Taming the real estate boom in the EU: Pathways to macroprudential action

In the fallout of the 2008 crisis, macroprudential policy has been installed as the policy remedy against future financial instability, a primary focus being developments in the real estate sector. With house prices consistently rising over the course of the last 5 years in the EU causing alarm among macroprudential supervisory bodies, a core question of regulatory governance is in how far macroprudential bodies have been capable of bringing about counter-cyclical actions against the build-up of such vulnerabilities, even against the resistance of industry and consumers alike. This paper investigates this question using a novel dataset of macroprudential intensity coded for the 17 EU Countries which experienced a real estate housing boom since 2015. Specifically, it asks which configuration of factors account for the capability of countries to impose stringent anti-cyclical regulations to act against housing booms? Using Fuzzy Set Qualitative Comparative Analysis technics suited for configuration analysis, we find that homeownership salience, the experience of a real estate crisis in 2008 and the macroprudential institutional set up to be crucial variables that jointly influence the activation of counter-cyclical measures, in particular those borrower-based measures which are deemed the most efficient to curb pro-cyclical amplifications in the real estate sector. These results have implications for the capacity of the EU to prevent future crises.