Author : Ms. Laura Valderrama
Release : 2023-03-24
Genre : Business & Economics
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European Housing Markets at a Turning Point – Risks, Household and Bank Vulnerabilities, and Policy Options - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook European Housing Markets at a Turning Point – Risks, Household and Bank Vulnerabilities, and Policy Options write by Ms. Laura Valderrama. This book was released on 2023-03-24. European Housing Markets at a Turning Point – Risks, Household and Bank Vulnerabilities, and Policy Options available in PDF, EPUB and Kindle. European housing markets are at a turning point as the cost-of-living crisis has eroded real incomes and the surge in interest rates has made borrowers more vulnerable to financial distress. This paper aims to (i) shed light on the risks in European housing markets, (ii) quantify household vulnerabilties, (iii) assess banking sector implications and (iv) examine policies’ effectiveness using simulations based on microdata from the Household Finance and Consumption Survey (HFCS) and EU statistics on income and living conditions (EU-SILC). Under the baseline IMF macroeconomic forecast, the share of households that could struggle to meet basic expenses could rise by 10 pps reaching a third of all households by end 2023. Under an adverse scenario, 45 percent of households could be financially stretched, representing over 40 percent of mortgage debt and 45 percent of consumer debt. The impact on the banking sector seems contained under the baseline forecast, though there are pockets of vulnerability. A 20 percent house price correction could deplete CET1 capital by 100-300 basis points. Fiscal measures, such as subsidies to the bottom income tercile, could save 7 percent of households from financial distress at an estimated cost of 0.8 percent of GDP.