ESRB Report Assesses Vulnerabilities in Residential Real Estate Sector
The European Systemic Risk Board (ESRB) published a report on the systematic, forward-looking assessment of vulnerabilities in the residential real estate sector in the European Economic Area (EEA). Following this assessment, ESRB published and issued warnings to the competent ministers of Bulgaria, Croatia, Hungary, Liechtenstein, and Slovakia, with newly identified vulnerabilities that have not been addressed sufficiently. ESRB also published recommendations to the competent ministers of Austria and Germany, the two countries that had already received warnings in 2016 and 2019, respectively, and whose vulnerabilities have not been addressed sufficiently. The sub-recommendations within each recommendation have an implementation timeline, ranging from June 30, 2023 to June 30, 2025. After these recommendations were issued, the authorities in Austria and Germany announced new measures to address vulnerabilities in the residential real estate sector.
The assessment report covered the residential real estate sectors of all European Union member states, also including Iceland, Liechtenstein, and Norway. The report analyzed the main trends in various real estate indicators as well as the macro-prudential policy actions that countries have taken to mitigate the resulting financial stability risks. The outcome of the analysis showed that:
- The vulnerabilities grew in most countries that received ESRB recommendations or warnings in 2019, similar to most of the other European Economic Area economies.
- Despite having introduced sufficient measures, the key vulnerabilities are of a medium-term nature and, depending on the country, relate to rapid house price growth and possible overvaluation of residential real estate, the level and dynamics of household indebtedness, the growth of housing credit, and signs of a loosening of lending standards.
- Beyond macro-prudential policy considerations, broad reforms in housing and other public policy areas are required to remediate the mismatch between the supply of and demand for housing in certain countries.
- Financial stability risks related to residential real estate have continued to increase in the context of the macroeconomic risks associated with the COVID-19 pandemic as well as the continuation of strong housing market dynamics and household indebtedness.
Regarding the remaining European Union member states, ESRB has either not identified a build-up of any material vulnerabilities related to the residential real sector or such vulnerabilities have been identified but the current policy stance has been assessed as sufficient in addressing them. ESRB also published a compliance report on the countries that received ESRB recommendations in 2019 concerning medium-term vulnerabilities in their residential real estate sectors. The report reviews the policy responses aimed at mitigating the vulnerabilities in Belgium, Denmark, Finland, Luxembourg, the Netherlands, and Sweden. The compliance report concludes that only Luxembourg was assessed as “fully compliant” while Belgium, Denmark, and Sweden were assessed as “largely compliant,” with Finland and the Netherlands having been assessed as “partially compliant.”
Related Links
Keywords: Europe, EU, Germany, Austria, Slovakia, Lending, Banking, Systemic Risk, Residential Real Estate, Financial Stability, Macro-prudential Policy, RRE, Credit Risk, ESRB
Featured Experts

Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous Article
SBV Discusses Credit Risk Measures, Cyber Risk, and Digital StrategyRelated Articles
EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
EBA Publishes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance
The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks
NGFS Report Explores Quantification of Climate Risk Differentials
The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations
EC Publishes Results on Review of Web Accessibility Directive
The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.
MAS Consults on Adjustment Spreads for Conversion of SOR Contracts
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.