The European Systemic Risk Board (ESRB) analysis shows that the level of accumulated vulnerabilities remains significant in most EEA countries. So far, the levelling off in the RRE markets has been too short-lived to bring down the level of accumulated risks, or “stock risks”, significantly.
However, the growth of cyclical risks has decelerated or stopped in most EEA countries. Altogether, the results of the risk assessments for stock risks and overall risk, which also accounts for cyclical risks, are the same as in 2021 for all EEA countries.
The policy assessment concludes with only a few changes compared with 2021
The macroprudential policy mix in five countries that previously received ESRB Recommendations (Austria and Finland) or Warnings (Hungary, Liechtenstein and Slovakia) is now regarded as fully appropriate and sufficient, compared with partially appropriate and partially sufficient in the previous assessment. For the other EEA countries included in the policy analysis in 2021, the policy assessment remains unchanged.
This means that policies are regarded as partially appropriate and partially sufficient in Bulgaria, Croatia, Denmark, Germany and Luxembourg, and appropriate but partially sufficient in the Netherlands and Sweden. In all countries that have been newly added to the policy analysis this year, policies are assessed as fully appropriate and sufficient (Cyprus, Greece, Italy, Latvia, Romania and Spain). The assessment of vulnerabilities is based on available data and covers developments up to mid-November 2023.
Housing market in Greece continues to expand
In the previous ESRB analysis in 2021, Greece was identified as having a low level of vulnerabilities. Greece was one of the few EU countries to have continuously recorded negative rates of lending growth. One of the risk factors was, however, the debt servicing capacity of households, in the light of a high household debt-to-GDP ratio.
Furthermore, as prudential and fiscal measures related to the COVID-19 crisis were being phased out, a deterioration in asset quality was expected to take place due to the high proportion of mortgage loans under moratoria.
The housing market in Greece continues to expand.
The annual growth rates of nominal house prices gradually increased from around 4% in 2021 to 14% in the second quarter of 2023. Despite strong house price dynamics, valuation metrics indicate that house prices are still undervalued.
Both housing loan stock and new mortgage lending continued to decline, with households still deleveraging from the legacy of high indebtedness from the sovereign debt crisis. According to the euro area bank lending survey, loan demand from households has declined in recent quarters on account of higher interest rates, lower consumer confidence and a worsening housing market outlook. Lending standards are relatively prudent. The proportion of loans at risky LTV or DSTI ratios is contained.
Nevertheless, the proportion of loans with somewhat higher DSTI ratios increased in the second half of 2022 and the first half of 2023. This reflects higher interest rates, combined with lower real disposable income owing to high inflation rates.
Vulnerabilities relate to households that have recently restructured their loans at higher interest rates, combined with lower real disposable income, and to those households that have taken out loans in other currencies. Policy mix No macroprudential measures in place.
Appropriate and sufficient the current policy measures
The current policy measures are assessed as being appropriate and sufficient. The
authorities should continue monitoring the vulnerabilities and consider introducing BBMs as a
preventative measure to keep lending standards sound.
