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Swiss Real Estate Market In Risk Zone: UBS

A measure of the risk of a real estate bubble in Switzerland's market for owner-occupied homes rose to its highest level in just over two years in the three months to March, signalling that the market is in the risk zone, investment bank UBS said in a report on Wednesday.

The UBS Swiss Real Estate Bubble Index climbed to 1.30 in the first quarter from a revised 1.26 in the previous three months. The reading was the highest since the fourth quarter of 2017, when it was at the same level.

"This puts the Swiss real estate market in the risk zone," UBS said. "The coronavirus effect should only become visible in the current quarter."

UBS attributed the increase in the index to three reasons, first of which is the 1 percent rise in prices in the first quarter, the fastest increase since 2014. This acceleration in the prices of owner-occupied market was link with a smaller rise in household incomes and stagnation in consumer prices.

"The fall in incomes since March, as a result of the corona crisis, isn't yet included in these calculations", UBS said.

Further, the applications for buy-to-let investments grew to a slightly higher level than in the previous quarters, while the trends in construction activity and mortgage lending, and the price-to-rent ratio were largely unchanged.

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