Indications increase that fall in base rates further than hoped

The much sought after fall in interest rates that could trigger a return to more active real estate markets could be further off than property market practitioners expect, or hope.

“Obviously the interest rate is the most important driver in our market and everyone is waiting for interest rates to fall, which might happen, but perhaps not at the same tempo as people might expect,” said Rogier Bos, Berlin Hyp’s head of real estate finance Benelux.

“Inflation is the absolute priority of central banks and rates will not fall until inflation is under control,” he told Real Asset Insight’s Richard Betts.

Pointing to statistics from Schroders he said that the perception of the market is already delayed in terms of the interest fall. “So it may come later than expected and that will have an impact on the market.”

Interest rates will fall as expected, but later in the year, meaning that recovery will probably begin at the end of the year, he added.

Another important indicator is swap rates. “Swap rates are currently already anticipating a fall of the deposit rates.” Bos said that this means that a fall in deposit rates does not necessarily imply that swap rates will fall as well.

Short-term interest will go down, but mid-term interest will probably remain stable for a while yet, Bos stated.