Everything you need to know about ECB rate cuts

In this issue:

• The low-down on the ECB’s long-awaited rate cut
• Debt Pulse Check: Is too much debt a good thing?
• Cross-border capital flows between Iberia and Latin America

The ECB’s long-awaited rate cut

The moment we have all been waiting for: the European Central Bank (ECB) cut rates by a quarter point on Thursday (6th) to 3.75% in their first cut since 2019, widening its gap with the US Federal Reserve.

• Christine Lagarde, ECB President, attributed the decision to “confidence in the path ahead” which has been increasing in the past months, while also revealing that the decision was unanimous for all but one ECB governor.

The rate cut materialised despite a slight uptick in inflation in May - from 2.4% to 2.6% - however the ECB also released new inflation forecasts, altering the previously estimated 2% for 2025 to a more modest 2.2%.

Growth forecasts were also amended from 0.6% to 0.9% for this year, followed by 1.4% growth for 2025, and 1.6% for 2026.

• Speculation remains regarding a second rate cut next month, as ECB remarks reveal no commitments to further cuts, although experts believe encouraging recovery from the euro area recession last year, plus slowing inflation and easing wage growth, justify a second reduction over the summer.

Across the pond, as price pressures prove stubborn, the US Federal Reserve is expected to maintain rates at a 23-year high range of 5.25% - 5.5% next week.

So, what’s next for the struggling real estate market? With avid anticipation for such rate cuts, and hope that they would be the magic key to reviving real estate transaction volume, the following months will be critical.

Join Europe’s elite real estate market players at GRI’s biggest event of the year, Europe GRI 2024, on 10-11th September in Paris.

Read more and register HERE.

Debt Pulse Check: Is too much debt a good thing?

Starring Blackstone, CIM Group, Delancey, Tristan Capital Partners, Apollo Global Management, and One Investment Management, players from the biggest real estate firms offered an exclusive interview with GRI Club, pooling their sentiments and strategies on real estate debt in this exclusive GRI report.

Is too much real estate debt a good thing? Is this huge preference for debt products leading to somewhere unsustainable in the real estate market? What happens at the inflection point when we need equity? Is there too much competition in debt products? What will this all ultimately mean for real estate in the next 2-3 years?

Check out some sneak previews below:

• Ben Eppley, Partner at Apollo Global Management:

“People are not distinguishing between the impact from the rapid increase in interest rates on real estate valuations and the actual operating performance of the underlying assets.”

• Siddharth Trivedi, Managing Director, Real Estate at OneIM:

“I would be most concerned about real estate portfolios which need a sharp reduction in interest rates to be solvent again.”

• David Gorleku, Managing Director, Real Estate Debt Strategies at Blackstone:

“We are starting to see compression in bid/ask spreads and our borrowers are becoming more active in acquisitions and refinancings.”

• Tal Lev Ari, Managing Director at CIM Group:

“Our high conviction sectors for the debt strategy are living and industrial.”

Read the full GRI report HERE.

GRI Report: Cross-border capital flows between Iberia and Latin America

Holding a unique position connecting senior real estate players in regions across the globe, GRI Club took the opportunity to connect appetite-hungry real estate players in the Iberian region with like-minded players from the numerous markets of Latin America. The result: the inaugural Ibero-American GRI 2024.

• The latest GRI Club report collates the exclusive insights from the event to reveal the opportunities and challenges found in the individual regions of Latin America, including Mexico, Brazil, Chile, Colombia, Guatemala, and Peru, while also addressing the appeal and challenges in Iberian real estate.

The resilience of Spain and Portugal against recent macroeconomic forces has positioned them as attractive real estate investment destinations, supported by their significant supply-demand imbalances and favourable fundamentals across various sectors.

Meanwhile, Latin America’s growing middle class and infrastructure demands offer an increasing array of long-term investment prospects across sectors such as healthcare, hospitality, and retail.

Considering the political instability of the region, however, local expertise and strategic partnerships are crucial for navigating the terrain.

Read the full GRI report HERE.

Other News ??

??? Sweden’s central bank calls for ‘more transparency’ around property values

?? Does specialism in real estate pay?

?? Where the crunch on property funds could be felt in Europe

?? With no energy, there is no data?

?? Real estate funds on hold pending rate cuts to utilise leverage squeeze

??? Prime property trends in London that extend to Europe

Corporate Radar ??

?? Accor brings Swiss?tel to Budapest’s Lagoon City

?? 23,000 sqm of space leased to new tenant at MLP Pruszków II?

?? Nido Living expands in Spain with new Madrid scheme

??? ECE to develop major resi project in Rome

?? Commerz Real sells London’s Paternoster Square after 20-year holding period

?? Hyatt Sees Opportunities in Germany, Across Northern Europe

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