Switzerland’s residential-property boom is the biggest risk facing the country’s economy, according to Daniel Kalt, UBS AG’s chief Swiss economist.
UBS’s Swiss Real Estate Bubble Index entered the “risk zone” for the first time in more than two decades in the third quarter as investors were attracted to one of Europe’s most stable and prosperous countries during the sovereign debt crisis.
“The real estate price situation in Switzerland, especially in Geneva, Zurich and Zug, is dramatic,” Kalt said at a briefing in Zurich. “This poses the biggest macro risk for the Swiss economy.”
The Organization for Economic Cooperation and Development said last month that Switzerland should toughen measures aimed at curbing mortgage lending. In July, the Swiss government introduced measures to reduce mortgage-related risks, such as rules giving it the option to raise capital requirements for banks.
Home values in the alpine resort of Davos gained 7.6 percent in the six months through September, the most of any Swiss region, according to the UBS index. Prices in Zug rose 5.1 percent, while those in Zurich increased 3.8 percent.
“The situation will go on like this for another one to three years,” Kalt said. “Then it will depend on interest rates and we’ll have to see whether the real-estate market will stabilize or not. If it were to go on like this, we’d see a doubling of real-estate prices every eight years.”
The Swiss National Bank has held interest rates at zero since August 2011 and imposed a ceiling on the franc last year as demand for the currency surged.
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