FRANKFURT (Reuters) – The European Central Bank’s rate hikes are already weighing on real estate investment in the euro zone and the impact is likely to grow further, although less than in the United States, a study shows of the ECB published on Wednesday.
Since July 2022, the Frankfurt institution has raised its interest rates by a total of 375 basis points and further increases in the cost of credit are considered likely in the light of persistent inflation, which is keeping price growth well in hand. above the ECB’s medium-term target of 2%.
“A temporary shock in monetary policy that increases the short-term interest rate by one percentage point leads, all other things being equal, to a drop in real estate investment in the euro area of ​​around 5% in after about three years”, writes the ECB in its Economic Bulletin.
In the United States, the same measure would lead to a drop in investment of around 8%, notes the ECB, however, highlighting the major divergences in the real estate market on both sides of the Atlantic.
According to the ECB, investments in real estate in the euro zone started to decline in the second quarter of 2022 and fell by a total of 4% at the end of the year. In comparison, in the United States, the market contraction started in the second quarter of 2021 and reached around 21%.
The ECB had already said it expected a “prolonged and substantial” decline in real estate investment in the euro zone in 2023 and 2024.
(Report Balazs Koranyi; Claude Chendjou, edited by Kate Entringer)
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