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Real estate markets and macroprudential policy in Europe

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  • Hartmann, Philipp

Abstract

Boom-bust cycles in real estate markets have been major factors in systemic financial crises and therefore need to be at the forefront of macroprudential policy. The geographically differentiated nature of real estate market fluctuations implies that these policies need to be granular across regions and countries. Before the financial crisis that started in 2007 property markets were overvalued in a range of European countries, but much like in other constituencies active policies addressing this were an exception. An increasing number of studies suggest that borrower-based regulatory policies, such as reductions in loan-to-value or debt-to-income limits, can be effective in leaning against real estate booms. But many of the new macroprudential policy authorities in Europe do not have clear powers to determine them. Moreover, the cross-border spillovers they may give rise to suggest the establishment of a well-defined macroprudential coordination mechanism for the single European market. JEL Classification: G01, G28, R39, G17, E5

Suggested Citation

  • Hartmann, Philipp, 2015. "Real estate markets and macroprudential policy in Europe," Working Paper Series 1796, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20151796
    Note: 229414
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    Cited by:

    1. repec:eee:jimfin:v:88:y:2018:i:c:p:25-53 is not listed on IDEAS
    2. Kelly, Jane & Le Blanc, Julia & Lydon, Reamonn, 2018. "Pockets of risk in European Housing Markets: then and now," Research Technical Papers 12/RT/18, Central Bank of Ireland.
    3. Hartmann, Philipp & Smets, Frank, 2018. "The first twenty years of the European Central Bank: monetary policy," Working Paper Series 2219, European Central Bank.
    4. repec:eee:jhouse:v:44:y:2019:i:c:p:88-98 is not listed on IDEAS
    5. Jed Armstrong & Hayden Skilling & Fang Yao, 2018. "Loan-to-Value Ratio Restrictions and House Prices," Reserve Bank of New Zealand Discussion Paper Series DP2018/05, Reserve Bank of New Zealand.
    6. Ely, Regis Augusto & Tabak, Benjamin Miranda & Teixeira, Anderson Mutter, 2019. "Heterogeneous effects of the implementation of macroprudential policies on bank risk," MPRA Paper 94546, University Library of Munich, Germany.
    7. Nocera, Andrea & Roma, Moreno, 2017. "House prices and monetary policy in the euro area: evidence from structural VARs," Working Paper Series 2073, European Central Bank.
    8. Lerbs, Oliver & Voigtländer, Michael, 2018. "Ist eine makroprudenzielle Regulierung des deutschen Hypothekenmarktes geboten?," ZEW Discussion Papers 17-029, ZEW - Leibniz Centre for European Economic Research.
    9. Fabrizio Ferriani & Wanda Cornacchia & Paolo Farroni & Eliana Ferrara & Francesco Guarino & Francesco Pisanti, 2019. "An early warning system for less significant Italian banks," Questioni di Economia e Finanza (Occasional Papers) 480, Bank of Italy, Economic Research and International Relations Area.
    10. Essi Eerola, 2017. "Macroprudential measures in the housing markets - A note on the empirical literature," Journal of Risk Finance, Emerald Group Publishing, vol. 18(3), pages 326-335, May.
    11. José García-Montalvo & Josep M. Raya, 2017. "Constraints on LTV as a Macroprudential Tool: A Precautionary Tale," Working Papers 1008, Barcelona Graduate School of Economics.
    12. José Garcia Montalvo & Josep M. Raya, 2017. "Constraints on LTV as a macroprudential tool: a precautionary tale," Economics Working Papers 1592, Department of Economics and Business, Universitat Pompeu Fabra.
    13. repec:eee:jhouse:v:39:y:2018:i:c:p:1-16 is not listed on IDEAS
    14. Dorothee Bohle, 2017. "Mortgaging Europe’s periphery," LEQS – LSE 'Europe in Question' Discussion Paper Series 124, European Institute, LSE.
    15. Burlon, L. & Gerali, A. & Notarpietro, A. & Pisani, M., 2018. "Non-standard monetary policy, asset prices and macroprudential policy in a monetary union," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 25-53.
    16. S. Avouyi-Dovi & C. Labonne & R. Lecat & S. Ray, 2017. "Insight from a Time-Varying VAR Model with Stochastic Volatility of the French Housing and Credit Markets," Working papers 620, Banque de France.
    17. Rünstler, Gerhard & Balfoussia, Hiona & Burlon, Lorenzo & Buss, Ginters & Comunale, Mariarosaria & De Backer, Bruno & Dewachter, Hans & Guarda, Paolo & Haavio, Markus & Hindrayanto, Irma & Iskrev, Nik, 2018. "Real and financial cycles in EU countries - Stylised facts and modelling implications," Occasional Paper Series 205, European Central Bank.

    More about this item

    Keywords

    bubbles; Financial crises; financial regulation; financial stability indicators; macroprudential policy; real estate markets; systemic risk;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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