Real Estate Sector and Financial Stability Risks in Chile: Chile

Selected Issues Papers, February 25, 2025

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The Chilean real estate sector has recently undergone adjustments which have increased the risks for the financial sector, but the system remains overall resilient.
In the baseline, the real estate market is expected to modestly recover.
Several factors mitigate credit risk.
The buffers in the financial sector currently appear broadly adequate to absorb stresses from high long-term interest rates and the tail risk of a real estate crisis.
Supervisors should monitor these risks closely, keep advancing in closing data gaps, and continue to extend stress test models to comprehensively capture real estate-specific risk factors.

Recent adjustments in the real estate sector have elevated financial sector risks.
Baseline outlook: modest recovery of the real estate market.
Risk mitigation: unspecified "several factors" that mitigate credit risk are present.
Financial buffers: currently appear broadly adequate to absorb:
- stresses from high long-term interest rates, and
- the tail risk of a real estate crisis.
Remaining vulnerabilities: need for closer supervisory monitoring, improved data coverage, and enhanced stress test models to incorporate real estate-specific risk factors.

Monitor real estate-related risks closely.
Advance in closing data gaps pertaining to the real estate sector and financial exposures.
Continue to extend and refine stress test models so they comprehensively capture real estate-specific risk factors.