VIENNA, Dec 2 (Reuters) - Austria’s property market is at risk of overheating, and the country’s central bank is watching in case measures to cool it are needed, though it is not taking action for the time being, the Austrian National Bank (ONB) said on Monday.
In a half-yearly report on financial stability in Austria, the central bank said it was continuing to urge banks to apply sustainable lending standards.
The ONB’s latest report on the housing market in Austria, for the third quarter, says that residential real estate is Austria is now 14.1% over-valued relative to market fundamentals. In Vienna, the figure is 25.9%.
“The weaker outlook for (economic) growth and concerns about a buildup of asset price bubbles in certain market segments clearly warrant heightened supervisory attention,” the ONB said in a statement on the report.
“In light of these developments, banks should ensure that they have enough room for maneuver in the case of a potential downturn,” it added.
The Financial Market Stability Board www.fmsg.at/en/about-us.html, which coordinates among the ONB, Finance Ministry and Financial Market Authority and meets at least four times a year, convened in September and found that the share of banks' new lending with high debt service levels relative to borrowers' income remained high.
“As the buoyancy of the Austrian real estate market could fuel a self-reinforcing credit-price spiral, the FMSB will continue to monitor systemic risks from real estate financing,” it said.
“The ONB will carefully evaluate whether the conditions for activating macroprudential measures are met and whether a recommendation to the FMSB for pre-emptive activation is warranted,” the ONB said. (Reporting by Francois Murphy)