Saturday, 15 March 2025
The European Central Bank (ECB) concluded its final meeting of 2024 with a widely anticipated move: a 25 basis point reduction in the key interest rate. Industry leaders from HIH Invest and BF.direkt shared their perspectives on the implications of the decision for capital and property markets.
Prof. Dr. Felix Schindler, Head of Research & Strategy at HIH Invest, noted that the rate cut came as no surprise.
“No surprises at the end of the year! The ECB cut the key interest rate by a further 25 basis points at its last meeting of 2024. This step was expected on the capital and property markets and has therefore already been priced in.”
Dr. Schindler emphasized that the focus will now shift to how interest rates evolve in 2025. He predicts additional rate cuts by the ECB, with longer-term capital market rates already reflecting this expectation.
“The size and number of interest rate hikes – especially in the second half of 2025 – are likely to depend on the new US administration. To what extent will the measures announced during the election campaign be implemented, and how will they affect Europe?” he questioned.
For real estate markets, particularly in sectors with resilient demand for space, such developments could have positive effects on both investment and financing.
In contrast, Francesco Fedele, CEO of BF.direkt AG, expressed skepticism about the ECB’s decision, advocating for a stronger stance against inflation.
“In my opinion, the ECB should have left the key rates untouched and instead should have fought inflation more consistently. The core inflation rate in the eurozone was recently well above the two-percent target, and for services, it was even around four percent.”
Fedele also raised concerns about the potential impact of geopolitical developments, particularly the possibility of punitive tariffs under the new US administration led by Donald Trump.
“If punitive tariffs are introduced, this could further increase inflation. High inflation rates are particularly damaging for the real estate industry. If the market expects more inflation, this can result in an increase in long-term interest rates. And these are much more crucial for the property market than key interest rates,” he added.
As the ECB’s rate decisions ripple through the capital and property markets, the outlook for 2025 hinges on a range of factors, including inflation dynamics and geopolitical shifts. For now, the industry remains divided on the central bank’s strategy, with potential implications for investment and financing strategies across Europe’s real estate sector.
