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<RESIDENTIAL REAL ESTATE: Systemic Risk

European Systemic Risk Board Residential Real Estate Warnings

Residential Real Estate Warnings

Eight member states are singled out as having medium-term vulnerabilities in the residential real estate sector so important as to constitute a significant procyclical systemic risk for the Union: Austria, Belgium, Denmark, Finland, Luxembourg, the Netherlands, Sweden and the UK. You can see the specific reports on each one as well as the letter from the ESRB to the relevant minister and the minister's response.

With the exception of the UK, for which there is a rather silly prediction that following the referendum anything can happen, good or bad, they're not sure, all the others have the same diagnosis: too much upward pressure on house prices and too much mortgage debt, especially in relation to disposable income. But only for Sweden does the ESRB make the link between rent control and pressure on house prices and mortgage lending when in fact this is the case for several of the targeted countries.

Recommendation on closing real estate data gaps: Interesting to see how quickly the EU is harmonising the approach to information about residential and commercial real estate, including even instructions to macroprudential authorities on their use of private sector data. The ESRB considers that unharmonised definitions and approaches to data hamper the reliability of its analyses.

EPF members: See epf16-118 of 29.11.2016