Euro zone property companies are being hit by surging losses and some will struggle to support their debts, which have risen to a higher level than before the 2008 financial crisis, the European Central Bank has warned. The losses, which the ECB said would have “consequences for the resilience of banks’ loan books”, stem from sharply higher financing costs, falling commercial property values, weaker rental income and rising concerns about the energy efficiency of buildings.
The central bank said signs of stress in the commercial property sector, which accounts for 10 per cent of all euro zone bank loans, “have the potential to significantly amplify an adverse scenario” and would “drive large losses” in the wider financial system
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