Real estate bubble index continues downward trend in the second quarter
Published: Wednesday, Aug 7th 2024, 10:30
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The risk of a bubble on the Swiss real estate market fell further in the second quarter of 2024. The UBS Swiss Real Estate Bubble Index fell from 0.95 points to 0.74 points.
The risk of a real estate bubble therefore remains "moderate", according to a statement from the bank on Wednesday. The index is now significantly lower than it was during the real estate bubble of the 1990s.
The risk of a bubble has declined compared to the previous year from all four risk perspectives, according to the report. Falling usage costs as a result of the SNB's interest rate cuts and the low growth in mortgage volumes contributed most to the decline. The price trend also weakened further.
Overall, home prices rose by 0.4% in the second quarter, according to UBS. This is the weakest quarter-on-quarter price increase since the beginning of 2019. In turn, this resulted in a year-on-year increase in home prices of 2.7%, or 1.4% when adjusted for inflation.
In contrast, the trend in rental prices is unbroken. They rose by 1.2 percent in the second quarter. This makes them 6.4% higher than a year ago. Existing rents (+2.7%) also recorded an above-average increase compared to the previous year.
UBS expects home prices to continue to rise over the next few quarters. In 2024 as a whole, home ownership should therefore become around 2 percent more expensive. An increase in price momentum is then expected next year. Falling mortgage interest rates and sharply rising rents are likely to have a positive impact on demand on the owner-occupied home market, according to the report.
The UBS Swiss Real Estate Bubble Index is made up of six standardized sub-indices. These are home prices in relation to annual rents, consumer prices, household income and mortgage volume in relation to household income, construction activity in relation to gross domestic product and demand for loan applications for investment properties.
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