The Living Sector

2025 Global Investment Outlook: Living

Relatively Inelastic Demand, Perennially Undersupplied

The Living Sector

Despite the disparity of real estate cycles across regions, countries, and cities, the living sector probably has the most similarities across the globe. The housing shortage, which is well-documented in developed countries is a fairly universal phenomenon. That said, the degree of undersupply does vary across countries and product types.

The lack of affordability is creating significant demand for rental units, particularly in developed economies. Over 80% of households we analyzed showed clear momentum for renting over buying, with renting households growing much more quickly than home-owning ones. In many of these countries, the ownership of rental properties is extremely fragmented, with relatively little institutionally built, owned, and managed product.

Key Takeaway: The Living Sector

Proclivity towards renting is gaining traction globally as a widespread housing shortage has contributed to an affordability crisis.

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We expect the wave of cyclical supply to slow in 2026-27, and then market rent growth should accelerate from its current lows.

As shown in the chart below, we estimate that U.S. NOI would have to increase about 15% or cap rates would need to decrease by 75 basis points (or some combination thereof) for new development to pencil at the national level, though the range of those estimates varies at the local market level. While there is still a gap, this is a notable improvement from a year ago (3Q 2023) when NOI was more than 20% lower and cap rates were more than 100 basis points higher than needed to kick start a new development.

Required Change in Cap Rates or NOI to Make U.S. Apartment Development Pencil

Sources: Oxford Economics, Eurostat, U.S. Census Bureau, Statistics Canada, Australian Bureau of Statistics, Hong Kong Census and Statistics Department, Statistical Bureau of Japan, and Hines Research. As of 2Q 2024.

In the U.S., the difficulty of homeownership attainment seems to be boosting single-family and townhome rental housing.

Learn why it is now more attractive than it ever has been to rent versus buy in the U.S. housing market.

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Disclaimer


The content herein and in the report is provided for informational purposes only. Nothing above or in the report constitutes investment, legal, or tax advice or recommendations. Such content should not be relied upon as a basis for making an investment decision and is not an offer of advisory services or an offer to invest in any product or asset class. It should not be assumed that any investment in an asset class described herein will be profitable. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice. Opinions or beliefs expressed in these materials may differ or be contrary to opinions expressed by others. Certain information above and in the report has been obtained from third-party sources. Hines has not independently verified such information.


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