QE: the next bubble?

Posted by Christian Hilber and Paul Cheshire, SERC and LSE QuantitativeEasing (QE) has been pursued by Central Banks in many countries, few more diligently than in the US and in the UK. Reports from experienced watchers of commercial real estate suggest this could generate a flood of cheap money – not into productive investment but into the higher yields offered by commercial real estate or its liquid versions, Real Estate Investment Trusts. This is because QE pushes yields on bonds and securities ever further below the rate of inflation. Such shifts are already said to be visible in the US where the economy is doing just a bit better than in the UK or Europe. Of course this pushes down yields in real estate in proportion to pushing up market values. According to the FT (£) there could already be signs of this in London.