ESMA – Risk exposure of the real estate sector in the EU securities and investment funds markets

The European Securities and Markets Authority (ESMA) has published its analysis of exposures of securities, markets, and asset management of the EU to the real estate sector.

According to ESMA’s analysis, studies conducted revealed (i) an increased levels of indebtedness within the real estate sector, leading to risk implications for non-bank financial market participants, and (ii) that the interconnections with the banking system cause the exposure and activities of financial entities, through which sectoral shocks may be transmitted in the EU financial system.

The Authority also provides details on the evolution of this sector over the last five years, highlighting, among other things, a generalized decline in valuations of major real estate equity and debt indices.

ESMA will continue monitoring this sector in the interest of the financial stability.