US quantitative easing raises global commercial property prices
A 10 basis point drop in long-term US yields from quantitative easing raises global commercial real estate prices by 4 percent over two years, according to a De Nederlandsche Bank working paper. The effect transmits via cross-border portfolio rebalancing by institutional investors.
Prices rise while credit diverges
Analyzing 22 cities across 11 countries from 2007 to 2019, the researchers estimate that a quantitative easing shock reducing 10-year US Treasury yields by 10 basis points lifts commercial real estate prices by an average of 4 percent after two years.
Domestic US prices rise by 5 percent, with cities such as Houston gaining over 11 percent, and Dallas and Atlanta exceeding 8 percent.
CRE markets outside the US experience a 3 percent price increase, led by Paris, Melbourne and Hong Kong.
However, credit dynamics diverge: bank credit expands for four quarters within the US, but remains virtually flat in foreign markets, indicating that international price gains stem directly from US capital flows.
Rebalancing and trade spillbacks
A two-country New Keynesian model formalizes three distinct transmission channels.
First, lower long-term interest rates loosen domestic borrowing constraints for firms.
Second, US banks rebalance their portfolios into higher-yielding foreign private debt, driving up foreign commercial property valuations without local bank lending growth.
Third, a spillback effect emerges through trade linkages: dollar depreciation and stronger foreign property markets boost demand for US exports, reinforcing the initial domestic stimulus.
Real estate is no local asset
The paper convincingly dismantles the notion that commercial real estate is merely a local asset market.
Yet relying on pre-2020 data overlooks how remote work structurally damaged office valuations and collateral channels.
Central banks shifting balance sheet policies must closely track cross-border property contagion.