IDEAS home Printed from https://ideas.repec.org/a/onb/oenbfs/y2022i44b2.html
   My bibliography  Save this article

Systemic risks of commercial real estate funding in Austria

Author

Listed:
  • David Liebeg

    (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division)

  • Maximilian Liegler

    (Oesterreichische Nationalbank)

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.

Suggested Citation

  • David Liebeg & Maximilian Liegler, 2022. "Systemic risks of commercial real estate funding in Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 44, pages 45-67.
    • Handle: RePEc:onb:oenbfs:y:2022:i:44:b:2
    as

    Download full text from publisher

    File URL: https://www.oenb.at/dam/jcr:ff33ecdf-48b0-4226-910a-8acf71bf041e/04_FSR_44_Systemic-risks.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jan Reinert, 2021. "Valuation accuracy of external and internal property valuations in Germany," Journal of Property Research, Taylor & Francis Journals, vol. 38(4), pages 337-354, October.
    2. Andrea Deghi & Mr. Junghwan Mok & Tomohiro Tsuruga, 2021. "Commercial Real Estate and Macrofinancial Stability During COVID-19," IMF Working Papers 2021/264, International Monetary Fund.
    3. Crowe, Christopher & Dell’Ariccia, Giovanni & Igan, Deniz & Rabanal, Pau, 2013. "How to deal with real estate booms: Lessons from country experiences," Journal of Financial Stability, Elsevier, vol. 9(3), pages 300-319.
    4. Davis, E. Philip & Zhu, Haibin, 2011. "Bank lending and commercial property cycles: Some cross-country evidence," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 1-21, February.
    5. Yu Gan & Tianzhu Zhang & Sai Liang & Zhongnan Zhao & Nan Li, 2013. "How to Deal with Resource Productivity," Journal of Industrial Ecology, Yale University, vol. 17(3), pages 440-451, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Crowe, Christopher & Dell’Ariccia, Giovanni & Igan, Deniz & Rabanal, Pau, 2013. "How to deal with real estate booms: Lessons from country experiences," Journal of Financial Stability, Elsevier, vol. 9(3), pages 300-319.
    2. Clavero, Borja, 2017. "A contribution to the Quantity Theory of Disaggregated Credit," MPRA Paper 76657, University Library of Munich, Germany.
    3. International Monetary Fund, 2015. "Namibia: Selected Issues," IMF Staff Country Reports 2015/277, International Monetary Fund.
    4. Demetrescu, Matei & Hosseinkouchack, Mehdi & Rodrigues, Paulo M. M., 2023. "Tests of no cross-sectional error dependence in panel quantile regressions," Ruhr Economic Papers 1041, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Asadov, Alam & Masih, Mansur, 2016. "Home financing loans and their relationship to real estate bubble: An analysis of the U.S. mortgage market," MPRA Paper 69771, University Library of Munich, Germany.
    6. Alessandra Canepa & Fawaz Khaled, 2018. "Housing, Housing Finance and Credit Risk," IJFS, MDPI, vol. 6(2), pages 1-23, May.
    7. Hassan Dargahi & Mehdi Hadian, 2022. "Oil shocks, financial stability and implementing macroeconomics and macro‐prudential policies in an oil‐exporting economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2481-2496, April.
    8. Mikkel Hermansen & Oliver Röhn, 2017. "Economic resilience: The usefulness of early warning indicators in OECD countries," OECD Journal: Economic Studies, OECD Publishing, vol. 2016(1), pages 9-35.
    9. Paulo M.M. Rodrigues & Rita Fradique Lourenço, 2015. "House prices: bubbles, exuberance or something else? Evidence from euro area countries," Working Papers w201517, Banco de Portugal, Economics and Research Department.
    10. Hertrich Markus, 2019. "A Novel Housing Price Misalignment Indicator for Germany," German Economic Review, De Gruyter, vol. 20(4), pages 759-794, December.
    11. Ciarlone, Alessio, 2011. "Housing wealth effect in emerging economies," Emerging Markets Review, Elsevier, vol. 12(4), pages 399-417.
    12. Funke, Michael & Kirkby, Robert & Mihaylovski, Petar, 2018. "House prices and macroprudential policy in an estimated DSGE model of New Zealand," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 152-171.
    13. Grigori Fainstein & Igor Novikov, 2011. "The Comparative Analysis of Credit Risk Determinants In the Banking Sector of the Baltic States," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 20-45, June.
    14. Duffy, David & Mc Inerney, Niall & McQuinn, Kieran, 2015. "Macroprudential Policy in a Recovering Market: Too Much too Soon?," Papers WP500, Economic and Social Research Institute (ESRI).
    15. Roland Füss & Daniel Ruf, 2018. "Office Market Interconnectedness and Systemic Risk Exposure," Working Papers on Finance 1830, University of St. Gallen, School of Finance.
    16. European Commission, 2013. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2013 Report," Taxation Papers 38, Directorate General Taxation and Customs Union, European Commission.
    17. Aveline-Dubach, Natacha, 2022. "The financialization of rental housing in Tokyo," Land Use Policy, Elsevier, vol. 112(C).
    18. Shimizu, Chihiro, 2014. "How Are Property Investment Returns Determined? : Estimating the Micro-Structure of Asset Prices, Property Income, and Discount Rates," HIT-REFINED Working Paper Series 12, Institute of Economic Research, Hitotsubashi University.
    19. Danilo Liberati & Valerio Vacca, 2016. "With (more than) a little help from my bank. Loan-to-value ratios and access to mortgages in Italy," Questioni di Economia e Finanza (Occasional Papers) 315, Bank of Italy, Economic Research and International Relations Area.
    20. Gabriele Galati & Federica Teppa & Rob Alessie, 2013. "Heterogeneity in house price dynamics," DNB Working Papers 371, Netherlands Central Bank, Research Department.

    More about this item

    Keywords

    commercial real estate; systemic risk; macroprudential supervision;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:onb:oenbfs:y:2022:i:44:b:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stefan W. Schmitz (email available below). General contact details of provider: https://edirc.repec.org/data/oenbbat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.