Eurozone Housing Investment Less Sensitive to Rate Hikes Than in US, ECB Says
17 May 2023
By Xavier D’Arcy – FRANKFURT (Econostream) – Housing investment in the euro area has been less affected by monetary policy tightening than in the United States because mortgage markets are less indebted, leveraged and securitised, the ECB said on Wednesday.
According to a pre-release from the third Economic Bulletin of 2023, due out on Friday, ‘housing investment in the euro area has been more sheltered from recent monetary policy shocks than in the United States.’
This was because the ‘lesser depth of euro area mortgage markets tempers the transmission of monetary policy shocks to housing investment’, whilst the ‘characteristics of the mortgage market in the United States reinforce the interaction between interest rate changes and credit access.’
The ECB said that while ‘housing investment is one of the most interest rate-sensitive components of economic activity, it is generally much less volatile in the euro area than in the United States.’ On the whole, the ‘volatility of quarterly housing investment growth in the euro area is about half that in the United States.’
However, despite faring better than the US, the ‘outlook for housing investment in the euro area is weak’, the ECB said.