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Photographer: Akos Stiller/Bloomberg Photographer: Akos Stiller/Bloomberg

Policy makers are taking note of Europe’s latest property boom.

As the Nordic housing market cools and prices fall in pre-Brexit London, lenders in the European Union’s eastern wing are shoveling cash to borrowers emboldened by record-low unemployment, wage growth and expansive monetary policy.

Low household debt means most of the region is still far from a housing spiral. But with troubled memories of the boom that swept from the Baltic to the Black Sea last decade, regulators in the Czech and Slovak Republic have tightened rules for banks and other countries may follow.

“The experience of 2008 global financial crisis has made all central banks a lot more alert to the housing market,” said Raffaella Tenconi, founder of London-based economic consultancy ADA. “House price recoveries are likely to continue –- in fact they are inevitable as long as the labor market tightens and rates remain very low.”

In the Czech Republic, where the central bank’s benchmark rate is a tick above zero and unemployment is 4.1 percent, the lowest in the EU, house prices jumped by more than a tenth in the fourth quarter of 2016. Hungary and Lithuania were close behind, according to Eurostat. Housing demand hit a record in the region’s biggest economy, Poland, in the first quarter, and Hungary’s central bank said that, while real-estate prices show no signs of overheating, prices in Budapest “warrant monitoring.”

Loans are surging too. Slovakia saw its mortgage stock jump 14.7 percent year-on-year, the fastest in the euro area. Romania’s grew 13 percent.

“The Czech Republic seems to be the leader in price increases, driven essentially by the low domestic rates and a lack of alternative investment options for residents,” said Simon Quijano-Evans, an emerging-market strategist at London-based Legal & General Investment Management Ltd., which oversees about $1.2 trillion of assets. “A cautious stance by the central bank would be merited.”

The bank increased its so-called counter-cyclical buffer for lenders last week to 1 percent of assets as of July 2018 from 0.5 percent now, with Governor Jiri Rusnok saying home loans were “biggest source of risk” to financial stability. Slovakia is acting similarly.

The Organization for Economic Cooperation and Development warned Slovakia on Wednesday that it should consider further restricting lending and phasing out home-ownership incentives to prevent a real-estate bubble. Slovakia and Estonia were also highlighted for potential vulnerabilities by the European Systemic Risk Board in a report last November.

“In Slovakia, risks to financial stability appear to be greater,” said Liam Carson, an emerging-markets economist with Capital Economics Ltd. in London. “Residential property prices are growing at the fastest pace since before the global financial crisis.”

Still, none of the former communist EU members were among the eight warned by systemic risk board that housing risks may threaten financial stability. Authorities in Slovakia, Malta and Estonia have taken appropriate measures to stem rising vulnerabilities, it said. What’s more, mortgages make up less than 30 percent of gross domestic product in most of the region, below the EU average.

With interest rates remaining low across the region, central banks opting to use macro-prudential tools, such as capital requirements or loan-to-value and debt-to-income limits, may price out younger workers, as seen in booms from London to Sydney.

“The combination of very low interest rates and stricter loan-to-value ratios has an asymmetric impact on society,” said Juraj Kotian, an economist with Erste Bank in Vienna. It may end up “punishing mainly low income earners and younger borrowers who may completely lose access to mortgages.”

( Adds ESRB comment in 11th paragraph. )