As North American property markets evolve, perhaps Australia could learn a lesson or two to help reshape its own property market.

From private capital filling funding gaps to AI reshaping the way we build, the PwC and Urban Land Institute (ULI) Real Estate Playbook for 2025 can easily be applied to the Australian context.

The 2025 Emerging Real Estate Trends in the United States and Canada report provides an analysis of the current status and outlook for the North American real estate market.

The report highlights the significant challenges the sector will face in 2024, including reduced credit availability, increased geopolitical risks and continued high interest rates.

Sound familiar?

Despite the obstacles, the report identifies opportunities for investors willing to engage in creative financing, form new partnerships and explore alternative real estate assets.

The report highlights a growing divide in the availability of capital, with large investors still able to obtain loans under tighter scrutiny, while smaller businesses face higher constraints.

Private investors, including family offices and high net worth individuals, are stepping in to fill funding gaps, often through strategic partnerships.

This trend is evident in the condo markets of major cities like Toronto and Vancouver, where construction costs and high interest rates have resulted in a large inventory of unsold units, even as strong population growth suggests a recovery potential in these markets.

The report highlights the importance of niche assets such as data centers and cold storage facilities, driven by technological advancements and changing consumer trends.

Housing affordability remains a critical issue, with new policies aimed at increasing supply facing significant challenges.

The industry is exploring innovations such as modular housing and generative AI to improve productivity and address affordability concerns.

Although the report focuses on the United States and Canada, several parallels can be drawn in the Australian context.

▲ Construction in city centers is skyrocketing in North America, just like it is here.

Like our compatriots to the north, Australia faces real estate challenges including housing affordability, high construction costs and the need for innovative financing solutions.

The Australian property market has also been affected by high interest rates and economic uncertainties, which have influenced investor sentiment and market dynamics.

The cautious optimism and gradual recovery of the sector is also relevant to the Australian market.

A key takeaway for Australia is the opportunity for private investors to play a greater role in filling financing gaps, particularly in the residential sector.

As seen in North America, family businesses and high-net-worth individuals can provide much-needed capital for projects facing traditional financing challenges.

The report also suggests alternative financing options such as green bonds, real estate investment trusts (REITs), crowdfunding platforms, mezzanine financing, tranche credit and subordinated debt to reduce dependence on traditional bank loans .

It highlights the need to implement zoning reforms, tax incentives and low-interest loans to increase the supply of housing and make it affordable.

The focus on niche assets in the North American market also applies to Australia.

The growing demand for data centers, driven by the rise of digital technologies and cloud services, is a global trend.

The same goes for the need for cold storage facilities to support online grocery businesses and food distribution.

▲ Cold storage and supply distribution facilities to support online grocery and meal kit services are proving popular investments in the United States.

The report suggests we should move away from constant chatter and start moving toward modular housing and generative AI as solutions to improve productivity, address affordability issues, and increase supply.

The potential for oversupply in high-growth areas and the importance of employment growth, demographics and immigration to support demand apply to the Australian context, particularly in large cities experiencing rapid population growth.

The impact of climate change on real estate, including rising insurance costs and the need to incorporate climate risk into decision-making, is highly relevant to Australia, given its vulnerability to weather events extremes such as bushfires and floods.

Andrew Alperstein, PwC’s US real estate partner, said these “challenges persist in the real estate sector, but there are signs of improvement after years of difficulty.”

Angela Cain, CEO of ULI Global, said the expected interest rate decline in 2025 will “reduce borrowing costs, facilitate price discovery and ultimately encourage an increase in CRE transactions.”

“Sentiment is improving, although still largely cautious,” Cain said, “but we are pleased to see early signs of a capital market poised to recover, as companies turn towards solid long-term fundamentals and adjust their strategy by market and property type.