Expectations of Rate Hike Hit Europe's Real Estate Sector Hard

The real estate sector of Europe's STOXX experienced a decline and reached a five-month low on Wednesday. This is anticipated due to speculations that the Federal Reserve and Bank of England (BoE) will increase their interest rates within the week.

The already struggling industry is expected to feel more pressure due to the stricter financial situation. This caused the sector to perform much worse than the wider STOXX 600 index across Europe on Wednesday.

The real estate industry experienced a sharp decline of 3.6% in a single day, the most significant drop observed since December. Meanwhile, the STOXX 600 witnessed an increase of 0.4% at 1408 GMT.

According to two traders, the shares of Aroundtown experienced the largest decline in Europe, dropping by 10% due to apprehensions that the company based in Luxembourg might decide to withdraw its dividend.

New inflation statistics for the UK were made public on Wednesday and led to an increased likelihood of a 25 basis point rate hike by the Bank of England during their meeting on Thursday. Furthermore, the Federal Reserve is also predicted to increase rates by 25 bps later on the same day.

Written by Joice Alves and Danilo Masoni