Regulatory Alerts2021-12-02
Added · Updated
Warning of the European Systemic Risk Board on medium-term vulnerabilities in the residential real estate sector of Croatia
The European Systemic Risk Board identifies medium-term vulnerabilities in Croatia's residential real estate sector as a source of systemic risk to financial stability, citing rapid household credit growth and potential house price overvaluation. The Board highlights that relaxed lending standards and government mortgage subsidies are fueling a risk of a credit-driven price spiral, noting that a substantial share of new loans exceed 90% loan-to-value ratios and many have loan service-to-income ratios over 40%. It recommends that Croatian authorities introduce explicit borrower-based measures to mitigate these risks and complement existing macroprudential policies with broader actions to address factors promoting household indebtedness.