Real estate markets in an environment of high financing costs

Ellen Ryan, Barbara Jarmulska, Giorgia De Nora, Adele Fontana, Aoife Horan, Jan Hannes Lang, Marco Lo Duca, Claudiu Moldovan and Marek Rusnák

Financial Stability Review, 2023, vol. 2

Abstract: Tighter financing conditions have reduced the affordability of and demand for real estate assets, putting downward pressure on prices. They have also increased the debt service costs faced by existing borrowers, with more-indebted borrowers in countries with widespread variable-rate lending being the most affected. Robust labour markets have thus far supported household balance sheets, thereby mitigating credit risk in banks’ relatively large residential real estate exposures. Commercial real estate firms, by contrast, have faced more severe challenges in a context of rising financing costs and declining profitability. While commercial real estate markets have comparatively low bank exposures, losses in this segment could act as an amplifying factor in the event of a wider shock. JEL Classification: G00, G01, G21, G51, R30, R31

Keywords: commercial real estate; financial stability; residential real estate (search for similar items in EconPapers)
Date: 2023-11
Note: 2731285
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:fsrart:2023:0002:2

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