The US Federal Reserve has raised interest rates for the first time in nearly a decade bringing to an end the era of record low borrowing costs.
The US central bank increased the target rate from 0.25% where it has been held since December 2008 in the wake of the collapse of Lehman Brothers to 0.5%.
It is the first of a series of gradual increases which are expected to see rates creep up to around 1% in the next 12 months.
The move is likely to have a significant impact on real estate pricing as the spread between property and bond yields narrows and the cost of financing real estate purchases increases.
US Treasury yields rose to more than 1% in the wake of the announcement for the first time since 2010.
However CBRE’s head of EMEA and UK research Neil Blake said he expected the impact to be muted given the decision had been taken because the central bank felt a sustainable recovery was now in place.
“This translates into rental growth in many European property markets, which will actually boost investor confidence. As long as interest rate rises remain gradual, any impact on property pricing will be muted, especially if rents are rising, and any ‘boomerang effect’ from emerging economies should be transitory. The UK economy and property market should weather the storm.”
