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UBS Real Estate Market Study
Price developments on the real estate market
Development of real estate prices in Switzerland: What are the forecasts for the real estate market? Which factors are decisive?
Content:
Content:
- Review: Home prices rose by 0.7 percent in the 3rd quarter of 2024 compared to the previous quarter.
- The Swiss Real Estate Bubble Index: The UBS Swiss Real Estate Bubble Index continued to drop in the third quarter of 2024 and currently stands at 0.41 index points.
- Outlook: The prices of residential properties are likely to increase by 3% to 4% over the next year.
- Risk map: The analysis shows a bubble risk in the major centres and tourist regions of Graubünden, canton of Vaud, Limmattal and Einsiedeln.
House prices rose by 0.7% in the third quarter of 2024 quarter-on-quarter, which is in line with the average for the last two years. Compared to the previous year, this resulted in a 2.8% increase in residential property prices. Adjusted for inflation, house prices are 1.9% higher than in the fall of 2023.
By contrast, the momentum in rents has slowed somewhat. Although asking rents have barely risen in the third quarter of 2024 compared to the previous quarter, they are almost 4% higher than a year ago. Existing rents also increased significantly and recorded a similarly high, and thus strongly above-average increase compared to the previous year.
UBS Swiss Real Estate Bubble Index in the 3rd quarter of 2024: moderate
UBS Swiss Real Estate Bubble Index in the 3rd quarter of 2024: moderate
The UBS Swiss Real Estate Bubble Index continued its decline in the third quarter of 2024 and currently stands at 0.41 index points. The risk of a real estate bubble is therefore rated as “moderate”.
The analysis shows that, from the fundamental perspective, the risk of a housing bubble remains high based on factors like rents and incomes. However, the risk of overheating is low as a result of the generally moderate price dynamics. Falling interest rates and low relative usage costs indicate that a price correction is unlikely. Low overall demand for mortgages and a further decline in new construction activity also point to the unlikelihood of a price bubble.
What is the UBS Real Estate Bubble Index and how is it calculated?
What is the UBS Real Estate Bubble Index and how is it calculated?
The UBS Swiss Real Estate Bubble Index shows the risk of a real estate bubble – a significant overvaluation of real estate and the likelihood of an imminent price drop – on the Swiss real estate market. UBS economists use a model with different subindices to calculate the bubble index:
- price-to-rent and price-to-income ratios (foundation)
- real rate of price change over three and 10 years (dynamics)
- cost comparison of purchase and rent (cost)
- mortgage volume-to-income and residential construction (environment)
Depending on the current index value, the real estate bubble risk is divided into the following four categories:
- low (below 0)
- moderate (between 0 and 1)
- elevated (between 1 and 2)
- acute (above 2)
What is the forecast for the development of the real estate market in Switzerland?
What is the forecast for the development of the real estate market in Switzerland?
In September 2024, the number of search subscriptions for residential property on online platforms was almost 15% higher than in the previous year, reaching pre-pandemic levels. In addition to falling mortgage interest rates, the sharp rise in rents is also having a positive impact on demand in the market for owner-occupied homes. There are therefore signs of a gradual acceleration in house price increases over the next few quarters. The prices of residential properties are likely to increase by 3% to 4% over the next year.
The map shows price developments over the last five years for all 106 Swiss economic regions, as well as an indication of regional risk based on the development of the price-to-income and price-to-rent ratios.
- In German-speaking Switzerland, we see high imbalances in the Limmattal region and now also in the Einsiedeln region. There is also a newly elevated imbalance in the Pfannenstiel region. Generally, in the local primary housing markets of German-speaking Switzerland, the ratio of purchase prices to rents has only increased below average across the board.
- In Western Switzerland, imbalances are primarily found in the canton of Vaud, where prices have decoupled from rents and incomes above average since the third quarter of 2019. In the Geneva region, there is no longer an elevated imbalance, as the recent price development has been below average.
- High imbalances exist as a result of the second home boom in the tourist regions of Graubünden. In the mountain regions of Central Switzerland, the imbalances are elevated.
The facts about your preferred municipality
The facts about your preferred municipality
Do you want to understand how property prices or population levels have changed in a municipality? Or how the location is perceived in general? How high are taxes? The UBS municipality guide is free of charge and answers all your questions.
FAQ real estate prices and real estate market
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