Deniz Igan
Chief of the IMF Research Department’s World Economic Studies Division

Deniz Igan is the Chief of the IMF Research Department’s World Economic Studies Division. Between 2021 and 2024, she was the Head of Macroeconomic Analysis at the Bank for International Settlements. Prior to that, she held various positions at the IMF, including as co-editor of the IMF Research Perspectives, an advisor to the editor for the IMF’s Finance & Development magazine, and a recurring contributor to the Global Financial Stability Report, the World Economic Outlook, and the IMF-FSB Early Warning Exercise. Her research interests include macro-financial linkages, financial crises, real estate markets, and the political economy of financial regulation. Her work has been published in academic journals including policy-oriented volumes and presented widely in conferences and workshops. Deniz is a CEPR Research Fellow, an EUI Young Policy Leaders Fellow, and an expert panelist at Zillow’s House Price Expectations Survey. Deniz holds a PhD from Princeton University.

Global Real Estate’s Uneven Reckoning

Real estate has become one of the clearest stress tests of the post-pandemic global economy—and the stakes are enormous: global real estate is estimated to be worth slightly more than $400 trillion in 2025, more than the combined value of global equities, bonds, and gold.

The pandemic set off a global residential real estate whiplash. In 2020 and 2021, ultra-low interest rates, fiscal support, remote work, and a surge in demand for space pushed housing markets higher in many economies, even as lockdowns, labor shortages, and supply-chain disruptions slowed construction. The reopening and rising geopolitical tensions then brought a different shock: inflation surged, energy prices jumped, and most central banks around the world raised rates at the fastest pace in decades.

Residential markets nevertheless proved more resilient than many expected. Higher mortgage rates damaged affordability more than prices: across 40 countries, the post-pandemic period produced the worst affordability squeeze in more than a decade, as borrowing costs rose while housing shortages and robust household formation kept a floor for prices. As some central banks began easing in the second half of 2024, housing stabilized in most parts of the world. By late 2025, real global house prices were only 0.6 percent below their year-earlier level and remained almost 3 percent above pre-pandemic levels. But the average concealed divergence: prices in advanced economies rose 0.4 percent, while those in emerging markets declined 1.4 percent, led by Asia. China remained a major exception: its protracted property adjustment continued to weaken domestic demand and local government finances while adding deflationary pressure.

Supply constraints help explain both this resilience and its distributional consequences. Responsiveness of new housing supply to changes in house prices has steadily declined over the past five decades. This structural shift amplifies house price volatility during monetary policy adjustments while leaving market rents largely unresponsive. This magnifies wealth and collateral effects for existing owners while leaving prospective buyers facing high prices and financing costs.

In parallel, commercial real estate experienced a sharp sectoral split. Hybrid work accelerated structural weakness in offices, especially in large US cities, while London, Paris, Sydney, and Tokyo recorded stronger leasing. Higher interest rates raised capitalization rates, reduced valuations, and complicated refinancing as older loans matured. This brought about a rise in delinquencies, driven by office stress, albeit from a low base. Global direct investment rebounded from its 2023 trough, supported by logistics, multifamily housing, and data centers.

The rise of data centers has been most striking. Digitalization, cloud applications, and artificial intelligence are redirecting capital toward land and specialized buildings. Their impact can spill well beyond the data center site itself. Competition for power-ready land and fiber access can raise the value of industrial parcels, reshape logistics and warehouse markets, and push developers toward secondary or exurban locations where grid capacity, permitting, and large sites are more available. Local economies can also benefit through construction activity, tax revenues, utility investment, and demand for supporting services, but these gains are not automatic: high electricity and water use, limited long-term employment, noise, zoning conflicts, and pressure on local infrastructure can generate community resistance.

Real estate markets rarely move like one global tide. The past few years have been a stark reminder of what a patchwork real estate markets can be: constrained housing markets, stretched potential first-time buyers, bruised office districts, and a data center rush. The next phase will be shaped by who can build faster and supply the infrastructure that a more digital, energy-hungry economy now demands.