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Commercial property shows signs of overvaluation in most European Union countries as yield-starved investors pile into bricks and mortar, the EU’s financial stability watchdog said on Friday.

The European Systemic Risk Board (ESRB) issued the warning just as its main stakeholder, the European Central Bank (ECB), prepares a new round of the same brand of monetary stimulus that has helped drive up property prices in the last few years.

“Most of the countries for which commercial real estate (CRE) price data are available have registered CRE price increases and signs of overvaluation, while bank credit for CRE has been muted,” the ESRB, chaired by ECB President Mario Draghi, said in its annual report.

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It added the price rise had been fuelled by a search for yield, driven down in some cases to below zero by years of ultra-low interest rates and massive bond purchases by the ECB.

“High investor demand and the search for higher yields, which have been a major source of the CRE price increase, particularly in prime markets, have potentially made investors vulnerable to a repricing of risk premia,” the ERSB said, without citing any specific figures to back its argument.

Unlike the real estate bubble of the 2000s, the latest price surge has not been mirrored by a boom in property-backed lending.

This has limited the knock-on effect on the banking sector, but has also made the issue more difficult to tackle for the authorities, whose tools mainly consist of lending caps.

The ESRB is comprised of the EU’s central banks and main financial watchdogs. It issues recommendations which are not binding.

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