An ECB report which examines threats to financial stability underscored heightened concern over a property boom that is now unravelling in countries such as Germany and Sweden.
Commercial property prices have been hit by economic weakness and high interest rates over the last year, challenging the sector's profitability and business model, the ECB said.
The sector is not big enough to create a systemic risk for lenders, but could increase shocks across the financial system and greatly impact the financial firms, from investment funds to insurance firms, collectively known as shadow banks.
The ECB issued its report as deep cracks emerged in the property market of the euro zone's top economy, Germany.
Commercial real estate transactions were down 47% in the first half of 2023, compared with the same period in 2022.
Persons:
René Benko, Banks, Balazs Koranyi, John O'Donnell, Barbara Lewis, Alexander Smith
Organizations:
European Central Bank, ECB, Signa, Chrysler, Signa Group, Reuters, Raiffeisen Bank, Bank, Thomson
Locations:
FRANKFURT, Germany, Sweden, Austrian, Hamburg, Austria, Bank Austria