The two big Swiss banks, UBS and Credit Suisse, are holding back from taking a larger stake of the Swiss mortgage business, while cantonal banks and Raiffeisen are aggressively pursuing an expansionary strategy.
UBS and Credit Suisse (CS) together have 27.4 percent of the Swiss mortgages market (by the end of April, 2017), which corresponds to a volume of 960 billion Swiss francs. The share declined 0.8 percent from a year earlier.
Cantonal banks, in their majority owned by regional governments, and Raiffeisen by contrast have increased their market share.
Bubble-Zone
The two big Swiss banks confirmed the decline in market share, according to a report by the «Financial Times» (behind paywall). They told the U.K. newspaper that they focused on growth in quality and sustained profitability.
The Swiss property market remains in the danger zone, with a high propensity for a meltdown, according to the latest UBS real-estate bubble index. The reading in the first quarter increased slightly to 1.39 index points.
The index last reached higher levels in the early 1990s, when it rose above 2, which is equal with a bubble. The current reading is indicating a risk, according to the UBS definition. The bank says that the market is booming with readings falling below 1.
The Interest Rate Factor
The property market is being fueled by the record low interest rates. Investors are finding it hard to generate a profit with bonds and shares are prone to decline in value. That’s why institutional investors keep buying property.
Raiffeisen, the biggest mortgage seller in Switzerland, and cantonal banks have gained market share. Their earnings are heavily reliant on revenue from mortgage selling.
