The quarterly UBS Swiss Real Estate Bubble Index currently stands at a level of 0.65. This represents a minor increase of 0.02 index points compared to the prior quarter.
Tracking current values, the UBS Swiss Real Estate Bubble Index utilizes the following risk-based level system: slump, balance, boom, risk and bubble. A value of 0,65 corresponds to the boom level and implies no elevated risk of overheating in Switzerland. Only when the index surpasses a value of 1 is the market considered risky. The index reached its peak in the early 1990s at a level of 2.5 at the height of the last Swiss real estate bubble.
Of the six sub-indices that are included in the index, only loan applications for real estate intended for rental fell slightly. The proportion of mortgage debt compared to income continued to grow strongly. The four other indicators also gained during the second quarter of 2011. The increase was, however, considerably less than in prior quarters. The main reason was the slowdown in the increase in real estate prices during the second quarter 2011.
In parallel with the UBS Swiss Real Estate Bubble Index, UBS Switzerland also publishes a regional risk map showing risk and potential risk regions (known as monitoring regions). These are defined as regions that represent a substantial risk to the Swiss real estate market due to their potential for a correction in regional home prices. The selection of risk regions is directly linked to the UBS Swiss Real Estate Bubble Index.
The selection of risk regions remained unchanged in the second quarter 2011. Zurich, Geneva and Lausanne remain Switzerland's most risky areas as a result of their national importance. Other areas of substantial risk include the large metropolitan areas of Zug, Pfannenstiel, March, Vevey, Nyon and Zimmerberg as well as the tourist region of Davos.
UBS Swiss Real Estate Bubble Index
Regional risk map
Method
The UBS Swiss Real Estate Bubble Index comprises six sub-indices that track: the relationship between purchase and rental prices, the relationship between house prices and household income, the development of house prices relative to inflation, the relationship between mortgage debt and income, the relationship between construction activity and gross domestic product (GDP) and the proportion of credit applications for residential property not intended for owner occupancy by UBS clients.
Our selection of risk regions is tied to the level of the UBS Swiss Real Estate Bubble Index and is based on a multi-level selection process utilizing regional population and property price data.
UBS AG
Media contact
Dr. Daniel Kalt, Chief Economist Switzerland
Tel. +41 44 234 25 60
Claudio Saputelli, Head of Wealth Management Real Estate Research
Tel. +41 44 234 39 08
Matthias Holzhey, Analyst Wealth Management Real Estate Research
Tel. +41 44 234 71 25
The UBS Swiss Real Estate Bubble Index report is available on the Internet via this link:
The next date of publication for the UBS Swiss Real Estate Bubble Index is 3 November, 2011.
