The Unassuming Economist

From the IMF’s latest report on Belgium:

“Increased vulnerabilities from real estate call for supervisory vigilance and possible use of macroprudential policies to mitigate stability risks. Despite the crisis, prices of residential and some commercial RE segments (e.g., logistics) have risen, also supported by low interest rates. In addition, house prices benefitted from the channeling of some of the excess savings accumulated during the pandemic (€25 billion, 5½ percent of GDP, in 2020) into residential properties. In a market correction the quality of RE assets, which account for a sizable share of financial-sector portfolios, may deteriorate. The NBB has appropriately maintained a risk-weight add-on for housing loans in place since December 2013 and affirmed December 2019 supervisory expectations that set limits on riskier mortgage lending. Market developments should be closely monitored for price misalignments. If imbalances mount, macroprudential tightening should be considered to constrain lending to highly-leveraged borrowers and strengthen buffers, also encompassing the commercial segment.”