Zurich, 06 May 2020 – In the last quarter, the rise in the index can be attributed to three developments. Firstly, prices rose by 1.0 percent in the first quarter, which was the highest increase since 2014. Secondly, this acceleration of rising prices in the home owner market was associated with a smaller rise in household income, and consumer prices stagnated. The fall in incomes since March, as a result of the corona crisis, isn't yet included in these calculations. Thirdly, the applications for buy-to-let investments rose to a slightly higher level than in previous quarters. On the other hand the trends in construction activity and mortgage lending remained stable. There was also little change in the price-to-rent ratio. 

Abrupt end to the acceleration phase

The impact the corona crisis has on the Swiss home owner market will probably only become clear in the current quarter, at the earliest. “We expect a decline in the number of transactions. Because both sellers and buyers are behaving more cautiously, pricing is more difficult and the effect on price behavior isn't clear,” says Claudio Saputelli, Head Swiss & Global Real Estate at UBS Chief Investment Office (CIO). “Particularly in less liquid segments and regions, chance and property-specific characteristics could have a greater influence on the transaction price than in the previous year.”

The aggregate demand for homes is also falling against the backdrop of rising unemployment and uncertainty about the economy. So the accelerated rise in prices that started in the middle of 2019, driven by low mortgage interest rates, is over for the time being. 

Sustainability of the price level is questionable

No significant price correction is to be expected in the market average. The financing conditions are tempting and the cost benefits of owning your own home compared with renting are still too great in many regions. However, there may be isolated corrections to some exaggerations. Whether some of the ambitious valuations in the market as a whole will be sustainable depends on an economic recovery in the second half of the year. “If household incomes collapse in the course of the year – which we don't expect to happen – considerable price corrections can be expected in the high-priced risk regions, in particular,” says Matthias Holzhey, Head Swiss Real Estate at UBS CIO. 


UBS Switzerland AG

Media contact

Claudio Saputelli
Head Swiss & Global Real Estate
Phone +41 44 234 39 08
+41 77 448 71 29

Dr. Matthias Holzhey
Head Swiss Real Estate
Phone +41 44 234 71 25