2025 FX forecast: And what it means for the global property market

Central bank interest rate cuts, political instability and tensions in the Middle East infused notable volatility in the currency market in 2024. This trend looks set to persist in 2025, with evolving trade dynamics, further monetary policy shifts and ongoing geopolitical uncertainty.

This article examines the potential trajectories of major and emerging-market currencies and their implications for global property markets, cross-border investments, and financing costs in 2025.

USD: From strength to strength?

The US dollar’s recent resilience is expected to persist through the start of 2025. Looser fiscal policy and a focus on protectionism during Donald Trump’s second term in office are likely to underpin USD demand in the coming months.

Reinforcing the upside in the US dollar is the expectation that the Federal Reserve will keep interest rates elevated to combat inflation, with USD investors now uncertain whether the US central bank will deliver another rate cut in 2025.

Impact on real estate investment

The US property market may cool as a strong US dollar reduces international buyer activity. However, domestic demand is likely to remain robust, supported by a resilient economy and strong employment figures. At the same time, more Americans may consider investing in real estate abroad, as they see their purchasing power increase.

EUR: Persistent weakness

The euro is likely to face downward pressure in 2025, potentially slipping below parity with the US dollar within the first quarter. Key risks to the Eurozone economy include potential tariffs imposed by the new US administration as well as geopolitical tensions in Ukraine and the Middle East.

In addition, the euro may also struggle if the European Central Bank (ECB) adopts more accommodative policies to help counter sluggish economic growth and political challenges in key economies like France and Germany.

Impact on real estate investment

A weaker euro is likely to make property markets in the Eurozone more attractive to foreign investors, particularly those from dollar-pegged regions. Increased demand in popular markets like France, Spain, and Portugal may underpin prices, even as local purchasing power diminishes.

GBP: A mixed outlook

Sterling has already gotten off to a shaky start in 2025 amid turmoil in the UK bond market . The government may seek to restore market confidence by implementing further spending cuts, but this risks choking off growth and triggering further weakness in GBP exchange rates.

How the Bank of England (BoE) will balance the challenges posed by persistent inflationary pressures and rising borrowing costs will also be crucial in determining whether the pound ultimately sinks or swims in 2025. A more hawkish approach to monetary policy could help sustain GBP support through the first half of the year.

Impact on real estate investment

For property investors, the uncertain outlook for the UK economy could translate into unpredictable price fluctuations in the local market. A strong pound would make UK property less attractive to foreign buyers, particularly those from Asia and the Middle East. Conversely, a weaker pound would likely spur interest in prime London real estate, long viewed as a safe haven by international investors.

Emerging-market currencies: Risks and opportunities

Emerging markets are forecast to face significant challenges in 2025. Elevated US interest rates and weaker trade volumes are likely to exert downward pressure on currencies like the South African rand, Mexican peso, and Brazilian real. EM currencies will also be vulnerable to US trade protectionism and geopolitical tensions.

However, real interest rates in many emerging markets like India remain high, which coupled with high commodity prices could help to maintain a certain level of stability with the EMFX landscape.

Impact on real estate investment: Currency stability in emerging markets could encourage greater foreign investment in their property sectors, particularly in high-growth regions like Southeast Asia and Latin America. On the flip side, any volatility could deter all but the most committed international buyers, creating opportunities for local investors to acquire assets at discounted prices.

Indirect FX effects on global real estate in 2025

While fluctuations in the FX market and their direct impact on purchasing power in the global real estate sector are often quite visible, the effects of currency volatility extend far beyond this surface level. Exchange rate movements can create a ripple effect that subtly influences market dynamics in ways that are less immediately apparent but equally significant.

1. Financing costs

Unfavourable exchange rates, coupled with higher interest rates in countries like the US, could increase financing costs for property buyers reliant on foreign currency loans. This is especially significant in emerging markets, where local currencies may depreciate further against the US dollar, exacerbating the cost of dollar-denominated debt.

2. Investor confidence

Real estate investors are likely to shift their focus toward regions that offer stable or favourable currency dynamics, as these environments help safeguard returns and reduce currency-related risks. Regions with strong economic fundamentals, political stability, and relatively predictable exchange rates will be particularly attractive to cautious investors seeking long-term value.

Conversely, emerging markets with weaker currencies but high growth potential could also draw significant interest from risk-tolerant investors.

3. Construction costs

In markets heavily reliant on foreign goods for construction, the cost of importing essential materials – such as steel, cement, and machinery – can rise sharply if the local currency weakens. This increase not only inflates overall project costs but can also disrupt budgets and timelines for developers.

In such scenarios, weaker currencies may force developers to either scale back on projects, delay completion, or pass the additional costs on to buyers. This may slow development activity, constraining housing supply and inflating property prices.

2025: Another year of volatility

Currency movements will continue to play a key role in shaping the global property market in 2025. While a strong US dollar may deter international buyers from entering the American market, it could empower US-based investors to explore opportunities abroad. Conversely, a weaker euro and emerging-market currencies could attract foreign investment, fuelling demand and driving price growth in key regions.

However, the indirect effects of currency volatility – such as increased financing and construction costs – may temper growth in some markets, adding an extra layer of complexity for developers and investors alike.

Understanding how FX movements may influence trends in the property market will leave you better able to capitalise on opportunities in the real estate market in 2025 , whether you’re a property professional or investor, or simply buying or selling a property abroad.

Learn more about what’s happening in the FX market and how you could protect your real estate investment by speaking to an expert from Redpin today.