There an interesting piece in the FT today on negative interest rates. Could we really be entering a period where banks are able to charge investors for depositing their cash? By increasing capital flows to real estate and decreasing target rates of return, could negative rates lead to increased prices (a bubble?) in residential and commercial real estate markets? Some people might argue that foreign investors in London are already accepting negative yields on residential investments in London. So-called “buy-to-leave” investors incur holding costs – insurance, service charges etc. and receive no income. My UCL colleague Peter Rees refers to the spate of new developments in central London as “towers of safe deposit boxes” for the uber-rich. It’s always been presumed that investors might be expecting a capital return. For instance, in the commercial real estate market, it could sometimes be optimal to keep a building vacant in a period of fast rising rents in order to avoid locking in at a “low” rent for five years. Whatever, deflation and negative interest rates seem to be causing quite a lot of head scratching. Are we in George’s “normal times” yet?