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Wifo policy warning on real estate bubble

By Lisa Chapman

A top economic think tank has said government policy must be tailored to react quickly to any future threat of a real estate bubble in Austria.

The Vienna-based Institute for Economic Research (Wifo) said in its new monthly report released today (Fri) that any massive fall in property values would affect banks more than a crash on the stock market since property was the main collateral for bank credit and home ownership was much more widespread than stock ownership.

Wifo said government monetary and budgetary policy needed to react as early as possible to any future indications that a real-estate bubble was forming.

The think tank added that research had shown there was a close connection between real estate and financial crises, with a real estate crisis usually leading to a financial crisis within a year. It said the real estate bubble in the USA had been "a central element" in the ensuing financial market crisis.

Austrian Times

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