How Rising Rates And Higher Borrowing Costs May Impact CRE Investment
With the Federal Reserve planning to boost interest rates another two or three times this year, there are growing concerns about the impact these moves will have on borrowing costs and property pricing.
The Federal Reserve raised its short-term interest rate benchmark in March to between 0.75% and 1%, and the Fed expects at least two more rate moves before the end of the year.
Typically when rates rise, so do real estate borrowing costs, which could put a damper on commercial real estate investment, according to CrediFi CEO Ely Razin. At the same time, higher borrowing costs can also lead to rising cap rates and lower property values, Forbes reports. One positive is the Fed would not raise rates were the economy not strong enough to support the move, and strong economic expansion typically translates to higher annual gross domestic product growth and job creation, which boosts demand in every property sector.
