ECB warns of fragile real estate markets in the euro area

Commuter trains will pass through the skyline with the financial district prior to the European Central Bank’s (ECB) board meeting on October 25, 2021 in Frankfurt, Germany. (Kai Pfaffenbach / Reuters)

Frankfurt — The real estate market is a “major vulnerability” for banks in the euro area, with the rise of remote work as the demand for pandemic dents in offices and homes takes on more debt to buy expensive homes. Said the European Central Bank on Wednesday.

Central banks are warning about the fast-growing real estate market in the euro area, created by decades of ultra-low interest rates and minor soundness regulations.

In the latest warning, ECB supervisors said commercial and residential real estate was the source of concern and planned to scrutinize the bank’s exposure to real estate.

“ECB banking supervisors have identified bank exposure to the commercial and residential real estate sector as a major vulnerability,” the ECB said in its newsletter.

Announced plans for a “targeted review” of a sample of banks with significant exposure to commercial and residential real estate.

“While the commercial real estate (CRE) sector is considered pandemic-sensitive, the residential real estate (RRE) sector continues to increase the medium-term risk of price adjustments, showing signs of overvaluation of home prices. The household debt has increased. “

According to the ECB, banks’ exposure to commercial real estate accounts for about 8% of monitored bank loans and more than 20% of corporate loans.



Posted on