Top 10 Issues For Real Estate In 2025: Political 'Turmoil' And 'Sky-High Insurance' Lead List

Political instability and escalating insurance costs are the top real estate market challenges in 2025.

An annual report from the Counselors of Real Estate (CRE), cited by the National Association of Realtors (NAR), highlights mounting pressures on the industry from geopolitical tensions to technological disruption.

The real estate sector shows cautious optimism following recent interest rate cuts and hopes for an economic soft landing. However, headwinds persist, notably the upcoming electoral cycle affecting more than 70 nations.

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“This coming year, elections in more than 70 countries could shake up an already volatile geopolitical landscape and the U.S. elections, in particular, will have a significant impact on regulation, trade, corporate taxes, immigration policy and sustainability,” CRE global chair Anthony DellaPelle said in the report.

Insurance costs are a major concern, following $380 billion in economic losses from natural disasters in 2023. The report noted that only 31% of the losses were insured, pushing premiums higher across residential, hospitality and senior living properties. The traditional insurance model faces pressure as property owners pivot toward risk management and alternative coverage options.

Financing remains tight despite recent rate decreases. The report notes that nearly $1.8 trillion in commercial real estate loans will mature before 2027, creating pressure on both lenders and borrowers. Banks are increasingly extending existing loans, but regulatory constraints and capital reserve requirements limit the strategy’s effectiveness.

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The NAR noted that the housing affordability crisis continues to deepen. Despite construction increases in major metros, the national housing shortage is 4.4 million units. Multifamily rents have surged 45% over 15 years, with 54% of renters now classified as cost-burdened, spending over 30% of income on housing.

Office space challenges persist, with vacancy rates projected to approach 20% by late this year. The shift drives increased interest in converting offices to residential, health care and educational facilities, though such transformations present technical and financial hurdles.

The rise of artificial intelligence (AI) presents both opportunities and challenges. While AI adoption grows across real estate operations, the industry grapples with data fragmentation and location-specific complexities. The computing demands of AI systems may boost data center development.

Climate change impacts intensify focus on sustainability and resilience. European regulations lead global environmental standards, while U.S. rules remain largely localized. “The urgency for prioritizing sustainability and climate resiliency in real estate strategies has never been more apparent,” DellaPelle said, linking extreme weather to rising insurance costs.

Price expectations between buyers and sellers show signs of alignment after prolonged disconnect.

The report suggests pricing gaps may narrow as market participants adjust to new conditions, with improvements expected across various property types.

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