Relax – the risk of a property bubble has fallen
The risk of a property bubble – a significant overvaluation of property and the danger of an imminent fall in prices – has fallen further in the first quarter of 2024. This is shown by UBS’s Swiss Real Estate Bubble Index. The bank expects the market for owner-occupied homes to stabilise further.
Owning a property does not automatically mean you are in your own bubble. But the issue of a property bubble is likely to be on the minds of some homeowners nonetheless. A bubble is said to exist when properties are traded at inflated prices and the property market becomes increasingly overvalued. Once prices reach their peak, the bubble bursts – and property prices fall.
Risk of a property bubble now only moderate
UBS regularly analyses the risk of a bubble in the Swiss property market. According to the recently published UBS Swiss Real Estate Bubble Index, the index fell from 1.09 points to 0.95 points in the first quarter of 2024. According to the bank, this means the risk of a property bubble has fallen from ‘elevated’ to ‘moderate’. Moreover, the index is now significantly lower than it was during the property bubble of the early 1990s.
House price growth is likely to slow further
Prices for owner-occupied homes rose by 0.7 per cent in the first quarter of 2024 compared with the fourth quarter of 2023, similar to previous quarters. However, the pace of price rises in the owner-occupied housing market has slowed, according to UBS. “On a three-year average, real prices rose by 2 per cent on an annualised basis, which is only slightly higher than the long-term average of 1.5 per cent,” the bank notes. And, according to the bank, a further reduction in the annual rate of price growth to between 1 and 1.5 per cent is on the cards by the end of the year. Subdued economic growth, persistently high financing costs and the high absolute price level are weighing on demand, according to UBS. As a result, the risk of a property bubble is likely to decrease further, it forecasts.
Healthy market consolidation
Thomas Graf, an experienced Bern-based estate agent, observes a healthy consolidation of the property market, particularly in the owner-occupied sector. “Neither buyers nor sellers need to fear inflated prices or unpredictable risks,” explains the property expert.
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