ECB quantitative easing likely to boost real estate investment in US

on Feb 13, 2015
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Europe’s Quantitative Easing (QE) programme may stir further real estate investments in the US despite euro weakness, as European investors seek a safe haven for capital.

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Last month, the European Central Bank launched an asset purchasing plan worth €60 billion (£44.5 billion) per month, which will run until at least September of next year, with the intent of stimulating the eurozone’s struggling economy. The immediate impact of the programme has been a further weakening of the euro, which may in turn fuel investments in the US as European capital flees to safety.

The EUR/USD has tumbled over 16 percent since the second half of last year, making US real estate more expensive for investors, but euro weakness is likely to provide an incentive for Europeans to acquire US assets. Steven Orchard, senior vice president at US real estate services firm Transwestern, was cited by the National Real Estate Investor magazine as saying that there is likely to be a greater appetite to own dollar-denominated assets, since the euro is declining in value, while the dollar is increasing.

Orchard shared his view that it is unlikely ”you are going to see a massive reaction of Europeans coming in and trying to swoop up properties”. According to him, it won’t be like a “light switch being flipped,” as European investors are already active on the US market, but the European QE is likely to accelerate buyer demand over the course of this year, given expectations that the value of the euro will decline further.
Despite some buyers already pulling back from buying US real estate in light of economic challenges in their home countries in Europe, there are still pockets of European investors and sovereign wealth funds that have remained active. According to Real Estate Weekly, European firms have been acquiring real estate in major US cities, in part due to higher returns than in Europe. The magazine cited a report from Real Capital Analytics that German firms invested $2.82 billion in US real estate last year – up from $2.39 billion in 2013 and the highest volume since 2008. French and Italian investment also grew significantly last year, albeit on a much smaller scale.

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