"In certain segments, there is the chance of certain market distortions, (but) I wouldn't use the word bubble," Butler told the Reuters Central European Investment Summit in Vienna.

Butler said the desire of people in the region to own property, particularly their own home, and the need for investment should not be underestimated.

The region had not seen the overbuilding experienced by some other countries and the only sector where there could be real pressure on prices was among holiday homes built to meet demand from British investors.

"I would be frankly more concerned about Spain in terms of residential property prices than any country in CEE," he told the Summit.

"If one had to choose one sector ... (it would be) holiday houses built for UK holidaymakers who may see their own financial status put under some pressure by higher rates in the UK and the lesser willingness of UK financial institutions to make large loans to value for second and third homes," Butler added.

RZB's Raiffeisen International is eastern Europe's third-largest lender after UniCredit's  Bank Austria and Erste Bank. Credit continues to grow at an annual rate of more than 20 percent in the former Communist bloc as consumers catch up with their western neighbors and buy credit-financed houses, cars and consumer goods.

Source: Reuters