ECB announces €1.1tn QE package: good news for property buyers?

Photo: Eisenrah

The ECB will buy €60 billion of bonds every month from central governments, agencies and European institutions in the euro area. The move, intended to boost the supply of money within the continent’s struggling economy, will continue to at least September 2016, or until they see a “sustained adjustment” in inflation.

The announcement caused the euro to plummet to an 11-year low against the US dollar, as well as weaken against the pound. With interest rates kept low, at 0.05 per cent, the ECB hopes it will stimulate borrowing and spending.

What does QE mean for the property industry?

The currency rates will stimulate spending from investors, according to some experts, who will take advantage of the more affordable currency.

While European corporate occupiers in Asia Pacific will be slower and more cautious, Asian capital will continue to view real estate markets in continental Europe as attractive, says CBRE, due to the wider yield gap; prolonged low interest rates; and favourable exchange rates.

“Their main focus will still be on the United Kingdom – predominantly London – but interest is also likely to spread to major cities in Germany and France.”

Property in the French Alps is around eight per cent cheaper for UK buyers compared to the same month last year, notes Skiing Property, while Swiss homes have increased in price by around 13 per cent.

Indeed, the onset of QE follows last week’s surprise announcement by Switzerland to unlink the Franc from the euro. As a result, the cost of a home in Switzerland soared overnight for any foreigner not purchasing with Swiss francs, with the currency’s value escalating against all major currencies.

“France, a truly international market, immediately becomes more attractive to foreign buyers – and it’s not only property that has become more expensive in Switzerland, but so have all the associated costs of ownership, including mortgage repayments. There could also be repercussions for the rentals market,” says Julian Walker, director at Skiingproperty.com.

For Russians, rouble’s devaluation against the euro since January 2014 has pushed up the price of a French ski pad by more than 60 per cent. Meanwhile, Americans have seen their buying power in France surge, thanks to the dollar gaining around 15 per cent against the euro in the past 12 months – a trend that will continue, at least in the short term, as the QE scheme rolls out.

On a positive note, CBRE adds that the decision removes much of the uncertainty around potential interest rate hikes and currency fluctuations in the Eurozone.

“European funds are expected to turn more active in seeking investment opportunities outside the Eurozone in 2015,” adds the firm. “Many groups will look to the United States and Asia Pacific due to their better economic prospects.”

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