House prices are soaring in Switzerland and are even becoming too expensive for those with deep enough pockets to afford them, a UBS survey shows.
While the Swiss middle classes still dream of owning their own four walls, a considerable number of millionaires are now advising against it.
UBS’ quarterly «Investor Sentiment» survey published Thursday shows 42 percent of Switzerland’s rich and super-rich surveyed believe now is not a good time to become a home owner.
This means that the number of those warning against home ownership is greater than the 38 percent of respondents who would definitely recommend buying a home. Another 20 percent consider current conditions to be reasonably favorable.
Switzerland International Outlier
In its latest study, the world's largest private bank surveyed almost 3,000 private individuals and more than 1,200 entrepreneurs worldwide. They each have at least $1 million in liquid assets or $1 million in business income a year. This represents an unmatched sample of this demographic. From a global perspective, the respondents – in contrast to Switzerland – have no reservations about buying real estate, with 51 percent telling UBS that now was a good time.
Inflation Threat
According to the study, Switzerland’s rich are not exactly jumping for joy about the next 12 months, with 74 percent more optimistic about their national economy – an increase of 17 percentage points from the previous quarter. On the other hand, 46 percent believe that inflation will pick up over the next 12 months.
To counteract this, they are now stocking up on more precious metals and stocks. However, the middle classes usually do not have enough liquid assets to hedge against inflation. This means inflation will affect them more and their dreams of home ownership will fade further.
Alarm Bells at Credit Suisse
Last June, UBS’ domestic rival Credit Suisse sounded the alarm about the rise in house prices. «For Generations Y and Z, this means the dream of owning a home will often remain just that,» the bank said.
Raiffeisen Switzerland, the country’s largest mortgage provider, made similar comments. «Anyone who is not already wealthy or can obtain capital based on their inheritance prospects will not be able to own a home until later in life.»
The other two banks’ studies did not pay much attention to the inflation factor unsettling the millionaires in the UBS survey.
«Unhealthy Trends»
In Switzerland, inflation fears have already sparked a rise in mortgage rates.
Comparison service Comparis recently predicted that inflation would increase over the course of the year. This is due, among other things, to government programmes to boost the economy, central banks’ ultra-loose monetary policy and supply chain problems.
In the meantime, house prices look likely to continue their upward trend.
Mortgage broker Moneypark Thursday forecast another round of price increases in the second half of the year.
It predicted that affordability was likely to restrict the pool of potential buyers even further.
«In the long run, these are unhealthy trends to which fresh, medium-term solutions are needed to restore market equilibrium,» Moneypark said.
