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This boom in Real Estate investment is a consequence of global interest rates being historically low. People want to put their money to work, borrowing is cheap
by nickgrosvenor 10y ago
This boom in Real Estate investment is a consequence of global interest rates being historically low. People want to put their money to work, borrowing is cheap, so they buy assets. Art, commodities, real estate, etc.
When interest rates go up. Fixed-income securities will be much more attractive.
Combine that with local home owners having to pay a higher monthly mortgage payment due to higher rates. Their affordability will go down.
The pendulum will swing and a sellers market will turn into a buyers market.
It will be sellers racing for the exit and patient buyers on the sidelines hoping a little longer wait will produce even better deals.
When interest rates go up, this issue will take care of itself.
- dccoolgai 10y agoYou'd think, but someone once told me a pithy statement like "the good lord isn't making any morevland, but he didn't stop making people". Because of that, I wonder how far real estate can ever swing to the buyer's side.
- TheCowboy 10y agoThe article appears to be talking about vacant homes that are a result of people buying flats and only using them when they visit the city, not vacancies due to demand bottoming out for new housing. A person wealthy enough to buy a spare Manhattan apartment isn't going broke if interest rates go up. Fixed-income securities are less attractive when there is increasing inflation. A bond that returns 1% will still only return 1%. You don't want your money stuck in 1% bonds when seeing double digit inflation. Interest rates basically go up to either counter or prevent an increase in the rate of inflation. It's difficult to target a single market to head off a speculative bubble with the tool of interest rates alone, especially if inflation is low and stable.