Demand will persist despite 2022’s expected rate hikes

Europe can expect two or even three interest rate rises this year as central banks strive to get to grips with inflation says Mark Holz, Group Head of Research, Corestate Capital Group.

“Things have changed quite a bit over the last couple of years,” Holz told Real Asset Insight’s Richard Betts. “Already, mid last year, inflation began to go up and there was talk of interest rates getting higher. It didn’t really happen then but now the inflation rate is 7 to 8%.”

“The Fed is moving already with interest rates getting higher. I think we can expect interest rates in Europe to be raised two times this year, maybe even three times. The entire interest rate spectrum will go up this year and next.”

Although there are elements of inflationary hedging within real estate with many leases indexed, people have less disposable income and less money to spend on retail, in hotels and restaurants. So there’s there’s pros and cons.”

Holz does not see a big change for debt finance. “There’s still a lot of demand from investors for investing into real estate, and they need that finance.”

There might be a slowing of investment activity towards the second half of this year but in the longer run, Holz says it will return as there is pent-up demand for property investments in general.

Click on the video to watch the full interview or listen to the podcast below.