The 2012-13 bailout had left its scars. There were bank haircuts, capital controls, and a new international infamy for economic secrecy. From Riga to Rome, every finance minister complained about the plight of its smaller neighbour and included a mention of “Cyprus” in their geopolitical shorthand.

Fast-forward to 2026, and the footnote has become a case study. The recent update to the real GDP growth forecast sees the pace of expansion slowing to 3.1% this year from 3.8% in 2025. Yes, it is slower than the previous year, but still remarkable for a nation to pull off during all this geopolitical volatility.

Take the latest data, for example. In Q4 2025, Cyprus’ economy expanded 4.5% on a year-on-year basis, up from 3.6% in the previous period. The milestone also marked the strongest economic expansion since Q4 2022, with the main drivers being the wholesale and retail trade, repair of motor vehicles, information and communication, and hotels and restaurants (+7.2%). Construction also recorded strong growth, rising 9.2%, while manufacturing increased by 4.7%.

In another piece of good news, tourist inflows (which skyrocketed to €3.7 billion in 2025) from the United Kingdom, Germany, Poland, Israel, Greece, France, and Sweden played a solid hand in propelling Cyprus to its historic GDP growth, while the Mediterranean island emerged as one of Europe’s most sought-after destinations. The boom also benefited the airline and hospitality industries, with airlines like British Airways, easyJet, and Ryanair expanding their services to accommodate the ever-growing number of visitors. Hotels and resorts in the island region, on the other hand, responded by ramping up their offerings, from luxury accommodations to eco-friendly resorts, ensuring a diverse range of options for all types of travellers.

Remarkable fiscal story

In 2025, Cyprus recorded a budget surplus of €939.2 million. Let that sink in for a moment. We are talking about a small island country with its own unique set of problems and challenges. The country is located in a volatile region, subject to tensions between Greece and Turkey. There are also costs associated with meeting EU targets for reducing carbon emissions and the costs of bringing salaries for government workers in line with those in the private sector. The employee salaries peaked at €4.13 billion in 2025. And yet, a budget surplus of €939.2 million was still recorded.

The ceiling for next year’s state budget is €10.7 billion, or €11.3 billion without interest costs. It is a political and economic price that was set with considerable care. In a eurozone periphery country such as Cyprus, this is something seen rarely and achieved even more rarely, as the fiscal discipline required is not always accompanied by the same degree of political consensus. The fiscal leeway was available, but action only followed as the debt crisis escalated and a new government came into power at the end of 2023, when public debt was at 73.6% of GDP. Now it is projected to fall to 52.9% of GDP by the end of 2026. This is no small reduction. It is a reduction of a historical and almost revolutionary character.

According to Cyprus’ Deputy Finance Minister Irene Piki, “Multi-year planning, more predictable policy, and fiscal space earned through responsible and reform-based ways rather than increased borrowing ensures high household, business, and investor confidence.”

She is right. And the timing of this issue must also be taken into consideration. With the war in Ukraine, energy-price volatility, and the costs of achieving the EU’s ambitious climate and digital agendas, Europe’s overall fiscal situation is extremely difficult. Most member states are feeling the strain, though a few, such as Poland, are coping better than expected. Others, like Bulgaria and Slovenia, will hardly notice any short-term impact from the EU’s fiscal rules for the next few years.

Cyprus is not in this group, but it will no longer be in the minority either. It will assume the EU Council presidency in the first half of 2026, at a time when all other member states with higher budget deficits will be trying to keep a low fiscal profile in advance of a potential EU debt-mutualisation discussion, while others will be more than happy to oblige by not questioning the fiscal prudence of the presidency. Cyprus’s economic model, which has proven itself in recent years to be sustainable despite high inflation and even though the country is heavily indebted, should attract worldwide attention during its presidency and generally face appreciation for its achievements.

The tech revolution

Here’s an honest take. Tourism is the story that gets the headlines, but tech is stealing the show, and that’s where the smart money is heading.

By the end of 2025, Cyprus’s Information and Communications Technology (ICT) sector contributed roughly 16% to national Gross Value Added (GVA). That is approximately €8.5 billion. The island now ranks second in the EU for ICT’s share of national GVA, ahead of economies with ten times the population and four times the infrastructure investment. The workforce in tech has more than tripled over the past decade, now exceeding 26,000 professionals. Cyprus ranks fifth in the EU for GVA per ICT employee. In productivity, in other words, not just headcount.

The talent pipeline is being deliberately engineered. Non-resident professionals earning over €55,000 annually get a 50% income-tax exemption. There is also a Digital Nomad Visa and streamlined residency for spouses of international workers. The type of person this attracts is mobile, high-earning, plugged into global networks, and likely to bring their employer with them or start something new once they are settled. In March 2026, the Research and Innovation Foundation sent a national pavilion to the 4YFN summit in Barcelona, showcasing eight companies in AI, robotics, and agritech. One Cypriot portfolio company, Threedium, was selected as one of only ten firms globally to present on the main NVIDIA GTC 2026 stage. That’s not luck.

TechIsland, the sector’s coordinating platform, has done the unglamorous but essential work of bridging local entrepreneurs with international executives. The ecosystem is self-reinforcing now, which is the point where you stop worrying about whether it is sustainable and start worrying about whether the housing stock can keep up.

What are the key factors helping the country’s tech sector? Let’s start with Cyprus’ geographical location. The Mediterranean island sits at the intersection of Europe, the Middle East, and Africa, giving companies access to huge markets if they prefer using the nation as their manufacturing and R&D hubs. Imagine businesses keen on maximising their prospects in the European market but also want outreach to Israel’s $100 billion tech sector, along with emerging Middle Eastern and North African (MENA) countries, Cyprus can become the base camp. Also, the country’s legal system is rooted in English common law, making it instantly familiar for those used to British or commonwealth standards.

Then comes the 12.5% corporate tax rate, one of the lowest in the European Union (EU). To sweeten things further, there is an “IP Box Regime” that results in qualifying intellectual property income being taxed at an effective rate of just 2.5%. Businesses holding IP in domains like software, AI, fintech patents, or video games get massive leverage for reinvestment and expansion in the Mediterranean island, as taxation remains simplified and pocket-friendly, compared to high-tax countries. The administration is actively courting the cause of the island nation becoming a regional tech hub by backing initiatives such as “Startup Cyprus” and the “Youth Entrepreneurship Scheme.”

Promise of energy utopia

Shipping accounts for more than 7% of the country’s GDP and often receives insufficient attention in debates that focus on new sectors. Now, though, the evidence is plain to see. The shipping sector is a major source of revenue. Cyprus alone accounts for around 4% of the global merchant fleet, while more than 20% of worldwide third-party ship-management activities are carried out from here. The figure for ship-management revenues for the first half of 2025 was €978 million, an increase of 6.7% on the previous quarter.

And that’s a lot of concentration! The top 27% of the companies account for 85% of total sales. Germany and Greece are the number one and two trading partners, respectively, accounting for 30% and 13% of sales.

In November 2023, the One-Stop Shipping Centre was established, which currently serves more than 300 shipping companies benefiting from the tonnage-tax regime. Almost all shipping companies based in Cyprus benefit from this, apart from the four historical ship-owning companies, which, in accordance with the current tonnage-tax legislation, are not allowed to gain an advantage through the new policies.

The overall gross tonnage of the Cyprus ship registry has increased by 20% over the last two years, reaching the highest level in the last two decades. A real and tangible effort is being made to modernise shipping further through the sponsorship of robotics and digital-technology-related scholarships and the upgrading of the associated educational infrastructure, as well as research into alternatives and new methods to support the greening of shipping. Shipping contributes significantly to the island’s employment sector, both in terms of direct and indirect on-shore employment (over 9,000 people) and the huge number of seafarers (80,000 and more) employed onboard vessels managed by companies based in Cyprus and therefore also indirectly contributing to the economies of the ports of call. Cyprus wants to maintain and further develop this very important sector.

Gas fields have been “coming soon” for years, and one can excuse the sarcasm. But now, for the first time in more than a decade, all indications are that 2026 will actually see the start of production of two giant offshore fields in Eastern Mediterranean gas. The Aphrodite gas field in Block 12, estimated to hold between 3.9 and 4.5 trillion cubic feet of gas, is slowly but surely moving towards its commercial development, following the recent memorandum of understanding signed by Egypt, Cyprus, and Chevron over the proposed pipeline project that will transport the gas from Cyprus to Egypt. The Kronos field in Block 6, operated by Eni, is also expected to reach a final investment decision this year, with first gas scheduled for 2028. The fact that the distance between the field and the Zohr field in Egypt, where the necessary infrastructure has already been built and is currently being used, will be largely compensated for by the intended infrastructure that will be built for the purposes of transporting Aphrodite’s gas to Egypt.

The energy situation in Cyprus is quite tough domestically. The EU carbon-allowance price is projected to reach €95 per tonne by 2026, and there is no exception for Cyprus in terms of compliance with the EU ETS, which will cost €490 million this year and will also be transferred to consumers through energy bills. The LNG terminal of Vasilikos, which has been delayed for many years, is expected to enter operation during the second half of 2026. The Great Sea Interconnector, which connects the Cypriot electricity grid with the Greek grid via Israel, is still considered a strategic investment, but is more at the level of intentions so far.

The offshore gas story is truly a major issue for the Eastern Mediterranean region’s energy future. In the meantime, however, Cypriots are forced to endure among the highest energy prices in the region. That is where the current government’s otherwise respectable record falls short.

Tax exemptions to the rescue

The story of the revival of the banking system in Cyprus is a very long and fascinating one. We are talking about a sector where non-performing loans (NPLs) comprised 49% of the total outstanding loans in 2016. It was not so much a sector with problems that required remedial action; it was a complete banking crisis that had been frozen in time. Today, the total of NPLs as a percentage of total outstanding loans is 3.2% at the end of 2025. The downward trend of NPLs, following a period of stagnation that coincided with the imposed capital-control regime of 2013, reflects in part the huge quantities of NPLs that have been sold and in part the successful completion of a large number of restructuring plans of exposures.

There was a big change in Cypriot tax law, and we believe it is the first significant change in tax laws introduced in the last two decades. The new laws took effect on 1 January 2026. Under the catch-phrase of meeting the OECD Pillar Two global minimum-tax rate, we are talking about a drastic increase in the corporate-tax rate from 12.5% to 15%. As such, it has been a very controversial move, and one can very easily understand why. But it was an inevitable decision.

Dividend tax has increased. The deemed-dividend distribution rules for profits earned after 2026 have been abolished. The special defence contribution on the actual dividends paid out from profits earned after 2026 reduces from 17% to 5%. The personal-income-tax-free threshold has increased to €22,000 from €19,500. The 8% flat tax on cryptocurrency gains and the 120% super-deduction for qualifying research and development expenditure are a couple of steps taken towards the future. A couple of things to note regarding the recent corporate-tax-rate increase and how it is being applied in the professional-services sector. Companies in the sector are already shifting toward digital assets, AI-related regulation, and wealth-mobility advisory services in response to the tax-rate increase. The pace of change can be dramatic.

Misfortune of thriving real estate

The consequences of rapid expansion are inevitable. As reported earlier, property transactions in January 2026 reached their highest level since 2008, with 1,411 contracts being deposited, an 11% increase on the corresponding period last year. Annual price rises in Paphos and Famagusta reached 25% and 23% respectively. The value of transactions in the Limassol premium market accounts for a third of the total.

