{"id":4782,"date":"2025-02-05T11:18:11","date_gmt":"2025-02-05T19:18:11","guid":{"rendered":"https:\/\/livsothebysrealtyca.blog\/?p=4782"},"modified":"2025-06-13T11:30:48","modified_gmt":"2025-06-13T18:30:48","slug":"investment-landscape","status":"publish","type":"post","link":"https:\/\/livsothebysrealtyca.blog\/spu\/investment-landscape\/","title":{"rendered":"Investment Landscape"},"content":{"rendered":"
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When Sotheby\u2019s International Realty published its 2024 Mid-Year Luxury Outlook<\/a> in July 2024, two topics were \u2028at the forefront of the year\u2019s agenda: whether a long-awaited reduction in \u2028U.S. interest rates would occur and what impact the many elections around the world would have on property markets. \u2028As the year came to a close, both of those questions had been answered. <\/span><\/p>\n

On September 18, 2024, the U.S. Federal Reserve, the country\u2019s central bank, cut interest rates by half a percentage point to 4.75% to 5%, the first reduction since March 2020 and down from a 20-year high of 5.25% to 5.50%. The Fed made a further quarter-point reduction in both November and December 2024, with only a further two cuts anticipated in 2025. However, Jerome Powell, the central bank\u2019s chair, suggested during the announcement of these changes\u2014the first of which took place on the heels of the U.S. Presidential election\u2014that policymakers would be watching incoming economic data closely, as a new Presidential administration takes power in January 2025, before making \u2028any future adjustments. <\/span><\/p>\n

The key indicator that will affect any further decisions the Fed makes on interest rates is inflation. When it made its first cut in September 2024, inflation was at 2.4%, nearing the Fed\u2019s 2% benchmark for price stability, down from a 20-year high of 9.1% in June 2022, according to the U.S. Bureau of Labor. Following the U.S. Presidential election, and the anticipation of tariffs promised by the incoming administration in 2025, inflation began to rise to 2.7% in November 2024, according to the Bureau of Labor Statistics, and could continue to change in the coming year. <\/span><\/p>\n

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“REDUCING POLICY RESTRAINT TOO\u00a0FAST OR TOO\u00a0MUCH COULD HINDER PROGRESS ON INFLATION.”<\/strong>
\n-Jerome Powell, Chairman, U.S. Federal Reserve System<\/p>\n<\/blockquote>\n

In turn, the Fed presented a cautious approach to any further interest rate cuts. \u201cWe know that reducing policy restraint \u2028too fast or too much could hinder progress on inflation,\u201d Powell said during a press conference following the Fed\u2019s rate cut \u2028in December 2024. \u201cAt the same time, reducing policy restraint too slowly could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the committee will assess incoming data, the evolving outlook, and the balance of risks. We\u2019re not on any preset course.\u201d Powell added that, despite expectation that inflation will be higher in 2025, the Fed is on track to continue to cut interests rates. \u201cI think the actual cuts that we make next year will not be because of anything we wrote down today,\u201d he said. \u201cWe\u2019re going to react to data.\u201d <\/span><\/p>\n

Changes in interest rates have a direct effect on mortgage rates. Anticipating \u2028the Fed\u2019s cuts, mortgage rates had started to fall in August 2024 to an average of 6.7%, down from a 20-year high of 7.79% in October 2023. But with lowered expectations about future cuts from the Fed and concerns about inflation, mortgage rates also slowed with the Mortgage Bankers Association (MBA) adjusting its expectations to range between 6.4% and 6.6% in 2025, according to a November 2024 report from Housing Wire. Fannie Mae also revised its projections to 6.4% \u2028in 2025 and above 6% in 2026.<\/span><\/p>\n

Mortgage rates would be further affected if the incoming U.S. president revives efforts to reprivatize the country\u2019s two largest mortgage guarantors, Fannie Mae and Freddie Mac, which were taken under government conservatorship following the 2008 housing crisis, according to an early December 2024 report from CNN. \u201cThe law says they \u2028are eventually to be privatized,\u201d Susan Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania, told CNN. \u2028\u201cBut the stakes are very, very high as \u2028to how this is carried out.\u201d One way to mitigate the market swings that could occur would be for the government \u2028to charge the companies a fee for the guarantee of a bailout in a future crisis. <\/span><\/p>\n

