Systemic risks of commercial real estate funding in Austria

David Liebeg () and Maximilian Liegler ()
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David Liebeg: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division
Maximilian Liegler: Oesterreichische Nationalbank

Financial Stability Report, 2022, issue 44, 45-67

Abstract: Commercial real estate (CRE) has come under increasing scrutiny by macroprudential as well as microprudential authorities. Our policy paper is embedded in macroprudential policymaking in Austria and informs market participants on the current state of play. In Austria, bank loans account for the majority of CRE exposures. Furthermore, Austrian banks are more exposed to CRE than banks in other EU banking markets. The growth of aggregate CRE lending to domestic borrowers is elevated, although most Austrian banks remain below critical thresholds. A large share of CRE loans in Austria is undercollateralized and at the same time exhibits high loan-to-value (LTV) ratios. Furthermore, the Austrian banking sector’s high exposure to just a few CRE borrowers combined with below-average ratings of CRE loans warrants the heightened attention of both banks and supervisors. However, rating migrations have so far not shown critical patterns. Research is under way to investigate the reasons behind high LTV and loan-to-collateral ratios, the impact of higher interest rates and/or an economic downturn on CRE market valuations, the adequacy of loan pricing and risk provisions, improvements of borrower-based indicators and the impact of climate risks and decarbonization.

Keywords: commercial real estate; systemic risk; macroprudential supervision (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 R30 (search for similar items in EconPapers)
Date: 2022
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