April 13, 2017 Real Estate News

Rising Rates Lure Foreign Investors To The U.S.

By: Rich Bockmann

Source: The Real Deal

From TRD New York: When the Federal Reserve raised interest rates in March for the second time in three months, it signaled that the nine-year stimulus campaign launched during the financial crisis was nearing an end. Overseas, however, “lower for longer” remains the reality, with low or even negative interest rates expected to continue in countries like Germany and Japan.

Even amidst uncertainty created by the Trump administration’s foreign policy, with yields in their own countries low, some foreign investors are gearing up to spend more on U.S. real estate — a welcome influx of cash. That’s especially true as tighter currency restrictions are forcing Chinese buyers to pull back.

U.S. interest rates have remained at near zero for almost a decade — a monetary policy that provided cheap money, fueling real estate investment as the economy recovered from the recession. But while the Fed is moving to gradually raise rates — most recently from .75 to 1 percent — overseas governments are standing pat with low ones.

Last year, the European Central Bank and the Bank of Japan even ventured into the realm of negative interest rates. The European Central bank’s deposit rate has been at negative .4 percent since early 2016. And the Bank of Japan’s policy board last month said it would continue to apply a negative interest rate of minus .1 percent.

Spencer Levy, head of research in the Americas for CBRE, speculated that investment from Germany and Japan could help offset China’s impending drop.

“Negative interest rates are driving capital out of those countries,” he said.

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