Thursday, 11 June 2026
Industry representatives and real estate specialists expect the property sector to continue adapting to a prolonged period of higher financing costs following the European Central Bank’s latest interest rate increase.
According to Prof. Dr. Steffen Sebastian of the IREBS Institute for Real Estate at the University of Regensburg, the real estate industry has already adjusted to higher borrowing costs, with recent ECB decisions largely reflected in capital markets. He noted that increasing defence spending, investment requirements and rising public debt could keep long-term interest rates elevated, requiring the sector to permanently adapt business models and financial assumptions.
Francesco Fedele, CEO of BF.direkt AG, said higher interest rates are likely to change financing structures and investment strategies rather than halt market activity. He suggested that development models involving deferred land payments and option agreements, which were common before the low-interest-rate period, could become more prevalent again.
Ulrich Creydt, Managing Director of Ypsilon Group, said the ECB’s decision was a response to inflationary pressures driven by higher energy and commodity prices. He expects financing conditions for developers and investors to become more challenging, potentially reducing transaction activity. He also noted that higher borrowing costs may lead more households to postpone home purchases, increasing demand in the rental housing market.
Patrick Brinker, Head of Real Estate Investment Management at Hauck Aufhäuser Lampe Privatbank AG, believes higher rates will continue to weigh on investment decisions and project financing. However, he pointed to sectors such as digital infrastructure and data centres as areas where investor interest remains strong due to favourable long-term demand trends. He also noted that equity-funded investment vehicles are less exposed to rising borrowing costs.
Prof. Dr. Felix Schindler, Head of Research & Strategy at HIH Invest, said the ECB’s move had been widely anticipated by financial markets. He attributed the decision to a broader inflation trend extending beyond energy and raw materials into a wider range of goods and services. Schindler expects further rate increases during the year but believes the latest move is unlikely to have a significant direct impact on property markets because long-term capital market rates are more relevant for real estate financing and valuations.
Michael Eisenmann, Managing Director of Real Blue Kapitalverwaltungs-GmbH, also described the rate increase as expected given ongoing inflationary pressures and geopolitical uncertainties. He said institutional investors are likely to remain selective in their investment decisions while monitoring developments in the Middle East and their impact on energy prices, trade routes and inflation.
Across the sector, market participants generally agree that higher financing costs are becoming a structural feature of the market. While this may place pressure on project economics and transaction volumes, many expect the industry to adjust through revised financing models, changing investment strategies and greater focus on sectors offering resilient income and long-term growth potential.
