Volume 73, Issue 2

Critics of the Eurosystem’s asset purchase programmes have long cautioned about unintended and undesired side-effects of the programmes. One of these potential side-effects are rising housing prices. There is good reason to assume that the lowering of security yields has lowered mortgage rates which in turn would have boosted demand for properties. Yet, while there is ample evidence that the security purchases have lowered long-term interest rates, the link between the latter and housing prices is looser than may be expected. Housing prices have grown stronger with the Eurosystem’s purchases, but not significantly stronger. Given the serious effects of highly and potentially overvalued housing markets, the ECB and other central banks are still well-advised to assess the side-effects of their policy measures thoroughly.