The European Central Bank (ECB) and the U.S. Federal Reserve (USFR) are withdrawing the policies installed during the Great Recession.
This decision shows that these governments are confident about the economy, but it may bring some uncertainties for consumers and businesses.
As the job economy grows in the U.S. and Europe, the central banks are deeming that it is no longer necessary to support the economy with outdated policies.
In early June, the ECB announced that it will phase out its bond-buying stimulus by the end of this year. This will affect the 19 countries that use the euro.
Out With the Old, In With the New
The ECB bond program was originally deployed in 2015 in order to save these countries from the risk of falling prices and growth. This was sparked by Greece’s debt crisis several years ago.
The decision, that sent the Euro down over one percent, came a day after the USFR raised interest rates.
ECB also plans to hold off raising interest rates until the summer of 2019. This is longer than some investors expected.
“While investors may fear higher interest rates, the stronger underlying economies that drive the stimulus withdrawal are positive for company profits,” said Michael McCarthy, chief market strategist at CMC Markets and Stockbroking. “These competing drivers mean that investor sentiment swings are an important consideration for markets.”
How Will ECB Affect The European Real Estate Market?
It is uncertain how this decision will affect the economy.
Experts are speculating that it may result in a real estate bubble, more wobbling banks, or a rise in bankruptcies.
When the banks flooded financial markets with cash it allowed companies and governments to pay little or no interest at all to raise money.
This saved the real estate market, especially in countries like Germany and the Netherlands, after the financial crisis.
Only the Future Will Tell
Experts believe that along with real estate, bonds and stocks will also experience a reprising in the years ahead.
Real estate investors are also concerned that other possible rate hikes may increase mortgages prices.
In Europe, Berlin has some of the most expensive real estate in all of Europe. The decision made by the ECB may significantly impact their market, as this will create some financial stress.
Hopefully, the European market will adjust well to these new changes, but investors will have to wait and see.
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