The Bank of Portugal leaves notices. Falling home prices are a risk

Banco de Portugal warns of risks and vulnerabilities in the economy that could upset financial stability, highlighting, in particular, housing prices, but also low household incomes and banking declines.

Presents Friday’s semi-annual financial stability report by the Bank of Portugal (BdP) Falling prices in the residential real estate market As one of the biggest risks to financial stability due to “changes in financing conditions”.

An alert appears when a file is Interest rates rose After several years in the negatives.

“In the context of the higher growth observed recently in housing credit, it is essential to ensure that this does not play a critical role in the Evolution of prices in the real estate market‘, refers to BdP.

The foundation notes that “despite the uncertainty caused by the epidemic crisis”, housing prices ‘Continued increase in Portugal’which is a reflection ofNon-resident demand for housing” And the “lack of supply“.

Thus, it is necessary to bank credit of the Portuguese taxpayers will not affect housing prices, leading, for example, to decline, the supervisor points out.

The British Development Bank (BdP) also dismisses the possibility of a significant increase in Home loan defaultQ, because of high interest rates.

Default issues, especially housing loans, are closely related to the labor market and the labor market has shown strength The flexibility that few expectedBdP Governor Mario Centeno notes at a press conference.

Centeno adds that the outlook for the Portuguese economy “shows an evolution consistent with the flexibility of the labor market, which is very positive“.

Low disposable income for households

The British Development Bank report also warns of the risks of a deterioration in the economic conditions of families due to “Low real spendable income“because of inflationThe effect of the increase in interest rates on debt servicing, to which is added uncertainty about the development of economic activity and employment.

BdP Governor says he is not ignoring that monetary policy normalization, initiated by the European Central Bank in December 2021, involves a cycle of higher interest rates, “because Very negative interest rates It did not constitute an environment conducive to economic growth and financial stability, especially if it persists for a long time.” However, he notes that it is necessary to ensure that there are “sufficient tools to support this.” Reflection in the monetary policy cycle“.

Corporate default

The BdP also highlights the increase in the likelihood of banks being defaulted by businesses, due to the macroeconomic environment inflationary pressuresas one of the main risks to financial stability.

The report notes that this default risk is due to “the combined effect of Financial weakness of some companiesincomplete recovery of activity and profitability of some sectors in after the epidemicas well as the “Existing Macroeconomic and Fiscal Framework”.