Risk of real estate bubble decreases further in the third quarter
Published: Friday, Nov 8th 2024, 15:30
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The risk of a bubble on the Swiss real estate market fell further in the third quarter of 2024. The UBS Swiss Real Estate Bubble Index fell to 0.41 points from 0.74 in the previous quarter.
This means that the risk of a real estate bubble has fallen for the seventh time in a row and is now at a moderate level, as the bank announced on Friday. Falling interest rates, moderate demand for mortgages, low construction activity and rising rents are the reasons for this, according to UBS.
The index value fell slightly in the two risk perspectives of foundation, which assesses the deviation of home prices from household income on the one hand and rents on the other, and the cost of rental properties in relation to owner-occupied properties. There was a slight increase in the dynamics area, which takes into account the real rate of price change, and the environment indicator, which puts the mortgage volume in relation to income and looks at the growth in living space.
According to UBS, home prices rose by 0.7% overall in the third quarter, which is roughly in line with the average of the last two years. In a year-on-year comparison, this resulted in a 2.8% increase in home prices. Adjusted for inflation, home prices are 1.9% higher than in fall 2023, according to UBS.
By contrast, the momentum of rental prices has slowed somewhat. Although asking rents barely rose in the third quarter, they were 4% higher year-on-year. According to UBS, however, existing rents also increased significantly.
The bank's real estate experts now expect demand for owner-occupied homes to rise at the end of the year. They cite the fact that search subscriptions for owner-occupied homes in September 2024 were almost 15 percent higher than the previous year as an indication of this. In addition to falling mortgage interest rates, the sharp rise in rents is also having a positive effect on demand for owner-occupied homes, they say.
"There are therefore signs of a gradual acceleration in home price increases over the next few quarters," says UBS. They expect prices for residential property to rise by 3 to 4 percent next year.
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