Real estate bubble index falls again in the first quarter
Published: Wednesday, May 15th 2024, 13:20
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The risk of a bubble on the Swiss real estate market weakened further in the first quarter of 2024. The UBS Swiss Real Estate Bubble Index fell from 1.09 points to 0.95 points, as the major bank announced on Wednesday.
The risk of a real estate bubble has thus fallen from "elevated" to "moderate". The index is now significantly lower than it was during the real estate bubble of the 1990s.
Looking ahead, the bank expects the situation to calm down further. A further reduction in the annual rate of increase in home prices of 1 to 1.5% is expected by the end of the year. In addition, the continued increase in financing costs and the absolutely high price level are putting pressure on demand. According to UBS, this should further reduce the risk of a real estate bubble
Meanwhile, home prices rose by 0.7% in the first quarter compared to the final quarter of 2023, a similar rate to the previous quarters.
Rents are becoming more expensive
Meanwhile, the momentum in rental prices was much stronger with a 1.5% increase in asking rents in the first quarter. Compared to the previous year, they were 6% higher. Existing rents also rose at an above-average rate of 2.7% compared to the previous year.
According to the bank, the analysis also shows that although the risk of a real estate bubble remains high from the perspective of the fundamental factors of rents and income, the risk of overheating has decreased as a result of weaker price momentum.
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.
The previous quarter's figures were adjusted significantly downwards due to an adjustment to the calculation model. The index values are therefore no longer directly comparable with previous editions of this study.
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