18 September, 2018

Overview


Interest rates have fallen to very low levels in recent years, driving a substantial across-the-board increase in property prices in nominal and real (inflation-adjusted) terms. With the global economy now in full recovery, some investors are concerned that interest rates will revert to pre-Global Financial Crisis levels, causing real estate prices to fall. This process has become known as interest rate normalization.

What does this mean for real estate investors? CBRE analysis has shown that concerns about rising real and nominal long-term interest rates are overblown. The likely increase in rates will be less than the consensus of economic forecasters and they will level off at well below pre-GFC levels. Here are eight things investors should know.

 

REAL LONG-TERM INTEREST RATES

 Real-Long-Term-Interest-Rates-cropped

*Full normalization is defined as interest rates returning to their 2000-2007 average.
Source: CBRE, August 2018, Consensus Economics, April 2018

Explore Guide

Quantitative Easing is coming to an end: what does it mean for interest rates and real estate?

Defining terms: what are ‘real long-term interest rates’?

Why do real interest rates matter for real estate?

What drives long-term real interest rates?

What do demographics and interest rates really look like?

Future path of real long-term interest rates?

What about short-term or policy rates?

Are cap rates secure?

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