How do rising construction costs affect real estate investment in 2025?

Rising construction costs in 2025 are likely to impact real estate investment by increasing the overall cost of developing new properties, potentially squeezing profit margins for investors. Higher costs for materials, labor, and land, coupled with ongoing supply chain challenges, could make it more difficult to build or renovate affordable housing. This may reduce the number of new projects coming to market, particularly in lower-priced sectors. Investors may need to reconsider the feasibility of certain projects or adjust their expectations for returns. Additionally, rising construction costs could lead to higher prices for existing homes, making them less affordable for buyers. However, for investors who can navigate these challenges effectively, there may be opportunities in sectors like energy-efficient homes, which can offer long-term savings that justify the initial investment.