than buy a new property with a 6.5% mortgage rate. While sales volume has been low, the price psf for a residential condominium unit stands at US$2,046, close to the 2017 peak of US$2,149.
After the 2024 election, we expect the Manhattan property market to recover. The S&P 500 exceeded 6,000 points for the first time after Donald Trump’s presidential win, and Bitcoin also hit a record. We expect decreased regulation in financial services. As a result, private equity, hedge funds and investment banking are all very optimistic with the future deal volume. This will directly affect the Manhattan property market. When the financial industry does well, the people will buy Manhattan property.
Residential real estate, which has outperformed the commercial sector since 2020, will continue to do well. The current vacancy rate for residential real estate in Manhattan is 2.74%, the lowest in the US. Rents are at historical highs because of demand from priced-out buyers being added to the rental pool.
The Federal Reserve cut interest rates for the second time on Nov 7 (the first was in September) as inflation is now below 3%. This should translate into lower mortgage rates, and therefore bringing in more buyers.
The mortgage rate is a big driver as half of the buyers need financing. In the past two years, most buyers have been purchasing properties with cash due to the increase in mortgage rates. As mortgage rates decrease, more buyers needing financing will come back into the market, hence increasing the demand.
A robust stock market and high deal flow in finance and banking will also drive up the Manhattan property market.
London, UK
Daryl Perry
Head of UK research and insight
Cushman & Wakefield
Leasing has been robust in London and key regional cities in the UK. In contrast, capital markets have been constrained by the high inflation and high interest rate environment, creating a mismatch between buyers and sellers. This is starting to ease with successive rate cuts and a more positive economic outlook.
Across the UK, investment volumes have been muted. In 3Q2024, just £6 billion was transacted in central London offices, although we now see examples of larger lot sizes coming to the market.
Our proprietary TIME Score Index suggests we are now at an inflection point. Several significant themes will continue to apply in 2025, including a focus on housebuilding and the need to address the UK’s housing crisis across a mixture of tenures, particularly in London and the South East; the need to decarbonise; and raising standards. The last two themes are particularly evident in London offices, driving record rents for best-in-class space.
Until the first half of 2024, the living sector was the most active sector across the UK and sectors that capture demographic change are appealing to investors. However, the increased cost of borrowing has stymied the forward-funding market.
Our report “The Shape of Real Estate 2040” suggests significant investment in multiple living subsectors — including student accommodation, elderly living and build-to-rent. Retail sector performance has improved markedly, with total returns running at 3.8%, and shopping centres and retail warehouses even higher, at 5.6% and 6.2% respectively.
Elsewhere, logistics remains attractive, while there is significant interest in data centres due to the proliferation of artificial intelligence (AI). We are still seeing recalibration across the office sector, but demand for best-in-class offices, particularly in Central London, will remain strong.
Despite easing inflation, the outlook for interest rates is still volatile, with expectations varying between 3.6% and 4.7% across the market by the end of 2025. The market reaction to the fiscal outlook set out in the chancellor of the Exchequer’s Autumn Budget has put upward pressure on the outlook for both the cost of borrowing and the risk-free rate — both of which remain relatively elevated. As long as this remains the case, it will act as a drag on increased liquidity, particularly on large-scale investments. Nevertheless, there is a significant volume of money geared towards real estate.
Spain
Miriam Goicoechea
Head of research Iberia
CBRE Spain
Real estate investment in Spain recorded a transaction volume of €8.05 billion in the first nine months of 2024, representing a 6% year-on-year (y-o-y) increase. In the third quarter alone, investment rose to €2.54 billion, reflecting a slight increase of 9% y-o-y. Notably, the number of transactions increased by 5%, and the average transaction value rose to €25 million (up 4% compared to 2023). Of the transaction volume during the quarter, Madrid captured almost double that of Barcelona, representing 38% and 20% respectively.
The volume achieved in the year’s first nine months aligns with the average for the past 10 years. In 2024, moderate investment growth of between 5% and 10% is expected, reaching around €12 billion at the end of the year.
The expectation of new interest rate cuts allows for a forecast of reduced financing costs, which will ultimately compress these prime yields and incentivise a gradual increase in investment volumes during 2025. In any case, the risk remains with armed conflicts and the intensification of geopolitical tensions, especially with the impending impact of the Trump administration.
