Economy: FOCUS ON EQUITIES: The real estate sector is suffering from the turnaround in interest rates

FRANKFURT The day before, the European Central Bank (ECB) had also heralded the turnaround in interest rates in Europe and announced the first increase in key interest rates in the euro area in eleven years for July. Real interest rates have, of course, been on the rise for some time. “At the turn of the year, the representative interest rate for a mortgage with a 10-year fixed interest rate was just 1 percent,” explained Moritz Kraemer, chief economist and head of research at LBBW, in a recent study. “Since then, financing costs have climbed to 2.8 percent, the highest since 2014.” In the study he had devoted himself to the subject of real estate prices in times of interest rate turnaround. According to Kraemer, they have roughly doubled in the past decade. Despite increased risks, he believes that a “new era of falling house prices” is unlikely across the board. He sees an argument for investments in real estate in the protection against inflation.

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