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Central bank says no fear from real estate bubble

Austrian central bank downplays real estate bubble fears

The Austrian central bank has downplayed concerns over whether the real estate bubble in Vienna and the rest of the country could shake financial stability.

However the central bank said on Monday it will be monitoring the situation by creating a new fundamental price indicator.

Residential real estate in Austria increased 39% between 2007 and 2013, the highest increase seen in the Eurozone. Vienna saw particular price hikes with the top-end of the market attracting foreign buyers looking for second homes.

About the risk of a housing bubble in the country, the Austrian central bank said on Monday: "The risk to financial stability from increasing real estate prices is gauged to be low.

Low interest rates from the European Central Bank have been pointed to as one of the reasons for the price increases as it makes mortgages less expensive.

Germany is also experiencing rises in real estate prices but the central bank Bundesbank has also said it doesn't present a risk. "It is very unlikely that this will result in macroeconomic risks or dangers to financial stability," the bank said in October, although highlighting that house price corrections in cases of over evaluation may lead to "perceptible" losses in wealth for some.

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