November 28, 2016

Today the European Systemic Risk Board (ESRB) has published a set of country-specific warnings on medium-term vulnerabilities in the residential real estate sector. The warnings are addressed to the relevant ministers in the following eight Member States: Austria, Belgium, Denmark, Finland, Luxembourg, the Netherlands, Sweden and the United Kingdom. The ESRB has a mandate to issues warnings when significant systemic risks are identified and when necessary to flag such risks.

The key vulnerabilities highlighted by the ESRB assessment are of a medium-term nature and relate to the rising indebtedness and ability of households to repay their mortgage debt or to the valuation or price dynamics of residential real estate. Regarding households, in many of the countries receiving warnings, vulnerabilities are related to the level of indebtedness or the growth of mortgage credit. Regarding valuation, some countries have vulnerabilities related to the rate of price growth or overvaluation of residential real estate. The ESRB performed an analysis of risks to the banking system from residential real estate. At this time, the ESRB has not identified direct near-term risks arising from residential real estate exposures in the banking systems of the warned countries, although second-round effects are not excluded in the medium term. 

See link for full ESRB report: 

http://hofinet.org/upload_docs/Vulnerabilities%20in%20the%20EU%20Residential%20Real%20Estate%20Sector.pdf