Empirical studies for the United States and other OECD countries instead indicate that real estate markets and macroeconomic developments are closely interlinked. And in the event of a recession that extends beyond the real estate sector or even of a general financial crisis, cumulated losses could considerably impair banks’ internal capital adequacy.
My colleague on the Executive Board, Claudia Buch, mentioned this back in November 2014 when we presented the Bundesbank’s latest Financial Stability Review. Looking further ahead, there is yet another danger looming that we must keep in mind: the possibility of an interest rate reversal.