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The real estate bubble index declines strongly
The UBS Swiss Real Estate Bubble Index recorded a strong decline in the first quarter of 2018 and is currently at 1.10 index points. Household incomes rose significantly in the past quarter, while owner-occupied housing prices fell slightly. The regions of Lucerne and Zurich Oberland no longer count as exposed regions.
Zurich, 8 May 2018 – At 1.10 points, the UBS Swiss Real Estate Bubble Index lay in the risk zone in the first quarter of 2018 following a significant decrease. The Real Estate Bubble Index thus fell for the third consecutive year. Both the owner-occupied housing market and the mortgage market continued to cool in the first quarter of the year. At the same time, Switzerland posted above-average real economic growth of 0.6 percent quarter-on-quarter, and consumer prices also increased significantly. By contrast, demand for buy-to-let investments remains high and the ratio between purchase and rental prices also points to a persistently unhealthily high interest rate dependency on the owner-occupied housing market.
Falling owner-occupied housing prices despite a booming economy
The buoyant economy helped boost demand for residential property, but slightly rising mortgage rates, tight economic viability and fiercer competition for vacant rental housing prevented higher prices. Single-family homes increased slightly in price by 0.1 percent compared to the previous quarter, but owner-occupied housing prices fell by 0.9 percent. Compared to the previous year, condominiums recorded the biggest decline since 1998 at minus 2 percent. In addition, the growth of households' mortgage debt in the banking sector declined again, rising by 2.5 percent year-on-year to below the expected nominal economic growth of 3 percent for the year as a whole.
Economic viability virtually unchanged since 2016
However, the imbalances on the owner-occupied housing market did not just decrease quarter-on-quarter. In retrospect, revised data from the Federal Statistical Office show a significantly more positive development in household incomes than previously assumed following the abolition of the minimum CHF exchange rate in early 2015. The bottom line is that the price-income ratio has not deteriorated further since mid-2016.
UBS Swiss Real Estate Bubble Index – 1Q/2018
Prices in Basel are booming
The risk map has also changed to reflect the decrease in the real estate bubble index. Thus, the regions of Lucerne and Zurich Oberland no longer count as exposed regions. In the group of exposed regions, Basel-City currently has the highest growth rates - thus, the price level is 15 percent higher than in 2015.
Regional risk map – 1Q/2018
Risk regions for the Swiss residential property market and regions with a price correction of more than 5 percent since 2014
The UBS Swiss Real Estate Bubble Index report is available on the Internet via this link: www.ubs.com/swissrealestatebubbleindex-en.
The index is published on a quarterly basis. The next date of publication for the UBS Swiss Real Estate Bubble Index is 7 August 2018.
UBS Switzerland AG
Claudio Saputelli, Head Swiss & Global Real Estate, Chief Investment Office WM
Phone +41-79-513 50 45, email@example.com
Dr. Matthias Holzhey, Head Swiss Real Estate Investments, Chief Investment Office WM Phone +41-44-234 71 25, firstname.lastname@example.org