European Housing Market Could Be Heading For A Crash Of Epic Proportions Thanks To Negative Interest Rates
It appears the European housing market is heading toward the perfect storm of a collapse. The European Central Bank has initiated negative interest rates and it is causing property values to skyrocket. This is coupled by high rates of household debt in Europe.
The European Central Bank five years ago slashed its benchmark interest rate to below zero in an effort to ramp up the continent’s stagnant economy. However, it kickstarted a surge in demand to buy housing.
Matthias Holzhey, UBS’ head of Swiss real estate told the Times:
A UBS survey found that Munich, Amsterdam, and Paris are among the cities at risk of a bubble. Germany’s central bank discovered real estate in the country’s cities is overvalued by 15% to 30%
ECB’s European Systemic Risk Board responded by asking 11 countries to bring in prices under control. The ECB asked them to increase regulatory requirements and tax policies. Those countries include Denmark, Sweden, and Austria. As a result, Spain capped rents at the rate of inflation. The mayor of Paris also plans to enact rent controls and build subsidized housing.