The European Systemic Risk Board issues a warning to Slovakia on vulnerabilities in the residential real estate sector
In a warning issued to Slovakia and published on 11 February 2022, the European System Risk Board (ESRB) says it has identified medium-term vulnerabilities in the residential real estate sector (RRE) in Slovakia.
The warning is among the results of a detailed European Economic Area-wide assessment of vulnerabilities relating to RRE.
The ESRB warns Slovakia about:
- the high rate of house price growth
- signs of house price overvaluation
- rising household indebtedness
- rapidly increasing provision of mortgage loans
At the same time, the ESRB points out that measures adopted by Národná banka Slovenska (NBS) in the areas of lending limits and capital buffers have an important role. It considers them appropriate for the current situation.
If, however, the cumulation of risks continues at its current pace, the ESRB advises the Slovak authorities to consider adjusting these measures in response to particular identified risks. These relate mainly to the increase in borrowing among already indebted households and the extension of loan maturities, often beyond the borrower’s retirement age. If the risks still continued to intensify, the ESRB would suggest tightening capital instruments.
The ESRB’s findings are to a large extent in line with the Bank’s own conclusions as presented in the most recent editions of its Financial Stability Report and Macroprudential Commentary. We welcome that the ESRB has focused its attention on potential future risks.
The Bank will continue to closely monitor the situation in Slovakia’s credit and housing markets. It stands ready, if necessary, to adjust regulatory policy in order to contain any future build-up of risks.
The full text of the ESRB warning is published on the ESRB’s website
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