Blog | 25 Dec 2024

Outlook for cities in 2025: Identifying opportunities and risks

By Emilia Rosén

After a challenging year for many cities in 2024, our outlook for 2025 is one of cautious optimism. On average, cities from across the world, with the exception of China, will see GDP growth either increase or maintain pace in 2025. Despite this positivity, however, within regions there will be large variations in trends and performances for cities and across different metrics. By examining key economic indicators, we can identify which cities are poised to thrive and which might struggle—insights that are vital in today’s dynamic global economy.

GDP growth will be varied in 2025, but positive overall

As an indicator, GDP growth is often used to get a snapshot of the economic health and productivity of a city. And across the world, there will be many disparate trends in 2025.

Chart 1: In most regions, average GDP growth is forecast to accelerate or maintain pace in 2025

Source: Oxford Economics

Emerging APAC cities are set to continue to dominate the global rankings for GDP growth, with Hyderabad, Bangalore, and Chennai expected to see growth accelerate to between 7.8% and 9.2% in 2025. And perhaps not as exceptional but still robust, San Jose, Orlando, Seattle, San Francisco, and Las Vegas in the US will all see rates above 3% in 2025, thanks in part to their large tech sectors. European cities, too, will see modest improvements on average, with Warsaw, Prague, Sofia, Stockholm, and Bucharest anticipated to lead output growth in the region.

But the outlook is not entirely positive for all cities. Cities in advanced APAC lag other major cities around the world, with ageing demographics and shrinking populations acting as a significant drag on growth in places like Seoul and Osaka. Elsewhere in Asia, Chinese cities with larger concentrations of low-value manufacturing sectors or smaller exposure to China’s fast-growing IT and professional services sectors—such as Shenyang, Tianjin, and Suzhou—will likely underperform against their peers. In Europe, Paris will see the biggest economic slowdown of all major cities in the region, as growth in its important consumer services sector softens in 2025 after the Olympic-induced boost it received in 2024.

Employment growth is also an important metric of economic health, indicating and promoting economic stability, consumer spending, and overall quality of life.

Despite some disruptions in recent months for US employment—relating to the impacts of hurricanes and the Boeing strike—the country should see a robust rate of jobs growth in 2025, and we forecast that all top 50 metros will experience positive job creation. We expect Salt Lake City, Austin, San Antonio, Riverside, and Dallas will experience the strongest rates of job creation among major US metros.

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In Europe, we forecast subdued employment overall, with some notable laggards in central and eastern Europe. Still, the Nordics should hold up well, with Copenhagen and Stockholm in particular expected to post positive growth in the upcoming year. In some advanced APAC countries, structural issues are beginning to rise to the surface; employment in Nagoya City, Busan, and Seoul is set to decrease by up to half a percent next year, with rapidly declining birth rates already starting to have an impact on population growth and labour markets.

Bright prospects for consumer spending for European and US cities

We forecast positive consumer spending growth for many of our global cities, helping to fuel GDP growth and drive job creation.

In Europe, consumers have been cautious throughout 2024, plagued by the higher-than-normal inflation rates from the 2020–23 period. However, we expect that consumer spending should increase next year as these fears subside, with Prague primed to outpace the rest at 4% growth. In the US, proposed policy changes under Trump 2.0 will boost spending prospects across most metros in 2025 and over the medium term, though the regressive nature of the policies will disproportionately benefit locales with a greater share of higher-income households, such as San Jose, San Francisco, and Seattle.

Housing remains a key concern for homebuyers

Another common theme permeating the economic landscape in 2024 and 2025 is housing. Housing affordability has been a topical issue of late, as it’s become an increasing concern for cities and citizens across the globe. In Spain, a combination of supply-side constraints and strong demand has placed significant upward pressure on prices in recent years, with cities like Barcelona and Madrid becoming increasingly unaffordable. Elsewhere in the US, all the largest metros have seen affordability decline considerably over the past five years, with fewer than 15% of people able to afford the average home in places like San Jose, San Francisco, Honolulu, Los Angeles, and San Diego. 

However, as much as consumers might prefer cheaper housing, the instance of rapidly declining house prices is usually indicative of broader economic issues. In China, for example, house prices have been steadily declining for many years as cities grapple with debt issues among housing developers and low confidence in consumers. There is now the faintest of signals that the negative trend is in reverse, with a few Tier 1 cities—like Beijing and Shanghai—positing positive house price growth. But only time will tell if this is a reversal of fortunes or a fluke.

Still, there are some reprieves to be found. As interest rates in Canada continue to come down, indebted consumers can breathe a sigh of relief as mortgage rates become more affordable. Places with overstretched housing markets such as Vancouver, Victoria, and Toronto all saw affordability improve over the past year, and we expect that this will continue through 2025.

Trump 2.0: Future tariffs threatening current prospects

The re-election of President Trump to office has been one of the most staggering comebacks in recent history, and his proposed policies—including some stringent tariffs—will undoubtedly have a large impact on the world economy. Although it will take time for the policies to take effect and be written into law, risks loom over the horizon for export-dependent cities. Indeed, many cities in China (within the southeastern and central provinces), metros in Canada (New Brunswick, Alberta, Saskatchewan, and Ontario), and in Europe (including eastern Europe, Germany, and Italy’s industrial belt) are all particularly vulnerable.

And beyond these direct impacts, neighbours and trading partners might also face indirect, knock-on effects—some positive and some negative. In APAC cities in export competition with China, higher tariffs may stimulate US demand for their directly competing manufactured goods and encourage supply chain diversification, which could lead to greater foreign direct investment across cities. On the other hand, lower demand for Chinese manufactured goods will reduce demand for the intermediate inputs that China imports from the rest of APAC, thereby hampering growth. With the impact of President Trump’s actions in office and the scope of the tariffs still unclear, the path ahead in 2025 is anything but certain.


To learn more about our analysis of the outlook for key cities in different regions, download our report.


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