Money supply, exchange rates and office market dynamics: comparative evidence from the UK and Germany

Purpose - The aim of this study is to shed light on the relative importance of money supply and exchange rates variations on office markets prices dynamics. Design/methodology/approach - Using a parsimonious real estate asset pricing model, the authors focus on the two biggest European office markets; namely the United Kingdom and Germany. The authors use a panel approach based on a robust econometric methodology (GMM with correction errors-in-variables). The authors take into account the variations of exchange rates and money supplies for the most important currencies. Findings - The results highlight the impact of money supplies and exchange rates on office prices after the Global Financial Crisis. The authors report that the monetary policies in the UK and in Germany (Euro zone) have had significant influences in the real estate sector after the Global Financial Crisis. However, the authors identified significant differences between British and German office markets for the 2009–2019 period regarding the impact of money supply and exchange rates variations on the office prices dynamics. Practical implications - The results highlight the impact of money supplies and exchange rates on office prices after the Global Financial Crisis. The detailed and exclusive database (composed of the main office markets in the United Kingdom and in Germany) allows the authors to identify significant differences and opportunities for investors. Originality/value - The authors use a parsimonious model and apply a panel approach based on a robust econometric methodology to analyse the impact of exchange rates and money supply variations on the office prices dynamics. The detailed and exclusive database (composed of the main office markets in the United Kingdom and in Germany) allows the authors to identify significant differences for investors.