As we already know, the rate at which property prices increase is around 5%–7% annually, and salaries in the country are still not high enough to absorb even remotely the current rental rates. Rent accounts for a staggering 32.3% of the average household’s monthly income in Limassol. The average monthly rental price for a one-bedroom apartment in the city centre of Limassol is around €1,300.

The government plans to complete 244 affordable residential properties allocated to low-income families in all major municipalities across the country by the end of 2026, while a private partnership is expected to deliver 1,000 affordable rental homes, with the municipality also expected to set aside €16 million for a new subsidised project in Limassol and €12 million for a similar scheme in Strovolos. This is not bad, but there are still very few measures to curb the problem of affordable housing. Remember, however, that problems related to affordability usually go unnoticed for years until they hit the headlines and cause mayhem.

Tourism income has reached €3.69 billion, up 15.2% year-on-year, with visitor numbers exceeding 4.5 million for the first time, and tourism’s share of GDP standing at around 14%. A services surplus of over €2.8 billion was recorded in the third quarter of 2025 alone, in large part due to the goods-trade deficit being a structural feature of the economy.

Tourism is trendy but is cyclical, weather-dependent, geopolitically volatile, and above all requires low-cost air travel. In the technology and shipping space, the trends are more structural. We are not diminishing the success of tourism, which remains very strong, but policymakers need to remember that it is just a base that needs to be expanded upon rather than a plateau to be sat out on.

The bottom line

The future looks promising, but it is not without challenges. The job market is extremely tight, with unemployment at just 4.5%. It means everyone who needs a job has a job, but there aren’t enough workers to boost spending power any further.

Cyprus has 1.38 million people and is one of the EU’s smaller member states, with most of them residing in cities like Nicosia and Limassol.

Though the population is growing through immigration, the median age is around 40 years, which means that people are ageing quickly and productivity is decreasing. On top of that, birth rates are really low, with around 1.5 children per woman.

Cyprus is struggling to find fresh talent. And it is in a race against time. If they cannot find enough working population to support their rapidly ageing population, their economy could suffer greatly.

Moreover, foreign firms invest heavily in Cyprus but pull back profits. The repatriation of profits contributed to around 7% of the GDP account deficit. The Fiscal Council notes that domestic reinvestment is weak and FDI seems “transient” without deeper local ties.

To combat this, Cyprus introduced new screening rules. From April 2, 2026, non-EU and Swiss investors need pre-approval for €2 million plus deals that require a 25% or more stake in strategic sectors such as AI, tech, health, and energy. If they do not comply, they risk fines up to €50,000 or a shutdown due to non-compliance. The bureaucracy adds two to three months of delay, increased legal fees, and various uncertainties for companies that want to invest in the island. Investors might want to look for other nations with better ease of doing business.

Cyprus has historically attracted FDI through lax rules, but is now forced to align these standards with the EU. However, this oversight often leads to increased friction through red tape, and geopolitical checks (Investigating Russian and other controversial links). Foreign investors were drawn to low taxes and golden passports, which ended in 2020. Massive FDI, especially from Russian companies, peaked at $33 billion in 2015 and fueled the real estate boom. Russian investments reached 80% of the total FDI of Cyprus. However, it also enabled round-tripping and sanction evasion after the Ukrainian crisis.

The 2024 data from the Central Bank of Cyprus reveals that Russian FDI stock in Cyprus hovers at €83.46 billion and has plummeted drastically from €135.7 billion in 2022. The €52 billion drop is attributed to Western sanctions and geopolitical tension.

Look, small open economies are always vulnerable to things they cannot control, such as energy shocks, regional conflict, shifts in EU policy, and global capital-flow reversals. Cyprus is not immune. But the combination of fiscal discipline, a diversified sectoral base, a sophisticated banking system, and a government that has made genuinely difficult structural decisions creates a degree of resilience that was not there a decade ago. These are not vanity metrics. They are signals that the growth dividends are being reinvested rather than extracted.

Is everything perfect? No. Energy costs remain a drag. Housing affordability is a genuine social tension. And the gas fields, however promising, have a long way to go before they change balance-of-payments arithmetic.

But Cyprus in 2026 is a fundamentally different proposition than it was in 2013. It has earned the right to be taken seriously. Definitely not as a tax-haven footnote or a bailout cautionary tale, but as a small economy that looked hard at what it wanted to be and built its way toward it with more discipline than most expected. That’s a story worth telling.

The post Cyprus: The island rebound appeared first on International Finance.

The rise in unemployment starting in September showed deeper changes happening in Australia’s workforce. It hit 4.5%, the highest since November 2021. Things got psychologically and economically worse as the unemployment rate crossed the 4% mark, signalling the conclusion of the era of ultra-low unemployment.

Jeff Borland, Professor of Economics at The University of Melbourne, recently prepared an analysis that highlighted a critical divergence where the economy was creating jobs at a slower pace than the population was expanding.

In 2025, the Australian economy added an average of approximately 12,900 new employed persons each month. While this indicates positive growth, it fell woefully short of the labour supply expansion. The number of people looking for work grew by an average of 22,100 per month during the same period.

This phenomenon is deeply rooted in Australia’s demographic trends, particularly the high rate of net overseas migration, which has sustained population growth at approximately 2.0% per annum. In contrast, total employment growth over the year to November was only 1.3%.

This gap of 0.7 percentage points represents a structural widening of labour market slack that monetary policy is specifically designed to induce. The Reserve Bank of Australia has maintained a restrictive cash rate setting precisely to cool the demand for labour and align it more closely with supply capacity. The September 2025 data suggested that this transmission mechanism was working, perhaps faster than anticipated.

However, the narrative became more complex with the release of data for October and November 2025, which showed a reversion of the unemployment rate to 4.3%. This volatility raises questions about the reliability of monthly seasonally adjusted figures and suggests that the September spike may have been amplified by statistical noise or temporary sampling variations.

Nevertheless, the broader trend lines confirm a softening market. By November, the stability of the 4.3% rate masked a deterioration in the quality and composition of employment. The Australian Bureau of Statistics reported that the total number of employed people actually fell by roughly 21,000 in November. The only reason the unemployment rate did not rise in response to this job shedding was a simultaneous decline in the participation rate, which fell from 66.8% to 66.7%.

The decline in participation is a critical indicator of discouraged workers exiting the labour force. When job seekers stop actively looking for work, they are no longer counted as unemployed, which artificially depresses the headline rate. This “hidden unemployment” suggests that the labour market is weaker than the 4.3% figure implies.

Full-time employment, which provides the income stability necessary for household consumption and debt servicing, plummeted by 56,500 positions in November. This loss was only partially offset by an increase of 35,200 part-time positions. This substitution of full-time roles for part-time roles is a classic defensive strategy by employers who are uncertain about the future economic outlook and unwilling to commit to permanent salary obligations.

The rise in the underemployment rate further corroborates the thesis of increasing slack. The underemployment rate, which measures employed persons who want and are available for more hours, rose to 6.2% in November. This metric is particularly sensitive to the cost-of-living crisis, as workers seek additional hours to cope with high inflation and interest rates.

A rising underemployment rate in an environment of falling real wages represents a significant squeeze on household welfare. When combined with the unemployment rate, the total labour force underutilisation rate pushed above 10.5% in late 2025, signalling that despite the “tight” rhetoric, there is a substantial reserve of unutilised labour capacity building up in the economy.

It is also important to consider the independent estimates provided by Roy Morgan (Australia’s oldest and most well-known independent market research company), which utilise a different methodology to the Australian Bureau of Statistics.

In September 2025, Roy Morgan estimated the “real” unemployment rate at 10.8%, with a combined unemployment and underemployment count involving 3.2 million Australians.

While the Australian Bureau of Statistics definition is the global standard for monetary policy formulation, the Roy Morgan figures highlight the lived experience of millions of Australians who feel the bite of a slowing economy more acutely than the official statistics suggest.

The discrepancy between these measures often widens during economic downturns, as the strict criteria for being “unemployed” (active search within the last four weeks and availability to start immediately) exclude those on the margins of the workforce.

Why prices refuse to budge

While the labour market is showing clear signs of cooling, the inflation landscape in Australia has remained stubbornly resistant to the dampening effects of monetary policy. Wages, prices, and productivity are feeding into each other, creating a cycle that keeps inflation higher than the Reserve Bank of Australia’s 2% to 3% goal. New data from late 2025 showed that inflation is still a serious problem and will need strict policies for a longer time.

In October 2025, inflation rose to 3.8%, up from 3.6% in September, with increases seen across many basic goods. The trimmed mean inflation, which is the Reserve Bank’s preferred measure of underlying price pressures, also moved higher to 3.3%. These figures confirmed that the disinflationary process had stalled and, in some areas, reversed.

Housing costs have emerged as the single largest contributor to this inflationary persistence. In October, housing inflation ran at 5.9%. This category is driven by two powerful forces that are largely immune to interest rate hikes in the short term. The first is the rental market, which is experiencing a severe crisis of supply. With vacancy rates at record lows and population growth continuing at a rapid pace, landlords have significant pricing power.

Rents have surged across all major capital cities, adding a heavy weight to the inflation basket. The second factor is the cost of new dwelling purchases, which remains elevated due to high construction costs. Labour shortages in the trades, combined with the high cost of materials, have kept the price of building new homes high even as demand for new approvals has softened.

The Wage Price Index for the September quarter rose by 0.8%, taking the annual growth rate to 3.4%. While this figure is below the peak seen in previous years, it remains high relative to the abysmal productivity performance of the Australian economy.

Productivity growth, which measures the output produced per hour worked, has been flat or negative for several quarters. When wages rise without a corresponding increase in productivity, the unit labour cost for businesses increases.

To maintain profit margins, businesses must pass these higher costs on to consumers in the form of higher prices. This wage-price dynamic is particularly evident in the service sector, where productivity gains are harder to achieve than in manufacturing or agriculture.

The divergence between public and private sector wage growth adds another layer of complexity. The 3.8% annual growth in public sector wages acts as a floor for wage expectations across the economy. State government enterprise agreements, particularly in the healthcare sector, have locked in wage increases that will sustain income growth for a large portion of the workforce.

While these increases are necessary to attract and retain essential workers, they also support aggregate household income and spending power. This fiscal impulse counteracts the monetary contraction sought by the Reserve Bank. Private sector wages, which grew at a more modest 3.2%, are showing signs of responding to the slowing economy, but the aggregate effect is diluted by the strength of the public sector.

The persistence of inflation has forced a recalibration of the “soft landing” narrative. The hope that inflation would glide effortlessly back to target while unemployment remained low has been replaced by the realisation that a more prolonged period of sub-trend growth and higher unemployment may be required to break the back of domestic price pressures.

The Reserve Bank’s revised forecasts in the November Statement on Monetary Policy projected that inflation would remain above the target band for “a while” and would not return to the midpoint until late 2027. This extension of the timeline reflects an admission that the embedded inflation expectations in the economy are harder to dislodge than previously thought.

While the Consumer Price Index measures the rate of change in prices, the accumulated level of prices remains permanently higher. The price of essential goods and services such as food, health, and housing has absorbed a significant portion of household budgets, leaving less room for discretionary spending.

This is evident in the GDP data, which showed a 0.2% decline in discretionary consumption in the September quarter. Households are prioritising survival spending over lifestyle spending, a shift that has ripple effects through the retail and hospitality sectors.

The island’s policy of isolation

The Reserve Bank of Australia has entered a phase of policy paralysis characterised by a high-wire act between a softening economy and sticky inflation. The decision by the board to leave the cash rate unchanged at 3.60% at its final meeting of 2025 was widely expected, yet it highlighted the unique and difficult position in which Australia finds itself relative to the rest of the developed world.