Meanwhile, opportunities will appear across all sectors. The green sectors particularly will attract the most significant investment appetite. In any case, we observe that some major trends such as an ageing population and digitalisation, are accelerating changes in some sectors.
Furthermore, the volume allocated to operational segments such as hospitals, retirement homes and educational centres will grow considerably.
According to CBRE’s 2024 European Investor Intentions Survey, residential and logistics have surpassed office as the most sought-after investment sectors for the first time, with 34% and 28% of the respondents, respectively, selecting both sectors as their preferred asset classes. Value-add and opportunistic strategies are at the top of investors’ minds as they seek to capture yield.
The macroeconomic and geopolitical context will continue to mark the evolution of investment in the sector, with the expectation of interest rate cuts that will favour investment activity.
In parallel, major demographic trends, such as new ways of living, working or leisure, will continue to drive the sector’s evolution. Investors will begin to focus and generate value in their portfolios. Active and professional management of real estate assets will be crucial to transforming and generating the expected returns. The transformation of properties and their usage is already a trend that will be consolidated over the coming months, especially in those obsolete assets that have the potential to be redesignated in other sectors.
South Korea
Yoona Choi
Managing director
Knight Frank Korea
In 2024, South Korea’s leading real estate markets, Seoul and Busan, displayed contrasting trends. Seoul, particularly high-demand areas like Gangnam, rebounded from minor price drops in 2023, showing resilience as a luxury market hub. Busan, however, experienced more moderate growth influenced by rising interest rates and regional economic challenges. While premium areas in Seoul remained strong, non-central locations showed limited growth due to strict lending policies and a weaker economy.
In 2025, price growth in Seoul’s premium districts is expected to stabilise but at a slower pace, given the prospect of continued high interest rates. High-demand neighbourhoods such as Gangnam and Yongsan are likely to retain buyer appeal, particularly among those seeking new developments with limited supply. In Busan, moderate growth is possible if lending regulations ease. Compared to 2024, growth across both cities is likely to level off, although Gangnam’s appeal remains strong.
Meanwhile, some provincial areas may experience price declines due to population decreases. This could accentuate the disparity between metropolitan and non-metropolitan areas, with metropolitan zones maintaining stable demand due to better infrastructure and employment opportunities, while provincial areas face pressures from population outflow.
Luxury residential properties in Seoul, especially in Gangnam and Yongsan, are projected to remain highly attractive investment opportunities in 2025. Sustained demand, limited supply and a rising expatriate rental market are likely to drive price appreciation. Supply shortages of new residential units, expected until at least 2026, will likely support price growth in these districts, offering rental and appreciation potential in high-demand areas.
Several key factors could either support or hinder growth in the Korean property market in 2025. Lower interest rates are likely to stimulate buyer demand by reducing loan burdens, while supportive government policies on redevelopment and tax reliefs may further boost interest in the market.
Additionally, a shortage of new housing developments, expected to persist, could drive price increases in high-demand areas. However, growth may be restrained by uncertainties such as potential impacts from a second Trump term, fluctuations in interest rates, and a weak Korean won, all of which suggest a need for cautious investment strategies.
Singapore
Desmond Sim
CEO
Edmund Tie & Company (SEA) Pte Ltd
On the back of an inflated interest rate environment, transactional activities remained low in the first half of 2024. Following the Fed rate cuts, the market started to pick up with residential sales leading the transaction activities. However, negative yield spreads continue to deter institutional investments in the commercial sector.
In 2H2024, a couple of new residential project launches achieved high volume of sales to close the year on an optimistic return.
For 2025, the residential market is expected to continue to display positive but stable results in terms of transaction volume. It is expected to outperform 2024. In terms of the investment sales market, we can expect the start of negotiations for commercial assets as interest rates start to taper.
However, we also expect high interest in the strata-titled commercial units as these investments remain more palatable in terms of sales quantum while they also remain not liable for the Additional Buyer’s Stamp Duty.
The most attractive real estate segments in 2025 will be residential and strata-titled offices, both for owner occupancy as well as investment.
