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The growing role of investment funds in euro area real estate markets: risks and policy considerations

Author

Listed:
  • Daly, Pierce
  • Dekker, Lennart
  • O’Sullivan, Sean
  • Ryan, Ellen
  • Wedow, Michael

Abstract

This article analyses the financial stability risks of investment funds active in euro area commercial real estate (CRE) markets. It finds that real estate investment funds (REIFs) have grown significantly in the past decade, and have a large market footprint in several euro area countries where the outlook for CRE markets has deteriorated sharply. In addition, REIFs are exposed to liquidity risk when they offer frequent redemptions, which could affect the stability of CRE markets. REIFs should therefore be subject to a common and comprehensive policy framework to reduce the liquidity mismatch and risks to financial stability. JEL Classification: G23, R33

Suggested Citation

  • Daly, Pierce & Dekker, Lennart & O’Sullivan, Sean & Ryan, Ellen & Wedow, Michael, 2023. "The growing role of investment funds in euro area real estate markets: risks and policy considerations," Macroprudential Bulletin, European Central Bank, vol. 20.
    • Handle: RePEc:ecb:ecbmbu:2023:0020:1
    Note: 406092
    as

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    File URL: https://www.ecb.europa.eu//pub/financial-stability/macroprudential-bulletin/html/ecb.mpbu202304_1~4a07638376.en.html
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    Citations

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    Cited by:

    1. Etienne de L'Estoile & Mathilde Salin, 2024. "Who Takes the Land? Quantifying the Use of Built-Up Land by French Economic Sectors to Assess Their Vulnerability to the No Net Land Take Policy," Working papers 941, Banque de France.
    2. Bandoni, Emil & De Nora, Giorgia & Giuzio, Margherita & Ryan, Ellen & Storz, Manuela, 2025. "Institutional investors and house prices," Working Paper Series 3026, European Central Bank.
    3. Kaspereit, Thomas, 2024. "Mandatory disclosure of open-ended real estate fund shares that are registered for redemption?," International Review of Law and Economics, Elsevier, vol. 80(C).

    More about this item

    Keywords

    commercial real estate; liquidity mismatch; policy framework; real estate investment funds;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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