Regulatory Alerts2021-12-02
Added · Updated
Warning of the European Systemic Risk Board on medium-term vulnerabilities in the residential real estate sector of Hungary
The European Systemic Risk Board identifies medium-term vulnerabilities in Hungary's residential real estate sector as a source of systemic risk, citing increasing house price overvaluation and rapid growth in mortgage and household credit. The Board notes that while loan-to-value limits are effective, approximately 25% of new mortgage loans carry high debt service-to-income ratios, and government subsidies contribute to demand pressures and household indebtedness. The ESRB recommends that Hungarian authorities consider tightening debt service-to-income limits, introducing maturity limits, or applying systemic risk buffers to mitigate these risks. Additionally, the Board advises complementing macroprudential measures with broader policy actions to address housing supply constraints and remove incentives for excessive household borrowing.