Meanwhile, we see global trade and political tensions, government measures and Fed rate movements as key factors that might affect Singapore’s property market growth.
Portugal
Igor Borrego
Head of capital markets
CBRE Portugal
As financing costs increased throughout Europe, real estate investments generally contracted while yields expanded. Portugal was no exception. However, the appetite for the country’s real estate sector remains high, with signs of investment recovery in many sectors.
We expect an increase of more than 40% in commercial real estate (CRE) investment volumes in 2024, which is quite relevant when compared to our expectations back in January of around a 15% increase. The forecast for 2024 total investment figure is about €2.3 billion, which is, by all standards, a strong year for the CRE market.
Lisbon represented a significant portion of the investment volume, but Porto and the Algarve region also displayed signs of a strong recovery.
The retail sector had the highest investment volume this year, accounting for more than 50% of the transaction volumes. Prime market yields have generally stabilised, and no significant movements are foreseen in the short term.
However, some sectors already show yield compression. Lisbon’s high street retail decreased by 25 basis points (bps) quarter on quarter to 4.5%, while purpose-built student accommodation (PBSA) decreased by 25bps to 5.25%.
In 2025, we expect the investment market to follow the same pattern as 2024 for two reasons.
First, there is a healthy transaction pipeline and several ongoing high-volume transactions that might spill over into 2025. Second, with the decrease in interest rates and the momentum in real estate investment, we could see increased transactions in sectors such as offices and logistics.
Product availability remains a challenge in almost every traditional asset class, which should continue to drive rents up due to healthy demand, as displayed by the offices, logistics and high-street retail sectors. In addition, this “flight to quality” trend is where tenants search for premium products with higher rents. This is visible in the offices and logistics sectors.
Meanwhile, opportunities can be found in sectors in their early stages of growth, such as student accommodation, senior housing, data centres, healthcare and agribusiness. We expect increased activity in the PBSA and logistics sectors as demand outstrips supply.
Overall, the property market is encouraging and bolstered by a booming Portuguese economy. Long-term interest rates have begun to fall as the major economies lower short-term rates and we anticipate property yield compression in 2025. We expect falling interest rates to drive further volume and property value recovery through next year. The main hindrances are a general scarcity of products marketable to core investors and the increasing construction costs.
New Zealand
Chris Dibble
Head of research New Zealand and strategic consulting Auckland
JLL New Zealand
As 2024 concludes, New Zealand’s property market shows signs of recovery and adaptation across its major urban centres, including Auckland, Wellington and Christchurch.
Auckland’s office sector demonstrated strong demand for premium central business district (CBD) spaces through 2024, although increased incentives indicate more tenant-favourable conditions. The industrial sector experienced a slight increase in vacancy rates, but pockets of demand continue to support overall performance. Retail performance was mixed, with luxury and large-format retail segments outperforming amid improving economic conditions.
Wellington’s property market is navigating changes to government-occupied space leading to reconfigured leasing patterns across the capital city. The industrial sector maintained stability with consistently low vacancy rates. The CBD retail sector showed signs of renewed confidence, driven by return-to-office mandates, lower inflation and generally improved economic conditions.
Christchurch exhibited resilience across various sectors. The CBD office market reported historically low vacancy rates, while the industrial sector remained robust, supported by sustained demand for logistics and warehousing facilities. The retail sector in central Christchurch, particularly in prime street-frontage locations, continued to experience upward pressure on rents due to limited supply.
The outlook for 2025 is cautiously optimistic across all three major New Zealand cities. The Reserve Bank of New Zealand’s OCR (official cash rate) cuts from 5.5% to 4.25% in late 2024 have energised various sectors, with further reductions anticipated in 2025.
In Auckland, office rents are forecast to grow moderately, with premium rents projected to increase at the highest rates over the next year. The industrial sector is poised for stability and further growth, with the projected economic pick-up in 2025 expected to be a key catalyst for rental growth resuming at long-term averages after a short hiatus following the significant upswings post-Covid-19.
Wellington’s office market may face challenges with increased space availability, but finding high-quality premises with appropriate seismic and sustainability credentials remains challenging.
