FRANKFURT, (Reuters) – The European Central Bank cannot ignore a rise in property prices which has caused a potentially deadly overvaluation. This was stated Tuesday by Isabel Schnabel, an ECB member.

In many parts of the Euro zone, house prices are increasing rapidly. Low interest rates and a high saving rate have led to increased property investments among wealthy households.

Schnabel explained that “Monetary policies cannot ignore such developments in institutional settings in which macroprudential strategies are, in principle and are the first line defence, but are not yet fully efficient.”

Schnabel, head of ECB market operations said house prices were currently too high relative to fundamentals across the entire euro area, which makes them more vulnerable to future price corrections.

Schnabel claimed that gradual withdrawal from bond purchases could reduce financial risks, and help to lower wealth distributional effects of monetary policy.

Schnabel claimed that including housing costs in inflation data would have raised prices by 0.4-0.5 percent in the quarter. That’s an impressive boost, considering inflation already runs at double the bank’s target of 2%.

The ECB’s inflation target has been missed for almost a decade, but housing costs could have helped it reach or close to its target in recent years. ECB research finds.

Schnabel rejected quantitative easing, which is also known to be an idea for an interest rate rise before bonds are purchased, in response to a recent debate within academia.

She stated that central banks could accept losses to their balance sheets if they raised policy rates prior to ending net asset purchase. This would eventually lead the average taxpayer into financial loss, while the continued purchases of net assets would only benefit the most wealthy households.