In mid-2025, the luxury real estate market is navigating through geopolitical uncertainties, soaring interest rates and marked regional disparities. While the market remains solid in certain major hubs such as the United States and Asia, Europe is experiencing a marked slowdown. Sotheby’s Realty International’s latest report highlights the sector’s ability to adapt to the current upheavals, with new buyer profiles, reallocation of capital and increased demands for sustainability.
The current geopolitical context is far from favorable for the luxury real estate market. In 2025, the war in Ukraine continues to weigh heavily on the European economic outlook, undermining the confidence of foreign investors. In addition, persistent trade tensions between the major powers, notably the USA and China, complicate international capital movements. This climate of global uncertainty is prompting buyers to exercise caution, and even to reposition their strategies.
Major geopolitical issues holding back investment flows
Against this backdrop, rising interest rates – a direct consequence of restrictive monetary policies designed to combat inflation – are having a tangible effect on buyers’ purchasing power, even in the very high-end segment. In the United States, for example, the average interest rate on mortgages has passed the 7% mark, a level not seen for over a decade. This change makes borrowing less attractive, forcing some investors to prefer cash purchases or to turn to markets where credit remains more accessible.
This combination of factors has led to a significant drop in transactions in certain areas. In Europe, according to consultancy Knight Frank, sales of prestige properties fell by 8% in the first six months of 2025, particularly in London and Paris, two historic strongholds of luxury real estate. This decline is explained by a more fragile economic climate, rising taxes on second homes, and a reduction in international travel, which is affecting foreign customers.
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Featured photo : © Sotheby’s Realty International