The industrial sector’s continuing demand and supply imbalance, combined with a more positive economic backdrop, will likely lead to marginal rent increases. Positive momentum is expected to build further upon Wellington’s retail sector after a positive end to 2024.
Christchurch’s CBD is expected to see new office completions in 2025, helping to diversify tenant options. The industrial sector shows growth opportunities. Retail in central Christchurch and certain locales continues to show ongoing rent pressures due to steady demand.
Sustainability credentials are increasingly important across all locations and asset classes. However, if choosing one specific asset class, the industrial sector emerges as a top choice across all cities, offering stable returns and growth potential due to sustained demand and supply constraints.
The factors influencing market growth include OCR reductions that stimulate investment and leasing activity; economic recovery driving demand across sectors; sustainability focus attracting premium tenants and investors; technology integration; differentiating assets; and government policies impacting market dynamics, particularly in Wellington.
As we enter 2025, the New Zealand property market shows promise for recovery and growth. Investors and occupiers should monitor economic indicators and sector-specific trends to capitalise on emerging opportunities in this evolving landscape.
Japan
Amous Lee
CEO
FM Investment
In 2024, Japan’s property market saw differing trends in its major cities. Osaka experienced steady demand, particularly in short-term rental (BNB) properties and serviced apartments. The city’s booming tourism industry, recovering from the pandemic and gearing up for the World Expo 2025, supported this growth. While price increases were moderate compared to previous years, the continued interest from investors was clear, particularly due to Osaka’s relatively lower entry costs compared to Tokyo.
Meanwhile, Tokyo has reached new price heights in 2024, driven by strong domestic and international demand. However, the high prices and limited supply of choice properties began pushing investors towards alternative markets, particularly Osaka, where capital appreciation potential is still strong at more affordable price points.
Osaka is set to outperform Tokyo in 2025 in terms of investment appeal. The World Expo 2025 is expected to bring a great surge in demand for short-term rentals, hotels and commercial spaces. This event will significantly enhance Osaka’s global profile, attracting more tourists and boosting the rental property market.
Furthermore, Osaka’s efforts to position itself as a hub for international business and tourism, combined with favourable local government policies, will make it a top choice for investors.
Due to all the above-mentioned factors, Itami Airport in Osaka is set to expect a growth of 30% of foreign tourists. Osaka has, in turn, experienced a steady growth in capital gain with Tokyo not too far behind.
Tokyo will likely see more moderate growth. While it remains a prime real estate market, high prices and limited development opportunities may slow down investment, especially from those seeking higher short-term returns.
We expect that the BNB market will likely be the most attractive real estate segment in Osaka next year. The influx of visitors for the World Expo 2025 is expected to drive high occupancy rates, offering strong returns for investors.
For the hotel segment, we witnessed a rise in hotel room rates in 2024. In Osaka, developments with special minpaku (Japan’s New Private Lodging Law) licences are well-positioned to capitalise on this surge in tourism for 2025 and beyond.
The commercial real estate sector, particularly hospitality and retail, will also see strong demand as tourism and business activities continue to rise in Osaka.
Several key factors will impact the property market in Osaka and Tokyo in 2025, such as tourism and international events, particularly the World Expo 2025, and the upcoming Integrated Resort in 2030, which will serve as key growth drivers for Osaka, making it a compelling investment opportunity for investors. Infrastructure improvements and supportive government policies will continue to encourage foreign and domestic investments.
However, currency fluctuations and a potentially strong yen could deter foreign investors. Additionally, rising interest rates may reduce borrowing power, impacting overall market liquidity.
Overall, Osaka stands out as a more promising market for investors in 2025, with its focus on tourism, affordable property prices and favourable regulatory environment positioning it for strong growth, especially in the short-term rental and commercial sectors.
Indonesia
Yunus Karim
Head of research
JLL Indonesia
Despite global economic uncertainties, Indonesia’s economy maintained healthy growth in 2024, with GDP increasing by 4.95% in 3Q. Foreign direct investment continued its upward trend in the first three quarters, with growth projected between 4.7% and 5.5% for the full year of 2024.
