Prices rise, bubble risk fades

The risk of a real estate bubble bursting continued to diminish in Switzerland in the third quarter, for a seventh consecutive partial period.

The prices of owned housing continued to rise, but a reduction in fees for residents induced by the reduction in the key rate of the Swiss National Bank, coupled with a reduction in their level of debt, largely contributed to the evolution of the real estate bubble index compiled on a four-year basis by UBS economists.

“The drop in interest, the moderate demand for mortgages, the low construction activity and the rise in rents increasingly argue against the risk of a price correction,” outline the authors of the report distilled Friday.

On a regional level, lower than average inflation in the Geneva region has now resolved the imbalance between property prices and incomes as well as between prices and rents. The distortions on the French side are now located in the canton of Vaud.

The accentuation of the imbalance between purchase prices and rents of main residences beyond Sarine also proved to be below average. The explosion in prices for second homes in the tourist regions of Graubünden has, on the other hand, generated new imbalances. Those already observed in the Alpine regions of central Switzerland have increased.

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