S&P Expect No Spanish House Price Boost From European Central Bank Stimulus

Will Spanish house prices get a boost from the ECB?
Will Spanish house prices get a boost from the ECB?

Quantitative easing by the European Central Bank (ECB) will not have much of an impact on Eurozone property markets says the ratings agency Standard´s & Poor´s (S&P), in contrast to some local market experts who expect quantitative easing to give the Spanish property market a boost.

S&P have argued that the ECB’s initiative will have a limited effect on European property markets as interest rates in many countries are already at historic lows. The

Although they do allow that low mortgage differentials, together with a weak Euro and falling oil prices, could boost house prices significantly in some Eurozone markets, that won’t be the case in Spain, where S&P expect house prices to rise just two per cent in 2016. That contrasts with more bullish forecasts from local market experts like Gonzalo Bernardos, who forecasts that Spanish house prices will rise five per cent this year.

The US agency also points out that long-term interest rates will continue at historic lows over the next two years as a result of the programme set in motion by the institution led by Mario Draghi to purchase assets to the value of €60,000 million a month at least until September 2016.

Why won’t the ECB’s stimulus ignite house prices in the Eurozone like similar measures by the Bank of England in the UK? Partly because of the culture of fixed mortgage rates (though not in Spain), but mainly because of the shortage of housing in the UK, which is definitely not the case in Spain outside of some prime areas.

SPI Member Comments

One thought on “S&P Expect No Spanish House Price Boost From European Central Bank Stimulus

  • Campbell Ferguson says:

    The increase in asset backing demanded of the banks by the EU removed so much liquidity from the market that it was not surprising that the banks haven’t had funds to lend to businesses or mortgages over the past few years. Very much a case of closing the stable door after the horse had bolted. Now, with their assets suitably protected by funds raised from public austerity, the banks are cautiously offering their ‘surplus’ back into the market, which will increase activity. QE will provide more finance availability, but reduces the asset backing of the Central Bank and is an inflation booster. In the long term it will bite back, but as sterling and the dollar has been similarly stimulated, all currencies are now backed by less and therefore equal. But its just ‘kicking the can down the road’. Eventually, economies must become balanced and start repaying debt not with more debt. Its like an individual paying off one credit card with another. Eventually that spiral will lead to complete worldwide insolvency as the lender nations realise that the debtor nations can never repay them. Eventually, the young boy’s voice will be heard, “The king has no clothes on”. But then there are none so deaf as will not hear!

Leave a Reply

Facebook Comments