Previous post Next post

Swiss real estate market UBS Swiss Real Estate Bubble Index 3Q 2016

 

Risks to the Swiss property market remained elevated in the three months through September, according to UBS Group AG’s quarterly index. “While the buy-to-rent price ratio reached an all-time high, moderate mortgage growth and the slightly-improved economy prevented imbalances in the owner-occupied housing market from widening,” it said in a report.

 

Major Findings

 

  • The UBS Swiss Real Estate Bubble Index stayed in the risk zone in Q3 2016, unchanged at 1.35 index points.
  • The buy-rent price ratio reached an all time high due to a further increase in the price of owner-occupied homes and lower rentals
  • The moderate growth in mortgages and the slightly improved economy however prevented an increase in imbalances on the market for owner-occupied homes.

 

UBS Swiss Real Estate Bubble Index

The UBS Swiss Real Estate Bubble Index stayed in the risk zone in the 3rd quarter of 2016 at 1.35 index points, unchanged compared to the slightly revised figure for the previous quarter. In contrast, the sub-indicators fluctuated. The buy-rent price ratio rose sharply whilst the slower growth in mortgage debt had a dampening effect.

Compared to the previous year, the volume of outstanding household mortgages increased by an unchanged 2.7 percent and thus continued to grow at a below average pace. Income growth in the current year again performed better than in the previous year. The stronger economic development thus balanced out the nominal owner-occupied home prices. The trend to stabilization in owner-occupied home prices however appears to remain intact. After adjustment for inflation, price growth rates are below that of the previous year and we do not expect a further acceleration in the next few quarters.

Switzerland UBS Real Estate Bubble Index

(see more posts on Switzerland Real Estate Bubble Index, )
Switzerland UBS Real Estate Bubble Index

. - Click to enlarge

Sub-indices of the UBS Swiss Real Estate Bubble Index

Owner-occupied house prices relative to annual rents
Rentals declined for the third quarter in succession due to increased vacancy levels whilst the prices of owner-occupied homes continued to rise. Currently the multiple of annual rentals required to purchase a similar home is an average of 29.4. The indicator thus exceeded the previous high of 1989. The dependency of the market for owner-occupied homes on continuing low interest rates therefore increased.

Switzerland Home Prices Relative to Annual Rent

Switzerland Home Prices Relative to Annual Rent

. - Click to enlarge

Owner-occupied house prices relative to household income

The nominal prices of owner-occupied homes increased 0.7 percent in the third quarter of 2016 whilst household income only increased minimally. The indicator thus increased slightly compared to the previous quarter. Approximately 6.3 annual household incomes are needed to purchase a home in the medium price segment. The long-term average is 5.3 annual incomes.

Switzerland Home Prices Relative to Household Income

Switzerland Home Prices Relative to Household Income

. - Click to enlarge

Owner-occupied home prices relative to consumer prices

Owner-occupied home prices increased 1.2 percent in real terms in the third quarter due to negative inflation. Year-on-year, however, a nominal rise of 1.5 percent was recorded. The trend to stabilization in owner-occupied home prices thus appears to remain intact. After adjustment for inflation, owner-occupied home prices are however around 1 percent above the high of1989.

Switzerland Home Prices Relative to Consumer Prices

Switzerland Home Prices Relative to Consumer Prices

. - Click to enlarge

UBS Switzerland AG
UBS AG is a Swiss global financial services company, incorporated in the Canton of Zurich, and co-headquartered in Zurich and Basel. The company provides wealth management, asset management, and investment banking services for private, corporate, and institutional clients worldwide, and is generally considered to be a bulge bracket bank. In Switzerland, these services are also offered to retail clients. The name UBS was originally an abbreviation for the Union Bank of Switzerland, but it ceased to be a representational abbreviation after the bank's merger with Swiss Bank Corporation in 1998. The company traces its origins to 1856, when the earliest of its predecessor banks was founded.
Previous post See more for 2) Swiss and European Macro Next post
Tags: ,

🤞 Don’t miss posts anymore!
Subscribe to our newsletter!

Permanent link to this article: https://snbchf.com/2016/11/ubs-bubble-index-switzerland-q3/

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This site uses Akismet to reduce spam. Learn how your comment data is processed.