While other major central banks have commenced easing cycles to support growth, the Reserve Bank of Australia remains locked in a restrictive stance, with the threat of further hikes still lingering in its forward guidance.

The December decision was unanimous, but the accompanying statement revealed a hawkish tilt that surprised some market participants. Governor Michele Bullock made it unequivocally clear that “cuts were firmly off the table.” The contrast with the United States Federal Reserve is particularly stark.

In December 2025, the Federal Reserve cut its benchmark interest rate by 25 basis points to a target range of 3.50 to 3.75%. This marked the third consecutive rate cut by the US central bank, driven by a cooling labour market where unemployment had risen to 4.4% and a greater confidence that inflation was on a sustainable path to target. The European Central Bank (ECB) and the Bank of England (BoE) have also moved to lower rates, responding to weaker growth profiles in their respective economies.

This divergence in monetary policy trajectories has significant implications for the Australian economy, particularly through the exchange rate channel. Typically, when the Reserve Bank of Australia holds rates steady while the US Federal Reserve cuts the interest rate, the differential shifts in favour of the Australian dollar.

A stronger Australian dollar makes imports cheaper, which provides a disinflationary impulse for tradable goods such as electronics, fuel, and vehicles. However, the Reserve Bank cannot rely on this mechanism to solve its inflation problem because the current inflation basket is dominated by non-tradable items like housing and services, which are largely insensitive to exchange rate movements.

The banking sector has responded to this new reality by revising its interest rate forecasts for 2026. The consensus among the “Big Four” banks has fractured. Commonwealth Bank, National Australia Bank, and ANZ have all shifted their views to predict an extended pause throughout 2026. These institutions now believe that the cash rate will remain at 3.60% for the foreseeable future, acting as a constant drag on the economy until inflation is decisively defeated.

In contrast, Westpac remains an outlier, forecasting two rate cuts in 2026, tentatively scheduled for May and August. Westpac’s economists argue that the current spike in inflation is driven by temporary anomalies that will wash out of the data, allowing the Reserve Bank to pivot mid-year to support growth.

Financial markets have taken an even more aggressive view, with interest rate swaps pricing in a significant probability of a rate hike by June 2026. This reflects the anxiety that inflation may have become structurally embedded at a level above 3%, which would require a second round of tightening to dislodge.

A return to rate hikes would be politically explosive and economically damaging given the fragility of the household sector, but the Reserve Bank has consistently stated that it will do “whatever is necessary” to return inflation to target.

The impact of this “higher for longer” regime is evident in the flow of credit and investment. While business investment has remained surprisingly resilient, rising 3.4% in the September 2025 quarter due to spending on data centres and digital infrastructure, household credit growth has slowed.

The “mortgage cliff,” which referred to the transition of borrowers from low fixed rates to high variable rates, has now evolved into a “mortgage plateau.” Borrowers have absorbed the shock of higher payments, but they have done so by slashing discretionary spending and drawing down on savings buffers. The prospect of no rate relief in 2026 means that this financial stress will be prolonged, increasing the risk of mortgage arrears and defaults as savings pools are eventually exhausted.

The Reserve Bank’s strategy relies on the assumption that the labour market will remain “healthy” enough to absorb this prolonged period of restriction. The forecast that the unemployment rate will stabilise around 4.5% allows the bank to prioritise inflation fighting. However, as the September spike demonstrated, labour market dynamics can shift rapidly.

If the unemployment rate were to accelerate toward 5.0%, the Reserve Bank would face a much sharper dilemma involving a choice between abandoning its inflation target or accepting a recession. For now, the board judges that the risks to inflation are greater than the employment risks, but this calculus will be tested in the coming months as the full lag effects of monetary policy continue to work their way through the economy.

Should the unemployment rate be held below 4.7% while inflation slowly moderates, the economy may achieve the elusive “soft landing.” This would involve a period of below-trend growth but no catastrophic collapse. However, the risks are tilted to the downside.

If the September unemployment spike was not an anomaly but a leading indicator of a sharper deterioration, the Reserve Bank may be forced to pivot rapidly. A sudden jump in unemployment would likely shatter consumer confidence and trigger a rapid deleveraging cycle in the housing market.

The post Australia’s ‘soft landing’ at risk appeared first on International Finance.

In 2020, he posed a question regarding why the economic recovery was being framed as a V or a U when the reality was far more disjointed. Ivan wrote that some would bounce back while others would not recover.

This dynamic is formally known in sociology and economics as the “Matthew Effect.” The term was coined by sociologist Robert Merton in 1968 and describes a process of cumulative advantage.

It traces its sentiment back to the biblical Book of Matthew 25:29, which states that everyone who has will be given more and will have an abundance, but from the one who does not have, even what he has will be taken away. In the economic landscape of late 2025, this ancient text reads less like a parable and more like a precise description of the divergence between capital owners and wage earners.

Mark Zandi, the chief economist for Moody’s Analytics, suggests that this structural divergence began in the 1980s during the Reagan era, when productivity growth began to outpace median wage growth. However, the data from 2025 suggests that this long-standing trend has accelerated into a profound fracture.

The upper arm of this K-shaped economy is being driven by an unprecedented concentration of consumption among the wealthy. Research conducted by Mark Zandi at Moody’s Analytics revealed that in the second quarter of 2025, the top 10% of wealthiest Americans were responsible for 49.2% of all consumer spending. This figure represents the highest level of spending concentration since record-keeping began in 1989.

The economy has become so lopsided that the richest Americans essentially account for half of all economic activity. This concentration distorts aggregate economic data. When the top 10% continue to spend lavishly on luxury goods, travel, and services, it masks the severe contraction occurring in the bottom 90%. High-income households have benefited from a wealth effect driven by soaring asset prices, including record highs in the stock market and continued appreciation in home values.

Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management, has raised alarms about this disparity. In a research note from November 3, 2025, she described the income inequality data as completely wackadoo and noted that the widening chasm between the haves and have-nots is critical to understanding the current economic cycle.

While the wealthy propel the markets to new heights, the lower arm of the K is extending downward with increasing velocity. This is visibly manifested in the earnings reports of major fast-food and fast-casual restaurant chains, which have historically served as reliable indicators of lower-income spending power.

Chains like McDonald’s and Chipotle have reported softening traffic as their core customers pull back on spending. Since 2019, the price of a chicken burrito at Chipotle has risen from $7.45 to $10.80 in 2025, while a McDonald’s Big Mac combo has jumped from $8.19 to $11.29. These price increases have forced a trade-down behaviour where consumers abandon fast-casual dining for home cooking or discount grocery options.

Dollar General reported a 4.6% increase in net sales in the third quarter of 2025, which executives attributed to share gains in consumables as financially pressured shoppers hunted for value. This shift indicates that the lower-income consumer is not merely cutting back on luxuries but is struggling to afford basic conveniences.

This performative wealth signals a desire to participate in the upper arm of the K even as financial reality confines consumers to the lower arm. Charitable organisations are working overtime, with the Portland Press Herald Toy Fund reporting a notable influx of struggling families trying to keep the Christmas spirit alive despite cutting back on their expenses.

The labour market mirrors this bifurcation. While the headline unemployment rate remained relatively low at 4.4% in November 2025, beneath the surface lies a story of two distinct job markets. Companies are retaining talent but aren’t hiring anymore, because of which the youth unemployment rate for those aged 16 to 24 reached 10.4% in September 2025.

Gen Z is struggling to find work as entry-level job openings declined 29% since 2024. A part of the reason is that AI is wiping out low-skilled jobs. Now, the American youth from poor and lower-middle-class families can’t even get their foot on the rung of the career ladder. This is an important development, as resentful young people can create significant unrest in a nation.

There is also a white-collar recession. American employers announced 71,321 job cuts in November 2025, a 24% increase from the same month in 2024. Over 153,000 job cuts were announced year-to-date in 2025 in the IT sector as firms pivot toward AI and efficiency.

The disconnect is further highlighted by the fact that despite these layoffs, the broader layoff rate remains historically low because companies are reluctant to let go of workers in a labour-constrained environment.

Policy impact of ‘Big Beautiful Bill’

The policy landscape of 2025 has played a significant role in calcifying this economic divide. The “Big Beautiful Bill” became law on Jul 4, 2025. The bill cuts taxes on overtime pay and tips, provides additional tax deductions for seniors, and introduces a new deduction for auto loan interest. However, it also makes a $3.4 trillion cut to social security for the next ten years, to make up for the lower tax revenue.

Medicaid and the Supplemental Nutrition Assistance Programme (SNAP) will take a huge hit with $1.4 trillion in slashed government funding. The government is cutting social security and lowering taxes for the rich, which is a wealth transfer mechanism from the poorest households to the richest in the country.

Trade policy has further exacerbated the strain on the lower arm of the K. The administration implemented widespread tariffs in 2025 with the stated goal of protecting American industry. However, the Yale Budget Lab estimates that these tariffs function as a regressive tax. The average annual cost of the 2025 tariffs for a household in the bottom income decile is approximately $900. While this is lower in absolute terms than the $3,900 cost for the top decile, it represents a much larger share of income. The burden on the bottom decile is 2.4% of their post-tax income compared to just 0.8% for the top decile. This policy directly erodes the purchasing power of those least able to afford it.

The administration had promised a tariff dividend check of $2,000 to offset these costs for working families. Trump fought his tariff war on the promise that he would give the American people a piece of the tariff dividend and bring jobs back to America. No such dividend arrived in 2025, and Treasury Secretary Scott Bessent clarified that it is unlikely till mid-2026 and that there is also the question of whether the Supreme Court would uphold the legality of the tariffs.

And the math doesn’t add up either. The tariffs generated approximately $120 billion so far, which is not enough to send $2,000 checks to 150 million Americans. It would cost nearly $300 billion to do so. This leaves low-income households paying the higher prices associated with tariffs without receiving the promised financial relief.

The lock-in effect

The housing market stands as perhaps the most formidable barrier between the two arms of the K-shaped economy. A phenomenon known as the lock-in effect has paralysed the market and created a distinct advantage for existing homeowners. As of late 2025, approximately 80% of mortgage holders have interest rates below 6%.

These homeowners are effectively shielded from the current market reality, where the average 30-year fixed mortgage rate hovered around 6.34% in December 2025. This disparity has created a two-tiered housing society. Existing owners are building equity and enjoying low monthly payments that were secured during the pandemic era of cheap money. Aspiring buyers, particularly Millennials and Gen Z, face a market where the income needed to afford a median-priced home has nearly doubled since 2020.

High interest rates have not only made mortgages more expensive but have also suppressed inventory. Homeowners are unwilling to sell and trade a 3% mortgage for a 6% one, which keeps the supply of homes for sale near 30-year lows.

This lack of supply keeps prices historically high despite the elevated rates. Consequently, renters find themselves trapped. The housing ladder, once the primary vehicle for middle-class wealth creation in America, has been pulled up out of reach for those not already on it.

A fracture that deepens

As 2025 draws to a close, the mechanisms driving the K-shaped economy appear to be entrenching themselves further. The Federal Reserve’s restrictive monetary policy, while necessary to fight inflation, disproportionately hurts those who rely on borrowing. The fiscal policies of the One Big Beautiful Bill Act reinforce the advantages of capital owners while fraying the safety net for the vulnerable.

The rich will continue to accumulate wealth through assets and favourable tax treatment, while the poor and the middle class will continue to navigate a landscape of high costs and limited mobility. The question remains regarding how long this divergence can sustain itself before the tension snaps the economy entirely.