Also, 2024 marked a milestone with the completion of the Cimanggis-Cibitung toll road in July. The road connects the Jakarta Outer Ring Road 2 and enhances connectivity throughout Greater Jakarta. In September, groundbreaking ceremonies were held for major transit projects — Jakarta Mass Rapid Transit West-East line and Bali Light Rail Transit systems.
In the first nine months of 2024, the Greater Jakarta property market demonstrated resilience across sectors.
Office occupancy rates across all grades remained steady at an average of 70%, with Grade A buildings experiencing rental increases in 3Q for the first time since mid-2015.
In the industrial sector, logistics warehouses are stable with strong demand.
As for hotels, they attract investors due to robust tourism and anticipated value appreciation.
The office market, with no new supply expected in 2025, is anticipated to continue benefiting from the “flight-to-quality” trend, leading to greater stability in overall occupancy and rental rates.
The retail sector remains stable and driven by demand in the F&B and fashion sectors. In particular, prime malls are expected to remain healthy despite the entry of new supply. Jakarta remains an attractive market for numerous global brands, with newcomers and established players actively expanding their presence in the city’s prime malls.
Condominium buyers remain cautious but continue to prefer projects in prime locations with limited competition and residences in mixed-use developments near public transport. Demand from end users is likely to bolster the ongoing stability of the landed housing sector. However, the government’s plan to increase value-added tax (VAT) to 12% in 2025 may impact the residential market, particularly if the current VAT waiver incentives are not extended next year.
The modern logistics warehouse market may experience increased competition due to the new supply pipeline, particularly in the eastern region of Greater Jakarta. Nevertheless, demand is expected to remain stable, driven significantly by third-party logistics. Furthermore, industrial land is forecasted to draw interest, benefiting from the China+1 strategy, which offers Chinese manufacturers an alternative to establish facilities outside of China. Additionally, the government’s effort to build an electric vehicle ecosystem is expected to attract industry players to the country. New supply of luxury hotel rooms, although limited, is likely to support growth in the trading performance of Jakarta’s hotel market.
The government forecasts a slightly improved economic growth trajectory, projecting growth of between 4.8% and 5.6%. With a new cabinet, there is hope that the administration will implement measures to boost economic growth and the property sector. Indonesia’s real estate market is poised for an exciting future.
India
Anuj Puri
Chairman
Anarock Group
Among the top seven cities of India — Mumbai Metropolitan Region (MMR), Pune, Bengaluru, National Capital Region (NCR), Chennai, Hyderabad and Kolkata — MMR remained the most active real estate market in India in the first nine months of 2024 (9M2024). The region witnessed robust activity in terms of housing sales and new launches. As per Anarock Research, approximately 1.21 lakh units have been sold in MMR in 9M2024, while over 1.07 lakh units have been launched by developers.
Both new launches and housing sales in 9M2024 were 3% higher each compared to 9M2023. This growth is good considering that the last two quarters saw real estate activity tapering amid elections in the country and the monsoon season. Pune witnessed the second highest housing sales with 63,180 units sold and over 50,150 units launched in 9M2024.
In 1Q2024, the top seven cities also saw an all-time high of real estate activity. Considering that this base is very high, real estate activity tapered down over the next two quarters. While the 3Q2024 marked a stabilisation period for the Indian residential real estate market, the underlying fundamentals remain strong. The country’s growing population, strong economy and urbanisation trends are expected to drive demand for housing in the future. Overall, the residential market across the top Indian cities is entering a phase of greater maturity, characterised by more measured growth, increased competition and a focus on quality and affordability.
In the short term, the Indian residential real estate market is seeing a relatively buoyant last quarter of 2024, fuelled by a surge in demand during the festive season. Developers have strategically planned a slew of projects to be launched to capitalise on this anticipated upswing. While the market has witnessed robust growth in the past couple of years, experts predict that the pace of growth may moderate in the coming quarters. The residential property prices, which have peaked, are anticipated to stabilise across major cities.
The luxury segment has been one of the frontrunners in the real estate activity in the last few years. The segment witnessed robust growth in terms of new supply and sales. Given the buoyant demand, developers across key cities such as Delhi-NCR, Bengaluru and MMR have been launching several projects in this segment. These projects are also getting sold within a very short span of their launch.
