The ECB warns of the vulnerability of the real estate market in the euro zone | Investment News

FRANKFURT (Reuters) – The property market is a “key vulnerability” for eurozone banks as the rise of remote working since the pandemic slumps demand for offices and households take on more debt to buy expensive homes , the European Central Bank said on Wednesday.

Central bankers have sounded the alarm over the booming eurozone housing market, which has helped create a decade of ultra-low interest rates and light prudential regulation.

In the latest warning, ECB supervisors said commercial and residential real estate had become a source of concern and that they planned to take a closer look at banks’ exposure to it.

“ECB Banking Supervision has identified banks’ exposures to the commercial and residential real estate sectors as a key vulnerability,” the ECB said in its newsletter.

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

“The commercial real estate (CRE) sector is considered vulnerable to the impact of the pandemic, while the medium-term risks of price corrections continue to grow in the residential real estate (RRE) sector. , with signs of potential overvaluation of house prices and high household indebtedness,” the ECB said.

Banks’ exposures to commercial real estate account for around 8% of supervised banks’ loans and more than 20% of their corporate loans, the ECB said.

(Reporting by Francesco Canepa; Editing by Christina Fincher)

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