Meanwhile, the impact of the Fed\u2019s interest rate decision also started to ripple out globally. While rates in the U.K. had dropped from a 16-year average high of 5.25% in June 2024 to 4.75% in November 2024, Bank of England policymakers told the BBC that any future rate cuts would likely be more gradual since inflation concerns persisted and the newly installed Labour government\u2019s budget and tax plans would likely increase consumer prices. <\/span><\/p>\n

Meanwhile, the People\u2019s Bank of China instructed the country\u2019s commercial banks to lower mortgage rates for existing home loans by at least 30 basis points below the loan prime rate. The one-year rate was set at 3.35%, the five-year rate at 3.85%. \u200b\u200b <\/span><\/p>\n

Political Changes <\/span><\/h3>\n

The impact of many national elections \u2028was still playing out as this report was being compiled. According to Reuters and The Economist, about half of the world\u2019s voting-age population\u2014in nearly 80 countries, collectively accounting for \u2028more than 60% of global GDP\u2014were eligible to participate in elections in 2024. <\/span><\/p>\n

The most closely watched of these was in the U.S., the world\u2019s largest economy and third-largest nation by population, which elected its next president in November. The Republican Party achieved a decisive victory in the election, winning the presidency and securing a majority in both houses of Congress. The outcome led to a surge in the U.S. stock market according to a report in The New York Times on November 6, 2024\u2014the day after the election\u2014and strengthened the value of the American dollar against the currency of major \u2028trading partners, including Japan, Mexico and China, due to the proposed tariffs the incoming administration has promised to impose against foreign goods. According \u2028to analysts cited by the The New York Times, the incoming Republican president\u2019s economic platform is expected to bolster growth but also raise inflation, which could lead to higher interest rates over time. <\/span><\/p>\n

Meanwhile, in the U.K., a landslide victory for the Labour Party in July 2024 stimulated the property market, with home prices in September rising at their fastest pace in nearly two years. The average \u2028price was up 4.7% from a year before \u2028and had risen for the third straight \u2028month, according to U.K. lender Halifax. However, a projected increase in taxes \u2028on the country\u2019s wealthy has led real \u2028estate agents in the luxury sector to \u2028seek out U.S. buyers for their high-end properties, according to Bloomberg. <\/span><\/p>\n

And in India, the incumbent Bharatiya Janata Party (BJP) held onto power but \u2028did not win an outright majority, leading \u2028to a coalition government with the Telugu Desam Party and Janata Dal (United). \u2028The BJP\u2019s tepid victory has not adversely affected the country\u2019s property markets, however, with a September 2024 Reuters poll of housing experts finding that property prices in India were expected to rise 7.75% in 2024, nearly double 2023\u2019s 4.3% growth, mainly driven by demand \u2028for luxury properties.\u00a0<\/span>\u25a0<\/span><\/p>\n\t<\/div>\r\n<\/div>\r\n\r\n\r\n\r\n\n\t\t\t<\/div> \n\t\t<\/div>\n\t<\/div> \n<\/div><\/div>","protected":false},"excerpt":{"rendered":"

Global rate cuts and political shifts reshaped 2024\u2019s real estate market\u2014here\u2019s what it means for luxury investment heading into 2025.<\/p>","protected":false},"author":237480080,"featured_media":4724,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_wpcom_ai_launchpad_first_post":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"{title}\n\n{excerpt}\n\n{url}","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false,"jetpack_post_was_ever_published":false},"categories":[765166268,135,765166251],"tags":[765166273,765166258,765166274,765166271,765166275,765166269,765166277,318499075,106159,272858,765166270,765166272,2155747,13092639,765166276],"class_list":["post-4782","post","type-post","status-publish","format-standard","has-post-thumbnail","category-765166268","category-articles-of-interest","category-luxury-outlook-report","tag-2024-market-trends","tag-2025-luxury-outlook-report","tag-fed-rate-cuts","tag-global-economy","tag-global-elections","tag-interest-rates","tag-international-property-markets","tag-liv-sothebys-international-realty","tag-luxury","tag-luxury-real-estate","tag-mortgage-rates","tag-real-estate-investing","tag-sothebys-international-realty","tag-sothebys-realty","tag-u-s-housing-market"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t