With consumer spending so heavily reliant on the top 10%, any shock to asset prices could cause the upper arm of the K to falter. If the wealthy pull back, the illusion of resilience provided by the aggregate data will vanish, revealing the fragile state of the broader economy beneath. Until then, the United States remains a nation of two distinct economies operating in parallel but moving in opposite directions.

The K-shaped economy in 2025 is not a theory or a chart, but a lived reality that shapes everyday life, determining who can buy a home and who must rent, who can retire and who must keep working, and who can afford abundance while others cut back. Wealth, opportunity, and security continue to move upward, while costs, risk, and uncertainty are pushed downward, reinforced by policy choices and a stagnant housing market.

The economy seems strong mainly due to the spending of the wealthiest households. However, this strength is limited and fragile. Without better wages, improved housing access, and a more robust safety net, the divide will deepen, leading to enduring social and political tensions.

The post Rigged economy leaves millions behind appeared first on International Finance.

The narrative is a deliberate distortion designed to evade moral responsibility and commit grave political wrongdoing. Canada, a prosperous nation, is abandoning its most vulnerable citizens, leading to soaring poverty and starving children. This catastrophe is wrongly labelled a temporary economic headwind, not a policy failure. We must immediately reject this sanitised view.

The evidence is overwhelming and utterly damning. Canada’s official poverty rate, measured by the Market Basket Measure (MBM), is expected to have climbed significantly to 10.2% in 2023, reversing years of hard-won progress and signalling a structural breaking point.

This distressing climb follows a staggering 21.8% jump in the poverty rate just from 2021 to 2022, confirming that the economic floor supporting low-income Canadians is fragile, inadequate, and wholly dependent on temporary governmental goodwill, which is now receding.

Look around and watch the financial anxiety spread like a contagion through every province. One in six Canadian households now experiences food insecurity, representing a crushing 15.6% prevalence in 2022.

This rate of insecurity closely tracks peak inflation and the soaring costs of necessities like shelter and transportation, confirming the economic origins of hunger. When Food Banks Canada assesses the country’s performance, it returns a dismal D grade for meeting food security needs and a failing grade for food insecurity overall. This is not an evaluation of charitable success, but an indictment of a state that failed its most basic duty, which is to ensure its citizens do not go hungry.

The moral obscenity is most acute when we count the children. 2.5 million children in the ten provinces are now growing up in food-insecure households in 2024, representing a third of all Canadian children, condemned to the stress and lifelong stigma of going without because their government prioritised fiscal inertia over feeding its young.

The rapid collapse in basic material well-being, evidenced by the increase from 2.1 million children in 2023, shows economic growth is failing to benefit everyone, resulting in stark, widening inequality.

These failures are most clearly demonstrated when examining the key indicators of structural neglect, showing a distinct reversal of progress immediately following the temporary relief offered during the pandemic years.

How Ottawa hurt workers

The structural origins of this current catastrophe can be traced back to the deliberate economic restructuring that began decades ago, a political project rooted in the neoliberal dogma that crushed the manufacturing sector and enshrined labour precarity as the new normal, ensuring that wages would stagnate while the cost of living exploded.

We see this criminal neglect in the data on wages. Overall median household income increased by a paltry 14.6% over 41 years between 1976 and 2017 in constant dollars. This near-stagnation of pay, spanning generations, confirms that the rewards of national productivity have been systematically diverted away from the workers who generate them.

Income inequality has persisted at or near record highs over the past decade. It has been engineered through policy choices that systematically weakened collective bargaining power.

When policy analysts discuss precarious employment, they are talking about a quantifiable lack of security, low wages, income volatility, and little opportunity for career advancement. This is the changing nature of work dictated by economic policy, a deliberate erosion of worker protections.

Worse still, the Canadian state has actively constructed a system of legal exploitation through its Temporary Foreign Worker Programme, a scheme that privileges corporate access to cheap labour over the human rights of migrants.

The policy shift favouring temporary migration over permanent residency has created a vast, vulnerable underclass of workers who are denied access to federally funded settlement services and are often bound to single employers, subjecting them to abuse and limiting their mobility. The absence of systematic monitoring to ensure their rights are protected further cements their precarious status, making them highly vulnerable to mistreatment.

This structure is marketed as necessary for economic efficiency, but it functions as a wage suppressor, ensuring that low-wage firms retain talent without having to offer competitive wages or working conditions.

The expansion of the TFWP, as experts have shown, actively contributes to maintaining wider discrepancies in regional unemployment rates than would otherwise exist, preventing the structural adjustments necessary to raise wages for all low-income Canadians.

The system is creating a two-tier economy, which is precarious by design and ensuring that those who harvest our food and staff our services remain perpetually marginal.

The long-term wage stagnation, when directly contrasted with the explosive growth in housing prices, a phenomenon where home prices in major markets rose by as much as 460% over three decades, fundamentally proves that political decisions prioritised capital accumulation and speculative wealth over worker compensation, a moral betrayal that doomed millions to financial strain even while holding down jobs.

How US Power crippled Canada

Being a neighbour to the world’s richest country should be a blessing, at least on paper. But Canadians have, until very recently, held deep fear of being a satellite, or vassal state to the great American hegemon. The anxiety was so terrible that in 1957, the “Gordon Commission” rang the alarm bells about the US economic takeover. By the early 1960s, the US interests controlled roughly 60% of Canada’s manufacturing and 70% of its oil and gas.

It’s important to note that just 15 years prior, Great Britain was Canada’s number one customer. World War II had wrecked Britain, and the English population could no longer buy Canadian goods. The Arctic giant had come out of the Great War without any casualties to citizens or factories, but was losing to the economic imperialism of its exceptional neighbour. In 1955, Canada had the highest standard of living in the world. The US slowly and steadily captured the Canadian market. And Canadians embraced protectionism as a policy, much like how the US under Trump operates today. American companies had to manufacture in Canada if they had to sell in Canada. This made American goods in Canada slightly more expensive than in America, but it also meant Canadians had ownership, jobs and a robust economy.

All this came to an end in the late 60s when the “Clarence Decatur Howe” Strategy came into being under the Canadian Minister of Trade (C.D. Howe). He aggressively courted American investment. His view was, “Who cares if they own it, as long as the jobs are here?” This policy built modern Canada, but laid the foundation for the dependency that exists today.

In 1965, Canada took the first step towards the forfeiture of its economic servitude. A move that would enrich Canada temporarily at the expense of the future of working-class Canadians and children. The Auto Pact (1965) destroyed Canada’s automobile industry. Many domestic industries went bust and America brought its branch plants into Canada. Ottawa became an assembly line with no access to real R&D or innovation. Yet Canadians were happy to have jobs.

In 1989, a comprehensive free trade agreement was signed that included all sectors of the economy, not just automobiles. This led to factories shutting down and relocating to the United States, and later to Mexico. As a result, there was widespread unemployment, and poverty levels rose significantly. Social spending was also reduced, causing the standard of living to decline. This marked the beginning of the decline of the Canadian dream, sacrificed for the benefit of American businesses and facilitated by Canadian politicians working on behalf of American lobbyists.

Today, an astonishing 77% of Canada’s exports are sent to the United States. This dependency gives the US considerable leverage; if America alters its trade policies—such as imposing 10% tariffs on aluminium or enforcing “Buy American” provisions—the Canadian economy feels the impact. The Canadian people took a bad deal, and to top it all off, the Trudeau government started a massive migration campaign to protect the housing bubble. But Canada’s poor and working class are the ones who suffer at every turn. From a nation with the highest living standards to economic indenture, Canada has come a long way and might want to rethink its policies and allies.

The decades-long policy crime

Of all the policy decisions in Canadian history, none more clearly embodies political malice than the federal government’s calculated withdrawal from social housing in the mid-1990s. More than any other decision, it entrenched the structural divide between those who own property and those condemned to struggle without it.

The evidence is surgical in its precision. The federal government froze social housing investments in 1993, ended its co-operative housing programme in its 1992 budget, and by 1995, it ceased funding new affordable housing development entirely, ending a 50-year commitment to shelter the most vulnerable. This act of institutional cruelty was immediately followed by the devolution of existing social housing administration to provincial and municipal governments in 1999.

This devolution coincided with the replacement of the “Canada Assistance Plan”, which had provided open-ended, 50-50 cost-sharing for social programmes, with the fixed, inadequate block grants of the Canada Health and Social Transfer. This manoeuvre effectively starved the social housing sector of resources, ensuring that between 1995 and 2002 almost no new non-profit units were created, a historical failure that created the decades-long supply void and the affordability crisis we now face.

The gap created by the government’s withdrawal was eagerly filled by financial speculators, transforming housing from a fundamental human right into the primary means of wealth generation for the middle and upper classes. Policies that supported the securitisation of mortgages fuelled the financialization of the housing sector, completely disconnecting increases in housing prices from economic fundamentals and income levels.

The result is that in major urban centres like the Greater Toronto Area, home prices jumped over 436% between 1994 and 2024, while household incomes climbed only about 34.6% over the same period.

The tragic consequence of this policy crime is visible on every street corner across the country. Over 10% of Canadian households, equating to 1.5 million individuals, are currently in ‘core housing need,’ and Canada is experiencing the proliferation of unstructured encampments in large, medium, and smaller cities.

When vulnerable people are discharged from systems like hospitals, corrections facilities, or mental health facilities and find no exit housing, they are forced directly into homelessness, a system failure directly attributable to the decades-old policy of gutting affordable housing programmes.

This lack of non-profit and cooperative housing supply is a systemic factor, compounded by high inflation and rising interest rates, demonstrating that the market cannot be relied upon to solve the crisis created by the state’s retreat.

And let us not forget the green blunder. As per policy think tank Fraser Institute, the previous Justin Trudeau government introduced a series of tax measures, spending initiatives, and regulations to actively constrain the traditional energy sector while promoting what the administration termed the “green” economy. However, the results were not encouraging.

Ottawa introduced regulations to make it harder to build traditional energy projects, banned tankers carrying Canadian oil from the northwest coast of British Columbia, proposed an emissions cap on the oil and gas sector, cancelled pipeline developments, mandated almost all new vehicles sold in Canada to be zero-emission by 2035, imposed new homebuilding regulations for energy efficiency, changed fuel standards, and the list goes on and on.

“Despite the mountain of federal spending and regulations, which were augmented by additional spending and regulations by various provincial governments, the Canadian economy has not been transformed over the last decade, but we have suffered marked economic costs. Consider the share of the total economy in 2014 linked with the ‘green sector,’ a term used by Statistics Canada in its measurement of economic output, was 3.1%. In 2023, the green economy represented 3.6% of the Canadian economy, not even a full one-percentage point increase despite the spending and regulating,” the Fraser Institute remarked.

Ottawa’s initiatives failed to deliver the promised green jobs. From 2014 to 2023, only 68,000 jobs were created in the entire green sector, which now represents less than 2% of total employment. Canada’s economic performance cratered in line with this new approach to economic growth. Rather than delivering the promised prosperity, it delivered economic stagnation.

According to the Canadian living standards (measured by per-person GDP), lifestyle prosperity was recorded on the lower side as of Q2 2025 compared to six years ago. In other words, Canadians are poorer today than they were six years ago. In contrast, the United States’ per-person GDP grew by 11.0% during the same period.

Cruel math of the safety net

The sheer, calculated cruelty of Canada’s current social safety net is evident in its outcomes. The system is fragmented, difficult to access, inefficient, outdated, inadequate, and is a bureaucratic maze meant to traumatise and deter those who seek aid.

