The European Central Bank has kept its key interest rate in the eurozone unchanged at 2.5 per cent for the time being. While the inflation rate in the eurozone recently rose to 3.8 per cent, placing it above the two per cent target, central bankers have maintained a wait-and-see stance following previous rate hikes. A compilation of industry voices, provided by RUECKERCONSULT GmbH, highlights the differing perspectives of fund managers, property developers, financing advisers and academics on this interest rate pause.
Macroeconomic situation and interest rate outlook
Maximilian Radert, Head of Product Development & Research at KINGSTONE Investment Management, regards holding the deposit rate at 2.5 per cent as logical. He notes that the current price pressure is primarily driven by energy prices, while significant second-round effects have so far failed to materialise and long-term inflation expectations appear stable. As higher capital market interest rates have already tightened financing conditions noticeably, the market is performing part of the monetary tightening. Radert contradicts economists forecasting another rate hike in December, pointing to growing economic risks and rising risk premiums in countries such as France.
Prof. Dr. Steffen Sebastian from the Chair of Real Estate Finance at the University of Regensburg (IREBS) also considers the decision to be expected. Central bank interest rate increases can do little against energy-driven price inflation. Nevertheless, the academic warns against giving an all-clear prematurely: if price pressure spreads to wages and other sectors as the situation develops, future rate increases remain a realistic scenario.
Impact on transaction activity and development
In terms of practical property financing, Francesco Fedele, CEO of BF.direkt AG, sees little immediate relief. Crucial for the market are long-term capital market interest rates, which have risen noticeably in recent months. This is dampening demand for residential property, meaning purchase prices are stagnating despite rising rents. At the same time, refinancing pressure is growing for commercial properties. Because extensions of distressed loans are not possible indefinitely, Fedele anticipates an increase in sales listings and required price concessions to make transactions possible once again.
Ulrich Creydt, Partner at Ypsilon Group, views the stable interest rate level following the increase on 10 September as supportive for investment and private home ownership. However, he emphasises that further rate hikes are by no means off the table; the ECB could feel prompted to act again at its rate decision on 17 December due to persistent energy costs.
From the perspective of developers and builders, keeping the interest rate unchanged for now provides operational breathing space. Richard Pail, Managing Director of DIEAG Investmentmanagement, explains that a more stable interest rate environment improves calculation certainty for total investment costs again, while also offering a more reliable foundation for yield requirements, purchase price multipliers and exit proceeds in institutional transactions.
