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A high interest rate environment could bring clarity to real estate investors
In August, an official from the U.S. Federal Reserve said the central bank — which has already raised interest rates three times from its near-zero levels at the beginning of 2022 — will keep increasing them until it sees compelling evidence that inflation is falling.
To counteract the United States’ worst period of inflation in four decades, James Bullard, St. Louis Federal Reserve president, said the United States could be in for interest rate hikes of another 1.5 percentage points or so for 2022, simultaneously raising questions about how long real estate performance can hold up in a high-interest rate environment.
Jacques Gordon, global strategist at LaSalle Investment Management, expects rising interest rates, high inflation and the withdrawal of quantitative easing (QE) to all have an impact on real estate fundamentals and capital markets in the second half of 2022 and 2023. QE is a strategy used by central banks to purchase securities in an attempt to redu