The defining failure of this system is its persistence in keeping people in poverty. An annual report shows that 98% of household types receiving social assistance in Canada are below the country’s Official Poverty Line.

Furthermore, 73% of these households are trapped in deep poverty, defined as having less than 75% of the poverty threshold. This is clear evidence that social assistance is quite literally designed to be a poverty trap, normalising destitution rather than facilitating escape.

This calculated inadequacy is exacerbated by rapid economic erosion, particularly due to high inflation. Between 2023 and 2024, more than a third of welfare recipients, 36% of tracked households, saw their total incomes increase at a rate below inflation, meaning that in real dollars, they are becoming poorer every year, actively losing ground against the rising cost of living.

This real income decline occurred despite some provinces attempting to offer one-time cost-of-living supports, demonstrating that the underlying provincial social assistance benefit rates are simply too low and frequently stagnant. When provinces like Ontario fail to adjust basic social assistance benefits, it is a conscious decision to normalise destitution and push vulnerable citizens deeper into the deprivation abyss.

This systemic cruelty falls hardest on specific groups. The poverty rate among people with disabilities is drastically high, solely because the benefits provided are fundamentally detached from the actual, significantly higher costs of living with a disability. The increasing reliance on the “Ontario Disability Support Programme,” as shown in Ontario data, reflects the reality that people with disabilities are being failed by both the labour market and an inadequate social net, leading to their over-representation in the poverty statistics.

For new parents, the mandated drop in income resulting from “Employment Insurance” benefits during maternity and parental leave creates significant financial stress precisely when costs are highest, a structural contradiction that pushes middle-class families toward financial instability.

Furthermore, Canada remains the only G7 nation without a comprehensive national school food programme, ignoring the overwhelming evidence that such programmes are highly successful drivers of improved health, education, and economic growth internationally. International experience, notably programmes like the United States’ “National School Lunch Programme,” shows that school meals yield a massive return on investment. Yet Canadian policymakers prioritise corporate tax breaks and speculative wealth over ensuring that millions of children eat nutritious food. This is a policy of moral bankruptcy.

And what of the medical costs? The financial burden of necessary prescription drugs is a known structural driver of poverty, yet Canada maintains significant gaps in coverage, refusing to implement a national pharmacare plan that works like Medicare. This deliberate policy decision forces low-income families and workers to choose between medicine and food, increasing health disparities and driving up overall healthcare costs unnecessarily. The political resistance is rooted in fears over escalating costs, yet a national plan would save Canadian families money while expanding access.

Indictment of a nation

From the destruction of stable manufacturing jobs under free trade to the calculated withdrawal of social housing funding in the 1990s, from the institutionalisation of precarious migrant labour to the maintenance of a welfare system designed to keep people in deep poverty, every data point confirms this reality. The combination of various crises has increased the desperation of the population, resulting from these compounded policy failures.

The evidence presented by national bodies and academic experts is indisputable. The “Market Basket Measure” tells us that the working poor cannot afford a modest, basic standard of living. Statistics Canada confirms that food insecurity tracks peak inflation, and human rights advocates warn that the refusal to make the right to food justiciable is the ultimate mechanism of governmental evasion.

The “Poverty Reduction Strategy”, launched in 2018, while ambitious in its targets, has stalled dramatically, showing that good intentions without enforceable rights and structural economic correction are merely political rhetoric.

Canada must choose immediately between two futures, one where we continue this shameful path of structural neglect, managing poverty through ineffective charity and political platitudes, and one where we implement a rights-based, income-guaranteed system that recognises the dignity and inherent worth of every person.

The post The collapse of Canada’s promise appeared first on International Finance.

Playing a pivotal role in this transformative journey is the Saudi Mortgage Guarantees Services Company – Damanat, a fully owned subsidiary of the Real Estate Development Fund (REDF). Established in 2023 and licensed by the Insurance Authority the same year, Damanat was created to enable access to mortgage finance for semi-bankable segments by providing assurances to lenders, supporting developers in securing project financing, and strengthening the secondary market through guarantees for investors. These efforts have collectively increased homeownership and expanded residential supply, especially for low- and middle-income groups.

At the forefront of this initiative is Osama Abdullatif Al-Othman, a visionary CEO with over 30 years of experience in real estate and private equity investments. His career spans leadership and executive roles at both national and international institutions.

Under Al-Othman’s guidance, Damanat has emerged as a cornerstone of the Kingdom’s housing ecosystem. Since its launch, it has issued over 151,000 mortgage guarantees, primarily benefiting low-income groups, semi-bankable individuals, and segments that are now enabled through Damanat’s strategic support.

A key element of Damanat’s impact is its product range, which offers solutions for individual homebuyers and developers. For individuals, it provides guarantees to lenders, ensuring risk assurance. And when it comes to the developers, Damanat offers the Off-Plan Development Guarantee (OPD), branded as “Tawer,” which enhances their ability to access funding by reducing credit risk associated with project financing. These programmes have accelerated housing supply and reduced financing barriers across the market.

In an interview with International Finance, Damanat CEO Osama Abdullatif Al-Othman said, “Our objective is not just to offer guarantees; we aim to enable access to housing finance for underserved populations, empower real estate developers, and stimulate the secondary market, all in alignment with Vision 2030.”

Damanat’s operations are based on transparency, innovation, and collaboration. These values are essential for building trust with banks, developers, government agencies, and the citizens. In addition to its national responsibilities, Damanat is actively collaborating with various stakeholders to attract international investment in the Saudi housing sector. It does this by offering structured and risk-mitigated pathways for participation.

Damanat invests heavily in human capital, offering ongoing training and professional development to equip its team with the tools needed to navigate the evolving housing finance landscape.

When asked about the company’s alignment with “Saudi Vision 2030,” Al-Othman affirms, “Damanat’s entire model is built around the Vision. Every product we design and every partnership we form is intended to drive higher rates of homeownership and create a more inclusive housing market.”

As the Kingdom advances toward its national diversification objectives, Damanat’s leadership under Al-Othman reflects how focused governance, inclusive solutions, and strategic innovation can collectively reshape the future of housing in the Gulf country, ensuring that every citizen has a fair opportunity to access suitable, secure, and affordable homes.

The post Damanat: Empowering Saudi housing through innovation & leadership appeared first on International Finance.

According to Property Finder, the primary ready segment of the market, one of the main growth drivers, saw total sales quadruple to AED 17.9 billion in May 2025. Meanwhile, the secondary ready segment recorded AED 24 billion in sales, representing a 21% increase in value year-over-year.

While total secondary sales increased by 23% to reach a new record of AED 29 billion, the value of primary ready and off-plan sales increased by 65% to AED 37 billion. The most recent data shows a robust market sentiment and ongoing demand for real estate in Dubai.

According to Property Finder, there is a high demand for housing in Dubai due to the recent large influx of new residents and tourists.

“With the remarkable growth in population this year, welcoming nearly 1,000 new residents each day – double last year’s daily visitor arrivals, demand for housing is poised to reach peak levels,” Cherif Sleiman, Chief Revenue Officer at Property Finder said.

“Against this backdrop, the real estate market is enjoying positive momentum, fuelled by digital transformation, international investor appetite and a surge in demand for premium living,” he added.

Meanwhile, according to a report by international property consultancy Knight Frank, a substantial USD 103 billion in private capital is expected to flow into Dubai’s residential real estate sector, demonstrating the strength of the real estate market.

Based on information gathered from 387 high-net-worth individuals (HNWIs) in East Asia, Saudi Arabia, the United Kingdom, and India, the report reveals that international investors are increasingly interested in Dubai’s booming real estate market.

As the demand for homes from the world’s elite continues to heat up, Dubai’s real estate market continued to grow in 2024, with values and rents reaching all-time highs and the total value of transactions across all sectors surpassing USD 207 billion, according to the report done in collaboration with YouGov.

The post Dubai home sales surge to record USD 18.2 billion amid population boom appeared first on International Finance.

In recognition of its scale and impact, Empire World was recently honoured with the prestigious international title “Most Innovative Mixed-Use Real Estate Project—Empire World—Iraq 2025,” presented by International Finance.

International Finance is known for celebrating excellence in both residential and commercial real estate developments in emerging markets, specifically honouring those who deliver consistently valuable and engaging experiences for customers.

Launched in 2006, Empire World has committed itself to delivering the highest standards in construction through world-class engineering teams and premium materials. By 2007, the project opened its doors, offering residents access to some of the most luxurious housing (Royal Villa) in Erbil. The project also boasts a wealth of turnkey office spaces, offering ideal environments for businesses to grow and thrive, all within a single, sprawling complex.

Empire World represents a USD 2.7 billion investment in the rapidly growing and economically autonomous Kurdistan region in northern Iraq. As a result, it has earned a high-ranking status among global commercial developments. Winning the International Finance Award further solidifies its standing on the global stage.

Located in Erbil, the capital of Kurdistan, the Empire World development exemplifies architectural innovation and commercial excellence. It marks a turning point in the region’s urban growth, placing it among the leading development hubs in Iraq.

Erbil’s outlook has been brightening with rapid development and increasing investment interest. The city has become a magnet for investors seeking high-potential opportunities, signalling a promising economic future. With significant investments in infrastructure, energy, and transport, the Kurdistan region is emerging as a gateway for broader investment in Iraq.

At each stage of construction, the Empire World project was designed to respond to the region’s market needs, particularly the housing deficit. Its location further enhances its strategic value. It is near Erbil International Airport and adjacent to one of the city’s largest parks—Sami Abdulrahman Park.

Empire World was carefully planned to provide everything an individual might need—residential units, entertainment spaces, green zones, and a thriving business environment. The quality of its housing units has earned a reputation as the best in the region, and its office complexes provide an ideal setting for businesses to flourish.

What makes Empire World stand out as one of the largest and most successful projects in Iraq are features like a mix of zones for business, residential, hospitality, and leisure, massive land area covering 750,000 square metres (300 acres) and a total project budget of $2.7 billion, promising long-term value and impact.

Empire World also has 88 towers, 300 luxury villas, along with other comprehensive facilities including a mosque, medical clinic, gym, shops, and restaurants. The presence of the JW Marriott luxury hotel has elevated the project’s status by leaps and bounds.

To date, 70% of the Empire World project has been sold—a testament to the demand and trust it has garnered. As one of Iraq’s most ambitious real estate endeavours, the project’s high quality and modern design continue to attract foreign companies looking to establish offices in a sophisticated and business-friendly environment. Empire World has also become home to many start-ups, offering them ideal conditions to grow and succeed in Kurdistan.

Due to the project, over 1,000 foreign and local employees have found work opportunities, contributing to the region’s economic development and signalling positive momentum for Kurdistan’s job market.

According to Empire World Chairman Peshraw Agha, one of the project’s major milestones was the early success of Royal City, a sub-project comprising 300 royal villas. These were sold out even before 2010, just four years after construction began. Today, real estate values in Royal City have more than tripled, reflecting the strong market and growth potential in the area.

Empire World consists of multiple sub-projects that have collectively contributed to its success, including Empire Square (residential and commercial), Empire Wings (West and East), Empire Diamond (West and East), Empire Business Complex, Empire Business Towers, Royal Villas, Royal Apartments, JW Marriott and Empire Luxury Restaurants. These projects were built with high-quality materials and modern design principles, adding long-term developmental value to the city of Erbil.

Being awarded the “Most Innovative Mixed-Use Real Estate Project—Empire World—Iraq 2025” can be summed up as a landmark achievement for Iraq’s real estate sector. Empire World has successfully contributed to regional development, created extensive job opportunities, and delivered a world-class urban experience that’s been shaping the future of living and working in the Middle Eastern country.

