Real estate bubble index slightly lower in the fourth quarter
Published: Thursday, Feb 8th 2024, 08:20
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The risk of a bubble on the Swiss real estate market decreased slightly in the fourth quarter of 2023. The UBS Swiss Real Estate Bubble Index fell to 1.41 from 1.44 points, as the major bank announced on Thursday.
According to the information provided, one of the main reasons for this was the slowdown in mortgage growth. In addition, a slight decline in the number of applications for financing for buy-to-let projects also led to the decline.
According to the communiqué, the current index level means that the home ownership market remains clearly overvalued relative to its historical development. Index values of over 2 signal a bubble risk, those of 1 to 2 indicate an overvaluation and those of -1 to 1 a fair valuation.
Prices defy interest rates
Commenting on the still relatively high level of the index, the report said that home prices remained resistant to higher financing costs. An overall low level of new construction activity and accelerated immigration make a price correction unlikely in the near future.
From a regional perspective, the market is particularly overheated on Lake Zurich, in parts of Graubünden, in the St. Gallen Rhine Valley and in the Lausanne region.
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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