If a story is generating more media coverage than late Queen Elizabeth II’s funeral is that of the widespread rise in interest rates in the majority of developed economies. Above all since this may impact on the possible effects of a recession on the macroeconomic level, as well as consequences on the residential property market.
Accordingly, Vicenç Hernández Reche, Tecnotramit’s CEO, economist, and doctor in Economic Psychology has a lot to say: ‘Needless to say forecasting on a market like the property one is highly complex given the diverse factors that intervene in its evolution. Few assets gather general elements such as economy, sociology, and psychology combined in a market of heterogeneous prices where assets located in the same city, neighbourhood, and building cannot only be valued differently, but prices be very dissimilar. Having said this, we must first understand what factors have caused such a sharp rise in residential asset prices over the past years and why they are now the focus of a misconstrued speculative bubble,’ as stressed by the expert.
Does this mean the residential property sector will be undamaged from monetary policies regarding rising interest rates? The answer is no according to Tecnotramit’s CEO. ‘The sector believes correcting prices is natural and also necessary in order for it to be cleansed. Otherwise, clear demonstrations of folly would show, and thereby, the start of a bubble that could become worrisome in the mid-term. In other words, correcting house price levels for particular markets will not only be logical but also good for the proper development of the overall economy and a good opportunity to free investments from irrational exuberance.’