On 1 February 2024, the European Systemic Risk Board (ESRB) published a report on vulnerability in the residential real estate (RRE) sectors of the EEA countries. In recent years, the ESRB has regularly assessed residential real estate vulnerabilities in the European Economic Area (EEA) countries and the extent to which they are addressed by macroprudential policies. This update focuses on changes in financial stability risks and macroprudential policy since the end of 2021. An in-depth risk and policy assessment was conducted for all the individual EEA countries.

Key findings:

  • The results show that the level of accumulated risks (‘stock risks’) remains significant in most EEA countries. However, the growth of cyclical risks has decelerated or stopped in most EEA countries.
  • Compared with 2021, the risk assessment has remained unchanged for most EEA countries. Overall, the assessment of stock risks and the overall risk assessment are the same as in 2021 for all EEA countries.
  • The forward-looking risk assessment remain scenario dependent, as uncertainty is high. However, economic growth is expected to pick up and inflation to moderate in most EU countries in 2024.
  • Since 2021, several countries have been activating macroprudential polices to mitigate risks related to REE markets and increase lender and borrower resilience.
  • The current policy assessment was completed with only a few changes compared with 2021. This means that policies are regarded as partially appropriate but partially sufficient in the Netherlands and Sweden.

The assessment also concluded that the countries that have received ESRB recommendations or warnings in the past should continue addressing RRE vulnerabilities with macroprudential policies, as well as other measures. Overall, the report emphasises that all countries should continue monitoring RRE vulnerabilities very closely and take the opportunity of the current slowdown in RRE markets to continue making structural reforms beyond the macroprudential remit, which would remove upward pressures on house prices and incentives for households to take on debt. If necessary, countries should enhance the macroprudential toolkit to strengthen the ability of the authorities to address RRE-related vulnerabilities.