The post Empire World: Iraq’s most ambitious real estate project appeared first on International Finance.

Singapore’s geopolitical approach is intricately linked to its economic survival, particularly in light of its small population and limited resources. Singapore, being an important hub of international trade and finance, has to contend with the challenge of navigating an increasingly fragmented world, characterised by shifting allegiances and economic uncertainty.

Geopolitics and economics

The US, as a key security ally and major investor in Singapore, has a corresponding role. Meanwhile, China’s proportion of trade with Singapore makes the nation a key economic partner. To this end, Singapore has kept its word. The city-state has cultivated close ties with both superpowers and promoted multilateralism through ASEAN and other regional economic frameworks.

Today, geopolitical tensions in the form of South China Sea disputes and the United States efforts to exit Chinese supply chains have left Singapore in a challenging situation. Counterintuitively, the city-state is extending its trade treaties with emerging markets, as well as working to advance digital trade with other value-hungry nations like Australia, the European Union (EU), and Japan.

Being a small country, Singapore is sensitive to changes in international trade, investment flows, and technological progress. With its policy of globalisation, Singapore’s open economy has thrived. However, the global shift away from a rules-based multilateral system due to prevailing protectionist policies poses a threat to Singapore’s economic stability.

The pandemic-induced supply chain disruptions and global push toward self-reliance in producing semiconductors have shed light on the middleman vulnerabilities of Singapore. In response, Singapore has shifted its attention towards diversifying its economic base through giant investments in frontier industries such as artificial intelligence, biotechnology, and financial technology.

The government has implemented incentives to attract multinational companies while backing local firms, particularly those involved in green energy and sustainable finance. Additionally, Singapore is going digital, focusing on cross-border e-commerce and fintech products, all to stay relevant in a future where digital commerce is as significant as traditional trade corridors. Despite these strategic initiatives, Singapore is also facing some long-standing issues that could slow down its economic growth in the future.

“With our population ageing and fertility rates dropping, the labour shortage problem remains a top priority. The government is trying to attract foreign skilled talent while ensuring that domestic workers are able to remain competitive through lifelong learning and retraining opportunities,” says Faizal Bin Yahya, Senior Research Fellow at the Institute of Policy Studies at the Lee Kuan Yew School of Public Policy, National University of Singapore.

However, immigration remains an issue that provokes strong emotions, with individuals voicing growing concerns about how the newcomers fit into society and what it does to our national identity.

“Singapore’s limited geographical size restricts its ability to expand its physical footprint. This limitation has resulted in innovative urban planning strategies such as underground infrastructure development and land reclamation schemes. Climate change further compounds our challenges, as the rising sea level and climate-related disasters pose threats to Singapore’s long-term sustainability,” Yahya added.

The government has made significant efforts to mitigate this challenge through investment in green technology. The government is introducing renewable energy, funding carbon capture initiatives, and advancing financial instruments tied to sustainability, as the world economy moves towards sustainability.

One important aspect of Singapore’s economic policy is trade diversification, which can mitigate some adverse effects. Beyond strengthening trade relations with its immediate neighbours, Indonesia and Malaysia, Singapore has signed 27 bilateral and regional free-trade agreements.

Moreover, Singapore has further deepened sub-regional development cooperation with Indonesia and Malaysia. In Batam, Indonesia, for example, Singapore has jointly developed industrial and high-tech parks. Furthermore, it is a partner to the Johor-Singapore Special Economic Zone, which aims to open Johor, Malaysia, to Singapore-based companies.

Structural and demographic challenges

Singapore’s labour force and resources, particularly its land, limit its ability to grow and develop. The number of foreign workers rose from 1.2 million in December 2021 to 1.52 million in December 2023, despite strict regulations such as the dependency ratio ceiling, which limits the number of foreign workers in relation to the overall labour force.

As of June 2024, the population of Singapore includes 1.86 million non-residents, 3.64 million citizens, and 544,900 permanent residents. The median age of the citizens was 42.8 years old in 2022. As of today, it is 43 years old. It is worrying that 19.9% of its citizens are 65 years and above, and in 2030, this number is expected to rise to 24.1%.

In 2023, 34,491 people were granted permanent residence, and 23,472 people were granted citizenship, a 1.7% increase from the previous year. To manage the flow of new citizens, social integration, ethnic, and interreligious peace activities have been at the forefront, although the number of new citizens granted has remained stable recently.

Immigration and foreign labour have become significant issues, particularly as general elections like the one in 2025 approach. The politicisation of immigration and foreign labour issues draws attention to the importance of maintaining racial harmony and ethnic balance. Racial classification by the Singaporean government is done using the Chinese-Malay-Indian-Others model.

During his 2025 budget speech, Singapore Prime Minister and Finance Minister Lawrence Wong presented several measures to aid Singaporeans to ensure that the nation maintains its economic growth and social compact with its residents.

These policies aim to encourage lifelong learning, offer job assistance, and help with workforce transformation. These included regular training subsidies for certain full-time and part-time courses, and enhanced workfare skills assistance for low-income individuals.

As part of its National AI Strategy 2.0, which the Singaporean government updated in 2023, Singapore is focusing on building its AI capability alongside leveraging technology to drive economic growth. The aim is to triple the number of AI experts to 15,000 by 2023. Furthermore, by enhancing its connectivity, the state continues to utilise and maximise its locational advantage.

Among the most densely populated countries is Singapore. Singapore’s housing market is in a dilemma situation—while it has made many homeowners by providing housing to residents through the Housing Development Board (HDB), it has also seen escalating property prices that have created giant concerns regarding affordability.

The government has introduced stringent regulations to curb speculation and ensure stability, such as cooling measures, additional stamp duties, and restrictions on loan-to-value ratios. However, demand continues to outstrip supply, leading to record resale levels and increasing rental costs.

Increasing foreign investment in luxury homes and a rising tide of expatriates have been pushing housing costs sky-high, posing difficulties for younger Singaporeans and lower-income groups in being able to find housing that they can afford.

The rising price of private flats has contributed to inflationary pressures, and Singapore is now among the most expensive cities to live in globally. The government has taken measures by increasing the supply of Build-To-Order (BTO) flats and introducing first-time homebuyers’ subsidies. However, the extent of their impact remains uncertain.

The current cost-of-living crisis is not limited to housing alone; it affects our everyday essentials such as food, transport, and healthcare. The global supply chain disruptions and higher energy prices have driven the increasing cost of living. Singapore imports most of its food and products, leaving it exposed to price fluctuations.

The hike in the Goods and Services Tax (GST) from 8% to 9% in 2024 has caused consumer prices to go up, despite the assurance of assistance from the government to lower-income earners.

The government has rolled out schemes such as U-Save rebates, cash handouts, and transport subsidies to alleviate the burden. But concerns about wage stagnation and income inequality persist.

As Singapore attracts increasing numbers of high-net-worth individuals and multinational companies, a means of balancing economic expansion with affordability for residents will be a key issue for policymakers over the coming years. Trade hub, sustainable energy, and AI: Singapore must enhance its global connectedness to consolidate its position as a node within the global value chain.

Changi Airport served over 58.9 million passengers in the aviation sector in 2023. Singapore is now restarting the construction of Terminal Five, which will be larger than Terminals One to Four combined and accommodate 50 million annual passengers to help it compete with other airline hubs.

The aviation sector supports around 200,000 individuals and contributes to 3% of Singapore’s GDP. In its 2025 budget, the government injected S$5 billion (US$3.7 billion) into the Changi Airport Development Fund.

The maritime sector supports around 170,000 individuals and contributes 7% of Singapore’s GDP. With the development of the Tuas Mega Port, Singapore continues to enhance its geographical benefits.

Singapore’s aspiration to be zero-emitting by 2050 means that it will have to rely increasingly on its neighbours because it is resource-constrained. S$5 billion (US$3.7 billion) was allocated to the Future Energy Fund in the 2025 budget.

To achieve its target of importing four gigawatts of clean energy by 2035, Singapore would purchase 1.2 gigawatts from Vietnam. Singapore also has deals with Indonesia to import one gigawatt of clean energy and two gigawatts of low-carbon electricity from Cambodia.

It is enabled by automation and investments in emerging technologies, such as AI, but this strategy must be accompanied by the retraining and education of Singapore’s ageing workforce. There must be collaboration with key stakeholders, such as small and medium enterprises, global corporations, and trade unions.

Singapore is employing sub-regional development and digital trade, including e-commerce, with like-minded partners in a bid to seek alternatives to strengthen multilateral trade. In the transition to a greener economy for more sustainable growth, connectivity also needs to be enhanced, but this has to be paired with cooperation with sub-regional partners.

Singapore’s economy grew faster than expected into the end of 2024. The city-state’s economy grew 5.0% in the fourth quarter from a year earlier, higher than both an official advance estimate of 4.3% and economists’ forecast of 4.7% growth. However, the government anticipates slower growth in 2025, as trade frictions and ongoing geopolitical conflicts may lead to higher production costs.

Ultimately, the city-state needs creativity, collaborative partnerships, and a relentless policy reform drive to ensure its prosperity as a vital stakeholder in the global marketplace, while the trade war wages on.

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Poverty is a multifaceted phenomenon which transcends mere financial considerations. Conventional methods often analyse poverty in Lagos slums with income criteria as the primary concern.

If an individual’s income falls below a specified threshold, they are considered impoverished. Though this method identifies financial distress it overlooks several dimensions of poverty, like inadequate access to education, healthcare, clean water, and satisfactory living conditions.

Assessing poverty necessitates a multifaceted framework rather than solely an income-based perspective. Multidimensional poverty entails examining various facets of deprivation to have a comprehensive understanding of the experience of living in poverty. It aids policymakers and researchers in recognising that an individual may continue to face difficulties despite having some income due to the lack of other vital services.

In a study examining poverty in the slums of Lagos State, three fellow development economists, including Oluwaseyi Omowunmi Popogbe, employed a mathematical framework to model multidimensional poverty. They employed the fuzzy set method. The fuzzy set method emerged in the 1990s as a substitute for relying solely on financial indicators to measure poverty.

The conventional monetary approach often categorises individuals as either “poor” or “not poor” according to defined thresholds. Poverty manifests on a continuum, with individuals encountering varying degrees of lack in multiple facets of their existence. The fuzzy set methodology addresses this by allocating varying degrees of membership to distinct poverty indicators.

The researchers identified significant disparities in poverty, as measured by a multidimensional score, among slums in Lagos State. Their discoveries will allow economists and policymakers to discern the many forms of deprivation experienced by individuals in slums. This should assist them in comprehending how to enhance their lives in a more focused and efficient manner.

The Lagos story

The research concentrated on five major slums situated near the coastline in Lagos State. As part of a $200 million loan initiative, the World Bank has designated these slums for enhancement to improve drainage and solid waste management.

They selected 400 participants from the five slums: Makoko, Iwaya, Ilaje, Ijora Badia, and Amukoko.

Avijit Hazra and Nithya J. Gogtay, experts in biostatistics and research technique, assert that a minimum of 384 samples is suitable for a big population size. Nonetheless, the chosen sample for this study constrains the capacity to generalise the findings to other slums, particularly those with distinct characteristics.

The multidimensional poverty index reached its peak in Makoko and Iwaya. These scores signify extreme poverty since they exceed the threshold of 0.50.

Conversely, Amukoko exhibited the lowest multidimensional poverty index, indicating milder deprivation across all measures.

