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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

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    File URL: https://www.oenb.at/dam/jcr:ff33ecdf-48b0-4226-910a-8acf71bf041e/04_FSR_44_Systemic-risks.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    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

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