Commercial real estate values in the euro zone look stretched, but there are no signs of bubbles in broader European markets, according to the president of the European Central Bank.

Speaking at a press conference at IMF Annual Meetings in Washington, Mario Draghi said he does not see evidence that stocks or bonds are overpriced in Europe.

“Let me be clear, I think people are convinced that stocks and shares right now and bonds can go up as well as down,” Draghi said in response to a question from CNBC. “I don’t think we’re living in a bubbly situation.”

The commercial real estate sector, though, does appear to be slightly overvalued, Draghi said.

“Where we see some signs of valuations that tend to be stretched is in the prime commercial real estate,” he said.

Macroprudential policy, not higher interest rates, is the best response to lofty valuations in the commercial real estate, Draghi said. He added the ECB, along with national authorities and central banks, is “monitoring” the market.

“You wouldn’t want to take wrong decisions in order to fix one specific market,” Draghi said. “What you want to do is have macroprudential policies and frameworks in place that could cope with these realities.”

Compared to historical averages, Draghi said he does not see the residential real estate market as “an especially worrisome situation.” He said higher residential prices in large cities have not been accompanied with increasing debt or leverage, adding credit flows are “pretty subdued” on average.

Source: cnbc
Draghi: Commercial real estate valuations stretched, but no bubbles in stocks or bonds