Makoko and Iwaya face substantial challenges in education, sanitation, and nutrition, which contribute to their higher poverty rates compared to other communities.

Makoko’s coastal position, characterised by improvised housing and inadequate infrastructure, exacerbates its susceptibility. Iwaya faces comparable difficulties in educational and healthcare services. These characteristics render both places more impoverished than other slums.

Among the three primary aspects of poverty assessed, education exhibited the greatest level of deprivation across all localities. This underscored the restricted formal education in the population.

Makoko and Iwaya demonstrated the most significant educational deficits. Notwithstanding certain advancements, especially in child enrolment, many neighbourhoods continue to exhibit significant disadvantages.

The second dimension that demonstrated a significant disadvantage was living standards. Variations existed among various slums. Makoko and Iwaya experienced a higher prevalence of sanitation issues.

The third dimension in the category of severe deprivation was health. Indicators encompassed mortality and nutrition. Numerous slums experienced elevated mortality and nutrition, significantly influencing their multidimensional poverty indices.

Other localities, such as Amukoko, demonstrated superior sanitation results. Conversely, the indicators for electricity, flooring, and cooking fuel typically exhibited reduced levels of deprivation, with the majority of slums registering scores around or below 0.03 in these categories.

The incidence of both severe and minor ailments, along with inadequate medical care, resulted in elevated mortality rates. Inadequate sanitation may contribute to health problems.

In Makoko and Iwaya, the lack of proper sanitation facilities and waste management has resulted in the disposal of refuse into the waterways.

Notwithstanding this, personal hygiene practices, including the use of clean water, soap, and regular brushing, were widespread. This contributed to maintaining a relatively low sanitation score in comparison to other health-related concerns.

Other slums exhibited comparatively superior garbage collection systems and enhanced sanitation standards.

What must be done?

One cannot improve the quality of life in Amukoko, Makoko, and Iwaya without addressing many faces of poverty, including inadequate infrastructure and limited access to essential services. These densely populated areas, often characterised by informal settlements, lack of proper sanitation, and insufficient housing, can become hubs of opportunity and sustainable living with targeted interventions. Such an endeavour involves a multitude of complexities and opportunities.

Infrastructure is a critical foundation for improving slum conditions. Roads and transportation systems must connect slum residents to the broader city, offering better mobility and economic opportunities. The people of these slums cannot educate themselves or participate in the economy without affordable public transport tailored to their needs.

There is also the question of reliable electricity and energy solutions, such as extending the grid or introducing renewable energy options like solar panels, which can provide consistent power to households. Offering subsidised rates for the use of sustainable energy to low-income families would significantly improve their situation.

Of course, clean drinking water and proper sanitation are equally vital. Installing piped water systems, boreholes, and community toilets, along with effective waste management solutions, significantly reduces health risks and improves living conditions.

One of the most important facets is housing in slums, which requires special attention. Imagine the impact that government and NGO partnerships can achieve through affordable housing projects, ensuring durable homes for these unfortunate individuals.

Only if financial institutions are willing to lend them microloans and subsidies, can their livelihoods and economic independence significantly improve. In a similar vein, granting land titles offers security and reduces the constant threat of eviction, fostering a sense of stability. Finally, none of the above would mean anything without the legal frameworks in place to protect residents from exploitation and to ensure fair and equitable treatment within the housing sector.

For slum dwellers, education is a transformative process. Free schools in the area can raise literacy rates and skill levels among the young. Providing scholarships, free uniforms, and learning materials ensures that education is accessible to all. Vocational training centres provide practical skills that enhance employability, focusing on trades like carpentry, tailoring, and IT.

The education process shouldn’t stop with children, as adult education programmes, including literacy and financial literacy workshops, empower older residents to manage their resources effectively and explore new economic opportunities.

Without a doubt, healthcare access is another pillar of improved quality of life. Community clinics that offer affordable or even free services could ensure that residents receive the essential care that they deserve. But it all begins with training health workers in first aid and preventive care, which address immediate health concerns.

Almost all communities aiming to improve life expectancy and quality of life prioritise health campaigns, including vaccination drives and disease screenings. Women and children are often the most vulnerable groups in any community, and targeted programmes for maternal and child health can significantly reduce mortality rates.

Adding cleanliness drives to the mix to educate residents about hygiene and encourage waste segregation and recycling significantly raises awareness and creates jobs.

Economic empowerment is crucial for encouraging self-sufficiency within slums. Job creation through the establishment of micro-industries and cooperative businesses can provide local employment opportunities. Government policies promoting local businesses to hire from these areas alleviate unemployment.

Access to microfinance, including low-interest microloans, supports small businesses and fosters financial independence. Programmes for skill development equip residents with the necessary skills to compete in the job market. Partnerships with companies for internships and apprenticeships provide invaluable practical experience.

Community engagement and leadership are essential for sustainable development. Local committees representing residents’ interests ensure participatory governance and foster a sense of ownership and responsibility. Platforms for youth and women to voice their concerns contribute to building inclusive communities.

Programmes addressing gender equality and domestic violence enhance social well-being. Systems for peaceful conflict resolution prevent disputes from escalating, while training community leaders in mediation strengthens social harmony.

Green spaces, such as parks and recreational areas, can improve mental and physical health. Urban farming projects provide fresh produce and promote self-sufficiency. Renewable energy projects, including community solar farms and biogas systems, reduce reliance on fossil fuels. Training residents to maintain these systems ensures sustainability and creates jobs. Disaster resilience measures, such as flood control systems and disaster preparedness training, protect lives and property.

Regular audits and feedback mechanisms enhance accountability and outcomes. Integrating slum development into broader urban planning ensures that these efforts align with the city’s growth. Policies promoting affordable housing, healthcare, and education address systemic inequalities and create a more inclusive urban environment.

Digital literacy programmes, coupled with affordable access to smartphones and internet connections, can bridge the digital divide and enhance employability. Smart solutions, such as apps for reporting infrastructure issues, improve service delivery.

Telemedicine services bring healthcare to residents’ doorsteps. Data-driven planning, which utilises information on slum demographics and needs, guarantees targeted and effective interventions.

Promoting local arts, crafts, and cultural events fosters a sense of identity and pride within the community. Patronage of local artists provides socio-economic benefits, and mentorship programmes pair young residents with professionals who inspire them to pursue their dreams.

Success stories not only boost morale and motivation within the community, but sports and recreational activities also enhance community cohesion and physical fitness, thereby improving the overall quality of life.

Partnerships and collaborations can improve slum conditions, government-NGOs can ensure efficient resource use, and joint programmes can address multiple issues simultaneously. Similarly, CSR (Corporate Social Responsibilities) initiatives can fund vital projects, including skill training and employment programmes. International aid and collaborations with global organisations bring expertise and resources, enabling innovative solutions.

Amukoko, Makoko, and Iwaya slums demand a comprehensive approach combining infra-development, education, healthcare, and financial empowerment with sustainable practices and community engagement.

Tailored interventions, designed with inclusivity and cultural sensitivity, can transform these areas into vibrant, thriving communities. By encouraging partnerships between governments, NGOs, and residents, the potential for meaningful change becomes a reality, offering hope and opportunity for all.

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Despite these challenges, prominent markets in the region—the UAE, Saudi Arabia, Qatar, and Egypt—showed remarkable adaptability and provided strong signals of long-term promise.

This success stemmed from a confluence of factors, including visionary government policies, the pursuit of ambitious “giga” projects, and growing interest from foreign institutional and individual investors. As a result, the Middle East continues to reinforce its reputation as a compelling destination for real estate investments.

Year of resilience and transformation

In 2024, the Middle Eastern real estate sector demonstrated a robust ability to withstand external pressures. Although the broader geopolitical environment could have undermined investor confidence, most key markets in the region were buoyed by stable oil prices, which helped ensure the continuity of major infrastructural developments.

Governments in Saudi Arabia and the UAE capitalised on these stable revenues to fund real estate and related non-oil projects, supporting diversification initiatives that have become increasingly central to national economic strategies.

This was especially evident in Saudi Arabia, where the ambitious diversification agenda called “Vision 2030” encompasses a shift away from a purely hydrocarbon-based economy toward a more multifaceted growth approach.

Rapid urbanisation emerged as an additional factor driving market expansion. Metropolitan areas such as Dubai in the UAE, Riyadh in Saudi Arabia, and Doha in Qatar continued to experience growing populations partly due to a steady influx of expatriates and high-net-worth individuals. These new residents spurred demand for residential as well as commercial real estate.

In Dubai alone, plans are set to develop over 28,700 villas by 2025 to meet the needs of the expanding expatriate population and wealthy global buyers seeking luxury accommodation. Across different cities, a rise in commercial real estate projects supported the growth of multinational and local businesses, while hospitality developments benefited from the revival of international travel and major events.

The Emirati city in January 2025 witnessed the administration approving the implementation of a series of housing projects worth AED5.4 billion (USD 1.5 billion) to benefit citizens across different areas of Dubai.

The projects will see 3,004 new homes being built for Emirati citizens, of which 1,181 units will come up in Latifa City for beneficiaries under the housing loan category. For beneficiaries, the projects envisage 606 new homes in Al Yalayis 5, 432 homes in Wadi Al Amardi, 398 homes in Al Awir 1, 200 homes in the Makan area of Hatta, 120 homes in Oud Al Muteena, and 67 homes in the countryside and rural areas of Dubai.

Despite facing wide-ranging global uncertainties, the Middle East’s major real estate markets stepped into 2024 with a renewed sense of purpose. National diversification agendas, favourable regulatory reforms, and the expansion of mixed-use urban developments all contributed to the sector’s dynamism.

Real estate symbolises national progress and reflects a country’s economic aspirations. Current trends emphasise sustainability, smart city technology, and integrated community living.

The key markets

The real estate landscape in the Middle East includes multiple countries at different stages of economic and infrastructural development. While smaller or emerging markets contribute to the diversity of the region’s property sector, four nations in particular—the UAE, Saudi Arabia, Qatar, and Egypt—have captured international attention with their rapid growth, bold policy moves, and large-scale real estate initiatives.

Each exhibits distinctive features: the UAE showcases its global-city credentials and investor-friendly regulations, Saudi Arabia pushes transformative “giga” projects through Vision 2030, Qatar builds on its post-FIFA World Cup momentum, and Egypt capitalises on a huge domestic market and strategic reforms to attract greater foreign investment.

UAE remained a leading indicator of real estate prowess in the region in 2024, with Dubai in particular achieving new benchmarks in teams of transaction volumes and property valuations.

Knight Frank’s 2024 Global Residential Review noted that Dubai’s real estate market was among the fastest growing in the world, with a 21% price increase and approximately 180,900 transactions totalling AED 522.1 billion (USD 142.1 billion). This performance was attributed to the city’s business-friendly ecosystem, zero personal income tax, and an established global reputation as a hub for finance, tourism, and technology.

A policy milestone that continued to boost Dubai’s real estate appeal was the Golden Visa programme, under which long-term residency permits were issued to tens of thousands of investors, entrepreneurs, and professionals. By 2024, more than 100,000 investors had leveraged this policy to establish or expand their presence in Dubai, injecting significant capital into the property market.

Another essential piece of Dubai’s success story is its emphasis on infrastructure and connectivity. The city’s airports collectively rank among the world’s busiest, while new expansions at Al Maktoum International Airport and enhanced roadway systems reinforced Dubai’s role as a major global transit point.

