UBS warns of overheating in the home market
UBS's real estate bubble index rose to the upper end of the risk zone in the second quarter. The drivers were rising house prices and increased household indebtedness for home purchases. The big bank sees a risk of overheating in individual regions.
According to a release from UBS , the UBS Swiss Real Estate Bubble Index, which is compiled every quarter by the Zurich-based bank, rose from 1.78 to 1.90 points in the second quarter of 2021 compared to the previous quarter. It remains in the risk zone between 1.0 and 2.0 points, explain the analysts of the Zurich big bank in the announcement. As drivers, they have seen sustained high price increases for home prices and accelerated growth in household debt for home purchase.
Specifically, house prices in the quarter under review were an average of 5.4 percent higher than in the same period of the previous year. Mortgage volumes rose by almost 3 percent over the same period. Here an acceleration of the increase "should be interpreted as a clear warning signal", the analysts write.
In contrast, the analysts recorded a year-on-year decline of 3.2 percent in asking rents. According to them, the unbroken high demand for residential property for the purpose of renting is primarily due to the expectation of further increases in prices on the residential property market. In individual regions in the cantons of Geneva and Zurich, the analysts have already identified a risk of overheating.
In general, "the imbalances in the home market" are likely to be "significantly higher than before the crisis" after the effects of the pandemic have been overcome, they predict in the press release. At the same time, they assume that the economic recovery will prevent the index from rising into the bubble zone starting at 2 points.