Going forward, the outlook for India’s luxury real estate market remains robust for the coming years. The sector will likely witness sustained demand, driven by increasing disposable incomes, aspirational lifestyles and a stable economic environment. While there might be short-term price corrections, the long-term trajectory appears positive, especially for projects offering unique value propositions. The market is expected to evolve further with an increased focus on sustainable luxury, technology integration and wellness-oriented amenities.
While home loan interest rates in India have remained stable in the last few quarters, geopolitical tensions and economic uncertainties could cast a shadow over the residential market. Nevertheless, the underlying fundamentals of the Indian economy remain strong and the long-term prospects for the residential real estate sector remain positive.
Hong Kong
Simon Smith
Regional head of research and consultancy, Asia-Pacific
Savills
Most sectors continued to consolidate in 2024 as Hong Kong faced slowing occupier and investor demand and a world-beating real estate cost base adjusted to new harsher economic realities. With a shrinking tenant pool, an overbuilt office market succumbed, even as hybrid working practices receded. The retail market saw more Hong Kongers shopping in cheaper Shenzhen while Mainland visitors to Hong Kong spent less. Luxury residential rents held up surprisingly well, but generally in areas favoured by new Mainland arrivals while elsewhere they remained broadly flat.
We expect overleveraged investors to remain under pressure next year and this will maintain downward price momentum across the commercial and luxury residential sectors but it could also help to lift transaction volumes.
Given the macroeconomic outlook and a possible higher-for-longer interest environment, investors will remain cautious, and the commercial markets in particular will look highly valued. However, distressed sales should remain a feature of the real estate landscape next year and cash-rich buyers are well placed to take advantage. End users may also find opportunities to lock in accommodation costs. We are slightly more optimistic about the residential sector where limited new supply, Mainland immigration and an absence of government restrictions could bolster confidence.
The city faces a number of headwinds in 2025, not least a Mainland economy which is experiencing below-trend growth, elevated unemployment levels, falling residential values and high levels of debt. A Trump presidency and the prospect of tariffs do not bode well for an export-orientated economy such as Hong Kong’s either. Subdued or uncertain business prospects could weaken occupier demand further while modest falls in interest rates will do little to reassure investors.
China
James Macdonald
Head of research, China
Savills
For 2024, it has been a challenging year for most asset classes and regions across China, including the leading cities of Shanghai and Beijing. Weak economic prospects and uncertainty have led companies to focus on cost reduction and headcount management, thereby weakening office demand as well as impacting salary growth and job security. These factors have had a ripple effect on the retail market and residential sectors. Additionally, new property completions have increased vacancy rates or maintained them at high levels.
Local authorities have relaxed restrictions in the residential market, and monetary support has become more accommodative, helping to spur demand — this has been more successful in Shanghai than in Beijing. However, addressing weak demand in the commercial and industrial markets has proved more difficult.
We anticipate an increase in fiscal support in 2025, with a focus on households and domestic consumption, alongside a shift in regulatory frameworks towards greater flexibility and pro-business, pro-growth initiatives. If effectively implemented, these measures could enhance economic prospects and bolster business confidence, ultimately resulting in higher occupancy levels.
However, economic recovery is expected to be slow and gradual, with improvements in market sentiment and economic fundamentals occurring over time. With policy focus pivoting back to real estate, the residential sector is likely to see a recovery in transaction volumes first, while pricing recovery may only follow once unsold inventories in certain cities reach more manageable levels. In contrast, the industrial and commercial sectors are expected to take longer to stabilise, with vacancy rates projected to remain high over the coming years, continuing to favour tenants in the market.
Each investor has a unique investment thesis, return hurdle, risk tolerance and skill set, leading to varied approaches. In 2025, we hope to see a true reset of property values and the clearance of unproductive assets, which may attract more opportunistic investors. Meanwhile, more conservative investors might focus on undersupplied markets such as multifamily housing or sectors with stable tenants and government support, such as life science clusters or manufacturing hubs. Additionally, some investors may seek opportunities in transitioning assets between private and public markets, with acquisitions tailored for future real estate investment fund (REIT) listings.