Sustainability and smart city initiatives have also become integral parts of Dubai’s planning. Under the Dubai 2040 Urban Master Plan, large swaths of the city are being reshaped to accommodate green spaces, renewable energy solutions, and eco-friendly transportation. Estimates suggest that by 2025, over a third of newly constructed office buildings will have LEED certification or similar sustainable credentials.

Meanwhile, major mixed-use developments in areas such as Dubai Creek Harbour and Dubai South are introducing innovative designs meant to foster walkability, efficient public transport, and the integration of retail, residential, and commercial areas.

While Dubai naturally garners much of the publicity, Abu Dhabi—the capital of the UAE—sustains its own real estate expansion by diversifying its economy away from reliance on hydrocarbons. The city aims to become a cultural hub through projects like the Louvre Abu Dhabi, along with significant developments on Saadiyat Island and Al Reem Island.

Taking the game to the next level, the Dubai Land Department recently launched the Smart Rental Index 2025, marking a transformative milestone in regulating and developing the Emirati city’s real estate sector. This index integrates the latest technologies and real estate expertise, aiming to provide exceptional services that meet the needs of all stakeholders in the real estate market. It further enhances transparency and fairness in determining rental values, aligning with Dubai’s Digital Strategy and the Dubai Real Estate Sector Strategy 2033 objectives.

Streamlined foreign ownership rules and enhanced regulations have helped draw more international investors to Abu Dhabi, making it an increasingly appealing destination for those seeking returns from luxury and mid-market residential developments.

Saudi Arabia: A giant in the making

Saudi Arabia has been on a clear path of real estate transformation, guided by “Vision 2030.” This national strategy seeks to diversify the Kingdom’s economy, cultivate private-sector participation, and position Saudi cities as world-class destinations for investment and lifestyle.

Substantial investments in the Kingdom’s giga projects, such as NEOM, the Red Sea Project, and Qiddiya, are driving this growth. These developments are not only designed to generate global excitement but also to advance Saudi Arabia’s sustainability and innovation credentials. Mega-scale ventures serve as catalysts for economic diversification, cultural enrichment, and technological advancement.

The residential and commercial aspects of these projects are expected to attract significant attention from institutional investors. They aim to enter the Saudi market early, anticipating future appreciation as these cities and attractions come online.

The government has also introduced incentives to stimulate local housing demand, including subsidised mortgage programmes. Moreover, significant efforts are being made to liberalise aspects of the economy, such as the relaxation of certain social regulations and a push for greater tourism, all of which translate into further real estate opportunities.

Luxury housing is particularly on the rise in Saudi Arabia, spurred by a growing affluent population and expatriates who prefer secure, gated communities and amenities that cater to upscale tastes. Market analysts predict that by 2025, the Saudi residential real estate market might reach a valuation of about USD 1.64 trillion, driven partially by the synergy of ongoing giga projects and progressive social reforms.

Qatar: Building on momentum

Qatar’s real estate sector has continued to build on the legacy of hosting the FIFA World Cup 2022. Although the event was a global showcase for Qatar’s infrastructure capabilities, the country’s real estate market has broadened its focus beyond short-term gains tied to sporting events.

In November 2024 alone, real estate transactions were estimated at QAR 1.14 billion (USD 311.55 million), with Doha, Al Rayyan, and Al Dhaayen municipalities leading in financial value and volume.

Legislative efforts to open the real estate market to foreign buyers have energised demand for properties in specific freehold areas. Luxury developments and integrated city projects such as Lusail City exemplify Qatar’s ambition to develop master-planned urban centres that emphasise sustainability, cutting-edge technology, and a high standard of living.

Legislative efforts to open the real estate market to foreign buyers have energised demand for properties in specific freehold areas. Luxury developments and integrated city projects such as Lusail City exemplify Qatar’s ambition to develop master-planned urban centres that emphasise sustainability, cutting-edge technology, and a high standard of living.

This planned city north of Doha showcases innovations in energy management, urban mobility, and architectural design. Another major locus of real estate dynamism is Education City, which hosts world-renowned universities and research institutions and has spurred demand for quality student housing, commercial facilities, and residential areas that cater to a cosmopolitan population.

Qatar’s tourism sector continues to evolve, supported by high-profile conferences, cultural festivals, and additional sporting events that attract global visitors. The hospitality market has therefore performed strongly, with hotels, serviced apartments, and short-term rentals all benefiting from the country’s drive to expand its global profile.

As Qatar moves forward with its “Vision 2030,” a framework meant to further diversify the economy and modernise the country’s infrastructure, the real estate sector is expected to remain a key channel for foreign investment.

Egypt: A market of contrasts

Egypt stands as one of the largest and most populous Arab countries, making its real estate market a subject of keen interest for local as well as international investors. Even in the face of currency devaluations and inflationary pressures, Egypt’s property sector has shown remarkable tenacity.

The Aqarmap real estate index reported a rise of 39.3% in property prices in the first quarter of 2024, building upon a 22.3% increase in 2023. This trend reflects the gap between a growing need for housing and the available supply in a country where the population now exceeds 100 million.

Legislative changes that loosened restrictions on foreign land ownership have played a significant part in sustaining market momentum. Foreign investors keen on affordable entry points see Egypt as an opportunity, especially in emerging areas of New Cairo, the coastal city of Alexandria, and new resort developments along the Red Sea.

On the other hand, the devaluation of the Egyptian pound has weakened domestic buying power, leading to disparities in who can afford property. Despite these currency-related challenges, the sheer scale of demand—driven by high birth rates, continued urban migration, and government-led infrastructure projects—points to steady growth over the long term.

Initiatives such as the development of a New Administrative Capital and expansion along the Suez Canal corridor serve as examples of Egypt’s commitment to reshaping its urban landscape.

Trends shaping the future

Across these diverse markets, several emerging trends promise to influence real estate trajectories in the Middle East. One prominent theme is the focus on luxury real estate. Dubai, for instance, reported a surge in high-end property transactions by 62% during 2024, with prices per square foot often topping AED 3,200.

Upscale developments in Saudi Arabia resonate with affluent buyers who favour opulent villas, advanced security features, and lifestyle amenities. The increased flow of expatriates and tourists, along with relaxed ownership regulations, further supports this segment.

Sustainability and technology-driven innovations are increasingly integral to how Middle Eastern cities are being designed and managed. Projects like Saudi Arabia’s NEOM and Abu Dhabi’s Masdar City highlight the region’s determination to pursue green building standards, advanced energy solutions, and smart city technologies.

The goal is not merely environmental responsibility but also the attraction of global investors who integrate environmental, social, and governance (ESG) principles into their portfolios. Meanwhile, local authorities are encouraging sustainable construction by implementing stricter building codes and providing incentives for LEED-certified developments.

The hospitality and tourism sector has also regained momentum, with short-term rentals becoming more popular in places like Dubai, Riyadh, and Doha. The occupancy rates in short-term rental properties saw an upswing, especially as global travel curbs eased and the region continued to host marquee events and conferences.

Regulatory frameworks in the UAE and Saudi Arabia have introduced guidelines for short-term rental platforms to ensure quality control, safety, and taxation compliance, which in turn strengthens investor and tenant confidence.

Further boosting market vibrancy is the rapid adoption of technology in real estate services. Investors and potential buyers can now conduct virtual tours of properties, complete remote paperwork, and make digital payments. Governments are likewise exploring blockchain solutions for property registration to enhance transparency and reduce fraud.

PropTech start-ups have proliferated, particularly in the UAE and Saudi Arabia, offering specialised platforms for property management, crowdfunding, and AI analytics that help developers optimise pricing strategies and building design.

Forecast for 2025

In 2025, the Middle East’s real estate market is expected to continue expanding. The UAE, with Dubai and Abu Dhabi at the forefront, may see price growth of between 5% and 8% for residential properties, with prime locations experiencing even higher margins due to sustained interest in luxury living.

Saudi Arabia’s drive to achieve “Vision 2030” milestones should reinforce the long-term trajectory of large-scale developments like NEOM and Qiddiya, drawing high-level corporate relocations and new waves of international tourists. Analysts project an annual growth rate of around 1.64% in Saudi Arabia’s residential sector, culminating in a market worth around USD 1.64 trillion.

Qatar’s Lusail City and other major projects tied to Qatar National Vision 2030 will continue attracting both FDI and residents seeking modern, amenity-rich neighbourhoods. The country is keen to preserve the momentum generated by the FIFA World Cup 2022, thus focusing on diversifying its entertainment, cultural, and business event offerings.

Even Egypt, despite its macroeconomic challenges, is on track for steady growth thanks to an ever-present need for housing in a rapidly increasing population. Foreign investors see a combination of comparatively low costs, reform-driven policy shifts, and a robust tourism scene as incentives to enter Egypt’s market.

Although macroeconomic factors, particularly oil prices and global monetary policies, could influence the pace of real estate transactions, collective confidence in the Middle East’s prospects remains evident. As other regions grapple with uncertainties tied to inflation, recession risks, or political upheavals, the Middle East stands out for its strategic policies aimed at diversification and openness to foreign capital.

Strategic considerations for investors

Investors interested in the Middle East’s property market can consider various strategies. One approach is to diversify across multiple countries and asset classes, spreading risk through exposure in luxury and mid-tier residential developments, office complexes, hospitality ventures, and retail.

Another consideration is to stay consistently informed about policy changes, as decisions around foreign ownership, visa regulations, and tax incentives can significantly shift market dynamics quickly.

Sustainability is growing in importance, and developments that meet or exceed green building standards tend to attract a more globally conscious clientele and are seen as future-proof in an era increasingly shaped by ESG considerations.

Technological advancements should also feature prominently in any long-term plan, as blockchain-based property transactions, AI-driven analytics, and the rise of PropTech startups will reshape how developers, brokers, and buyers interact.

While certain geopolitical factors could always alter the outlook, the overall expectation is for a steady march of growth, backed by megaproject announcements, progressive economic policies, and the region’s robust cultural and commercial ties to both East and West.

From the attention-grabbing developments in Dubai and Abu Dhabi to the transformative giga projects in Saudi Arabia, from the post-World Cup expansions in Qatar to the large-scale housing demands of Egypt, the region presents a vivid tableau of real estate evolution. Governments have embraced modernisation, sustainability, and international best practices at a scale that few other parts of the world can match.

The outlook for Middle Eastern real estate remains optimistic, underpinned by a constellation of positive indicators: supportive government policies encouraging foreign investment, strong population growth in key cities, ambitious infrastructure ventures that connect and enhance urban environments, and ongoing technological leaps shaping how property is built, marketed, and managed.

Sustainability efforts are gaining traction in every major market, a direction that not only addresses environmental concerns but also aligns with the preferences of a growing class of conscientious global investors.

Potential geopolitical developments and external economic variables still present challenges, but the region’s dedication to resilience and long-range planning has repeatedly proven its capacity to overcome hurdles.

As a result, analysts envision more record-breaking transactions, the arrival of cutting-edge architectural marvels, and deeper commitments to green, tech-savvy communities across the Middle East.

This blend of innovation, strategic foresight, and cultural evolution keeps the Middle East firmly in the global spotlight. From ultra-luxury beachfront towers in Dubai to futuristic urban experiments in Saudi Arabia’s NEOM, and from the growing modern cityscapes of Doha to the sprawling developments around Cairo’s New Administrative Capital, the market continues to provide fertile ground for visionary developers, astute investors, and an increasingly sophisticated pool of local and international residents.

As 2025 unfolds, these intersecting forces are set to shape one of the most dynamic and resilient real estate arenas on the planet, ensuring that the Middle East remains a critical focus for global property stakeholders well into the future.

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