Uncontrolled Adjustment Warning real estate market due to the sudden and significant rise in interest rates, he once again turned to IMF towards central banks, with a particular focus on advanced economies that have been ‘inflating’ prices before and during the pandemic. In this context, Greece is a low-risk country on five criteria.

In particular, in her analysis on the IMF blog, economist Nina Belyanovskaya notes that during the pandemic, property prices in many countries, especially in developed countries, rose to record levels, while interest rates were low and vacant houses were few. However, since last year, prices have either started to decline or slowed down. The IMF said slowing prices could also be a positive development in countries that experienced sudden growth during the pandemic.

However, in the context of the tightening cycle that began last year, the average mortgage interest rate in developed countries hit 6.8% at the end of 2022, more than double what it was at the beginning of the same year. If borrowing costs continue to rise or remain high for an extended period, demand and prices are likely to weaken further, according to the IMF.

According to the IMF, countries with high household debt and a large number of floating rate loans are at greater risk. Analyzing the indicators of risk in the housing market, it follows that Greece is not in danger.

During the pandemic, property prices rose to record highs, and interest rates were low and affordable homes were scarce.

It posted only a moderate risk rating (4/7) for interest rate policy changes in the first nine months of 2022.

However, according to other criteria, i.e. 1) for household credit risk as a percentage of net disposable income, 2) for a percentage of variable rate debt, and 3) for the proportion of households with a mortgage, the risk is either low or very low.

According to the IMF analysis, the current situation differs significantly from the conditions fifteen years ago. In most cases, while falling house prices are relatively unlikely to trigger a financial crisis, a sudden drop could dampen economic prospects, the IMF said. And if the potential risks increase, strict supervision and possible intervention by the competent authorities is required in the coming years.

As the IMF economist usually notes, banks are better protected than before the crisis, and in most developed countries, more stringent security criteria are applied.

However, Bilanovska concludes, the average household debt-to-income ratio is about the same as in 2007, largely due to countries that managed to avoid the hit of the crisis and have since increased their borrowing.