The property market’s growth will largely depend on the signals and policies issued by the government and the confidence these instil in businesses and consumers, in the short run. As we observed, a series of monetary policies had led to a significant impact prior to the national holidays. However, in the long term, the ongoing uncertainty and market malaise still require a sustained and comprehensive approach from both businesses and investors to shift their outlook.
Canada
Mark Fieder
Principal and president
Avison Young Canada
Toronto and Montreal led national investment sales volumes, with the lion’s share of transactions focused on industrial throughout the year, followed by multi-residential. This year saw greater volume in sales for all of Canada. In the first three quarters of 2024, the sales volume of C$25.7 billion surpassed sales of C$23 billion for the same period last year.
Canada is entering the next stage of the correction cycle. In the coming months, we will see price discovery with the bid/ask spread diminishing. This allows investors to better underwrite assets and occupiers to decide where to invest in their business more confidently.
Historically, this price discovery stage of a cycle is the start of a bull run, as seen in past cycles including 2010/2011, which can be compared to our current 2024/2025 market condition. We expect the industrial, multi-residential and retail asset classes to continue to lead the way and garner the most interest from investors. The value creation play will be in office and urban land opportunities.
Multi-residential, industrial and retail continue to be the asset classes of choice in Canada, garnering the most favour from lenders. Although trading will continue to take place, the lack of product to buy may keep activity and trading below average.
Our commercial real estate industry is carefully observing the Bank of Canada’s (BoC) interest rate announcements. As the first G7 country to cut its policy rate post-pandemic in 2Q2024, the BoC further cut the policy rate in both of its 3Q2024 announcements. With these moves, we expect real estate investments to become more attractive — opening the door for more entry from institutional investors.
While the downward trajectory of interest rates helps, lending sources continue to constrain struggling asset classes, such as office and residential land (especially high-density condo) in major cities except for Calgary and Edmonton, where migration has ignited demand for residential land. The BoC cannot move fast enough to cut interest rates.
Australia
Ben Burston
Chief economist of research and consulting
Knight Frank Australia
Clouded by multiple uncertainties since early 2022, property investment in Australia has been stuck in the slow lane. For some time, investors have been asking the same questions: how long would inflation persist? How high would interest rates rise? To what extent would asset values need to adjust?
After nearly three years, these remain important questions, but from a global perspective the degree of urgency has been dialled down as the answers are increasingly known and, where uncertainty still persists, it has fallen back within a more normal range. Inflation is subsiding, albeit after a few bumps in the road, while interest rates have peaked in the major economies and begun to retrace.
In Australia, progression on these key questions has been slower, but as we look ahead to 2025, the sentiment is much more positive, as investors look ahead to the prospect of improving economic growth, a gradual decline in interest rates and a return to capital growth, as a new cycle dawns after the downturn.
As the market returns to growth, we expect core assets in Sydney to lead the way. As Australia’s deepest and most liquid capital market and its most international city, investors are consistently drawn to Sydney, with regional surveys of cross-border investors consistently highlighting it as a key target within the Asia-Pacific region. In addition, many investors will be viewing the correction as an opportune time to acquire core Sydney assets with less competition.
Within Sydney, the industrial sector is likely to be quickest to return to growth. Industrial assets have largely been resilient over the past two years due to strong rental growth, but even as supply levels rise, most investors retain confidence in the long-term growth outlook and many are still seeking to deploy additional capital into the sector.
Offices are likely to follow, but there will be substantial variation by grade and location. Core CBD offices will be most sought after, reflecting the shifting pattern of tenant demand, while non-core CBD and suburban offices will take longer to recover and the market will remain bifurcated at asset level.
As in past cycles, the recovery in Sydney will gradually extend to other cities, with Brisbane likely to be next in line to benefit from the strong economic growth of South East Queensland and lower supply levels compared to Melbourne.
Many investors continue to seek exposure to living sectors and have taken time over the past two years to better understand the feasibility constraints and are now better placed to execute new developments and form new partnerships. We expect renewed growth in the development of build-to-rent assets, led by specialist offshore investors.
Finally, retail markets are set to benefit from significantly higher demand as investors re-engage with the sector and seek to rebuild allocations. Many have been heartened by the relative resilience of the sector during a difficult period and a favourable outlook for income growth will attract more capital in 2025.
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