The UBS Swiss Real Estate Bubble Index dropped from 0.71 to 0.64 points in the third quarter, according to a report published on Tuesday by the UBS Chief Investment Office Global Wealth Management (UBS CIO GWM). Despite the decline, the institution continues to classify the overall bubble risk as moderate, noting that a price correction for residential property is currently unlikely in the coming quarters.
The reduction in the index is primarily attributed to an economic recovery, which significantly decreased imbalances within the economic environment category. Residential property prices in the third quarter of 2026 stood 3.5 percent higher than the same period a year earlier, maintaining strong price momentum. In contrast, advertised rents increased by 1.7 percent and existing rents rose by 1.4 percent.
A key factor easing the bubble risk was a robust increase in household incomes, which led to a slight decline in the price-to-income ratio. Meanwhile, private household debt continued to expand, though outstanding mortgages grew by only 3.0 percent year-on-year.
Evaluation of fundamental factors indicates that overvaluation risks persist. Real home prices grew by an average of just under 2.8 percent annually over the past three years, outpacing the long-term average of 1.5 percent.
Significant regional disparities are evident. According to UBS, imbalances are particularly pronounced in the tourism regions of Graubünden, while the city of Zurich also exhibits a high level of imbalance. Elevated risks remain present in parts of Central Switzerland and along Lake Geneva in the canton of Vaud.
Looking ahead to 2027, UBS anticipates robust demand for residential property despite expected key interest rate increases. For the full year, the bank forecasts nominal price growth of 2.5 to 3.0 percent, with home prices continuing to outpace both incomes and rents.
