As an aside, additional confidence that inflation is on a sustainable adjustment path back to its target can also be derived from the treatment of housing in the HICP: only rents actually show up in the inflation rate, but not the cost of owner-occupied housing – unlike, for example, CPI inflation in the US.
In this latter case, financial stress will show up in nonperforming loans on banks' balance sheets and perhaps even in property repossessions or bankruptcies. What do these data tell us? Banks' non-performing housing loans have been trending upwards over the past few years, although they remain very low in absolute terms at around 0.8 per cent of banks' domestic housing loan books (Graph 7).