New York Times — PARIS — Europe’s economy is struggling to gain traction after years of anemic growth. But the rock-bottom interest rates meant to power a recovery are fueling a property boom that is creating a new set of problems.
Money is so cheap — a 20-year mortgage can be had in Paris or Frankfurt at a rate of less than 1 percent — that borrowers are flocking to buy apartments and houses. And institutional investors, seeing a chance for lucrative returns, are acquiring swaths of residential real estate in cities across Europe.
In some parts of Europe, said Jörg Krämer, the chief economist at Commerzbank in Frankfurt, valuations have already returned to or exceeded levels that preceded the Continent’s debt crisis a decade ago, igniting concerns that the property boom could end badly.
“The risks are real, because negative interest rates in Europe are cemented,” Mr. Krämer said. “What’s important for the economy as a whole is to prevent the emergence of a dangerous new bubble.”
“The dynamics have totally changed in a short period of time,” said Matthias Holzhey, the head of Swiss real estate at UBS and the lead author of an annual report on property price spikes in major global cities. In some parts of Europe, he said, “low rates are pushing real estate valuations into the bubble risk zone.”
Financial authorities are on alert. In September, the European Systemic Risk Board, an arm of the European Central Bank that helps regulate Europe’s financial system, called on 11 countries including Luxembourg, Austria, Denmark and Sweden to pursue regulations and tax measures meant to rein in prices and promote housing affordability and availability.
With European Central Banks rates at zero and below, asset bubbles have formed. Such as in Paris with apartment rent index.
Yes, European Central Banks (Robot Monsters) are helping creates super low mortgage rates that begat real estate bubbles.