Bricks, Mortar and Magic Prices

Why Homes Feel Like Rocket Ships

Real estate is more than a house; it is land plus any permanent structures or improvements attached to it (Investopedia, 2024). This differs from personal property such as cars or jewelry (Investopedia, 2024). Real estate encompasses residential, commercial, and industrial buildings, as well as raw land and special-use sites (Investopedia, 2024). In recent years, the value of these assets has surged. The UBS Global Real Estate Bubble Index 2025 reports that, although global housing markets cooled overall, cities such as Miami, Tokyo, and Zurich still face elevated bubble risk (World Property Journal, 2025). Inflation-adjusted prices in high-risk cities rose nearly twenty-five percent over the past five years, while rents increased only ten percent and incomes roughly five percent (World Property Journal, 2025). In contrast, moderate risk cities saw price declines (World Property Journal, 2025).

Construction costs add fuel to the fire. Building materials have jumped by about thirty-five percent since the pandemic; steel prices are up over one hundred twenty-five percent, and concrete costs fifteen to twenty-five percent more (Primior, 2025). Supply chain disruptions and material shortages have forced eighty-eight percent of construction firms to delay projects (Primior, 2025). The median home renovation cost reached roughly twenty-four thousand dollars in 2023, a sixty percent increase from 2020 (Primior, 2025). Developers face financing costs that are around twenty-two percent higher than in 2021 because interest rates for construction loans sit between seven point five and nine point five percent (Primior, 2025). Labor shortages persist; the industry needs about four hundred thirty nine thousand additional workers, and more than ninety percent of firms struggle to fill craft positions (Primior, 2025). Energy prices further inflate costs resulting to running equipment costs about twenty-three percent more than two years ago (Primior, 2025).

The Bubble Debate and Beyond

Soaring property values do not benefit everyone equally. Affordability has plummeted in many cities; for instance, in Hong Kong, it takes about fourteen years of average income to buy a sixty-square-meter apartment, and price-to-income ratios exceed ten in Paris, London, and Tokyo (World Property Journal, 2025). Even in markets with modest gains like Zurich and Geneva, near-zero interest rates encourage borrowing and push prices higher (World Property Journal, 2025). At the same time, supply remains tight because high construction costs discourage new projects. The Primior report warns that construction now accounts for more than sixty-four percent of a new home’s cost, the highest share since records began in 1998 (Primior, 2025).

Looking forward, demographic shifts, remote work, and sustainability goals will shape real estate. Aging populations in Europe may concentrate demand in city centers, while flexible work arrangements could boost suburban and secondary markets (World Property Journal, 2025). Energy-efficient and low-carbon buildings are becoming more important as governments and investors push for greener portfolios. Sustainable design not only reduces emissions but can lower operating costs.

What the Crystal Ball Shows

The era of effortless double-digit appreciation is fading, but real estate remains a major vehicle for building wealth. Markets may stabilise, yet demand for well-located, sustainable, and functional properties will persist. Investors who pay attention to fundamentals such as supply, demand, affordability, and sustainability will navigate the cycle better than those who chase quick gains. This presents a hopeful future for those who invest wisely in real estate.

What You Can Do Today

Whether you are buying, renting, or investing, start with research. Check local price-to-income and price-to-rent ratios and compare them with your earnings. Factor in financing costs and potential renovations like materials and labor are expensive (Primior, 2025). If you are an investor, diversify beyond hotspots that exhibit bubble risk and look for properties aligned with future trends such as green certification or adaptable spaces. If you are a renter, negotiate long-term leases before rents climb and consider smaller cities with lower ratios. Encourage local officials to promote affordable housing and sustainable construction. In this market, knowledge and patience are your strongest assets, empowering you to make informed decisions.

References

1. Investopedia (2024). Real estate definition types and how to invest. Retrieved from https://www.investopedia.com.
2. World Property Journal (2025). UBS flags Miami, Tokyo, and Zurich as bubble risk markets in 2025. Retrieved from https://www.worldpropertyjournal.com.
3. Primior (2025). Real estate development costs soar, and the hidden impact of inflation in 2025. Retrieved from https://primior.com.