Why You Should Consider Real Estate Investments in 2025
According to analysts, the real estate markets are gaining momentum again due to favorable macroeconomic conditions and recent data, which provide attractive opportunities for investors.
This week, the decline in U.S. Treasury yields indicated that investors' confidence in the Federal Reserve's potential to continue lowering interest rates has increased. This optimism is also reflected in the housing market; pending home sales rose for the third consecutive month in October. According to the National Association of Realtors, contract signings rose by 2% compared to the previous month and increased by 6.6% year-over-year.
The steady recovery in the U.S. housing market could mark the beginning of a revival in global real estate investments. According to UBS analysts, falling capital costs, improving debt availability, and a significant amount of ready private equity support this trend.
Supply Constraints Increase Expectations
Both commercial and residential construction remain constrained due to tighter regulations and high costs post-pandemic, leading to a shortage of quality properties. As interest rate cycles change, the combination of supply shortages and strong demand is expected to reduce vacancy rates and trigger rental increases, potentially leading to significant capital appreciation.
UBS highlights logistics properties, data centers, and telecommunications towers as prominent segments within commercial real estate in the U.S. and Europe, influenced by e-commerce and artificial intelligence trends. In residential real estate, multi-family units, elderly care homes, and student housing are identified as promising growth areas.
In private markets, core and core-plus real estate managers are well-positioned to capitalize on opportunistic purchases while generating income. Direct real estate investments in Canada, the U.S., and continental Europe are anticipated to be particularly profitable due to strong rental increases and declining interest rates.
Despite these positive signs, UBS advises caution in the UK housing market, where affordability challenges persist. Similarly, despite recent stimulus measures aimed at stabilizing the sector, mainland China remains a risky prospect.
UBS forecasts a broader real estate recovery by 2025 while emphasizing the importance of careful assessment. Investors should consider sector fundamentals and regional dynamics to effectively evaluate opportunities. For those prepared to manage regional and sector-specific risks, the current environment offers a promising entry point into the recovering real estate market.