The Unassuming Economist

“Without policy action, underlying forces for housing price appreciation will likely persist (…) Prices do not appear overvalued at this time, though they have recently picked up (…) Banks’ increased exposure to mortgages bears vigilance, and buffers should be maintained. The tightening in the risk weights for LTVs above a certain level for banks, and the capital surcharge for domestically-oriented banks, are appropriate. If these measures are found to be insufficient after some period of observation, further steps may be needed (…) Government policies should become more neutral in relation to home ownership vs. renting. Current policies provide incentives for ownership, spurring demand pressures further”–these are the main points from the overall assessment of a new IMF study on Luxembourg’s housing market. 

Read the full study here, which addresses the following topics: should the housing market be a source of concern; factors driving the imbalance between housing demand and supply; households’ financial situation; and bank exposures to real estate.