The listed property sector is closely monitoring the impact of the global and local interest rate cycle. High interest rates can negatively affect property companies by reducing capital value and free cash flows. As interest rates continue to rise, growth in the US and Europe is expected to slow, leading to weaker demand and lower prices. This may result in a more dovish shift among central bankers in 2024.
With speculation escalating the rolling over of the global and local interest rate cycle, the listed property sector is keeping a closer eye on this horizon than most. It is widely acknowledged that a high interest rates environment is bad for property companies, as it reduces both the capital value of the buildings, as well as the free cash flows the company generates as the interest bill increases.
With the higher interest rate cycle continuing to hit home over the coming months, despite easing towards the end of last year, growth in the US and Europe is ultimately likely to slow, which will feed through to weaker demand and less pressure on prices. This should pave the way for a more dovish shift among central bankers in 202
Interest Rates Property Sector Capital Value Cash Flows Growth Demand Prices Central Bankers
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