"The ECB’s interest rate freeze will do little to ease the pressure on the property market. This is because long-term capital market interest rates are the key factor for property financing, and these have risen significantly in recent months."

“The ECB’s interest rate pause will do little to ease the pressure on the property market. This is because long-term capital market interest rates are the key factor in property financing, and these have risen significantly in recent months. The consequences are already evident in the housing market: higher interest rates are dampening demand for home ownership, with the result that purchase prices are stagnating despite rising rents. At the same time, pressure to refinance is mounting, particularly for commercial property. Rather than taking losses, many banks have extended some problematic loans in recent years, thereby buying themselves time. However, this strategy cannot be sustained indefinitely. We therefore expect more properties to come onto the market in the coming months and for sellers to have to make concessions on prices. A sustainable recovery in the transaction market will require investors’ expected returns and sellers’ asking prices to converge once again.”