UBS sees slightly lower real estate bubble risk

The UBS Swiss Real Estate Bubble Index fell in the third quarter from 0.71 to 0.64 points. UBS Chief Investment Office Global Wealth Management (UBS CIO GWM) continues to classify the bubble risk as "moderate". At the same time, prices for owner-occupied housing are rising significantly faster than rents.

The decline in the index was mainly due to the economic recovery, UBS wrote in its report published on Tuesday. This has significantly reduced the imbalances in the "environment" category. A price correction in owner-occupied housing is currently considered unlikely in the coming quarters.

ubs bubble q3 26 s

(Graphic: UBS CIO GWM)

Prices for owner-occupied housing were 3.5 percent above the previous year's level in the third quarter of 2026. Price momentum therefore remained strong. Asking rents, by contrast, rose by 1.7 percent, while existing rents increased by 1.4 percent.

According to UBS, one reason for the easing in bubble risk is the sharp increase in household income. As a result, the price-to-income ratio declined slightly. At the same time, private household debt continued to rise. However, outstanding mortgages grew by only 3.0 percent year over year.

That does not mean the risk of overvaluation is off the table. UBS continues to assess the fundamental factors as risky. Over the past three years, home prices have risen by an average of almost 2.8 percent a year in real terms, significantly more than the long-term average of 1.5 percent.

Large regional differences

There are also major regional differences. According to UBS, the imbalances are particularly pronounced in the tourism regions of Graubünden. The city of Zurich also shows a high degree of imbalance. Elevated risks also exist in parts of Central Switzerland and along Lake Geneva in the canton of Vaud.

For 2027, UBS expects robust demand for owner-occupied housing despite expected key rate hikes. For the full year, it forecasts nominal price growth of 2.5 percent to 3.0 percent. According to UBS, home prices are therefore likely to continue rising faster than incomes and rents.