By Neil MacLucas
ZURICH--Signs are emerging that the recent price boom in
Switzerland's property market is starting to ease as the
government, the central bank and banks toughen up their lending
rules.
House and condominium prices in Switzerland have seen stellar
gains in recent years, prompting warnings, and later action, from
the Swiss National Bank to try and choke off demand for real
estate, driven by ultralow interest rates and the influx of
cash-rich foreigners.
Since the onset of the global financial crisis in 2008, which
triggered the downward spiral in global and Swiss interest rates,
condominium values have risen by roughly 30% and the prices of
detached house by more than a quarter, according to data from UBS
AG and property consultants Wueest & Partner.
The latest quarterly Swiss house-price index compiled by
property consultancy Fahrlaender Partner AG shows the average Swiss
condominium price fell 1.1% in the three months through March
compared with the previous quarter. Prices of luxury detached
houses are stagnating and even falling, particularly in the Lake
Geneva region.
The rate of average price growth for apartments and houses
slowed to 1% in 2013, from 3.7% a year earlier, the Federal Office
for Housing Affairs said this month.
Earlier this month the Swiss financial markets regulator, Finma,
approved measures from the Swiss Bankers Association to reduce the
time borrowers have to repay part of their debt and changed the
eligibility of second incomes when assessing credit risk.
The Swiss government welcomed the tighter lending rules, and
said while the rate of real estate price increases is slowing, the
gains are still higher than earnings growth.
The SNB and the government are worried many borrowers won't be
able to afford higher mortgage repayments when interest rates rise,
leading to repossessions and a sharp drop in property prices. This
in turn could threaten the stability of the banking system, in
which mortgage lending forms a key component.
"It looks as if the Swiss real-estate market is slowly cooling
down following these measures, but probably not as fast as the
Swiss central bank would hope for," said Julien Manceaux, an
economist with ING.
According to ING, the Swiss ratio of mortgages gross domestic
product has climbed to an all-time high of 145%, compared with a
ratio of just below 50% for the 18-country euro bloc.
Mortgage rates in Switzerland have held at record-low levels
since August 2011, when the SNB pared its key rate to near zero in
a move to curb global investor demand for the franc, which had come
to be a refuge from the debt problems in the euro zone.
The SNB, together with the government, has twice stepped in to
force banks to raise the amount of capital they must set aside
against the mortgages they extend, as it tries to damp credit
demand for housing.
Growth in mortgages for residential property outstripped the
expansion of Swiss GDP last year, according to the SNB, suggesting
growth in the economy may not be able to support the additional
spending on homes.
The total outstanding volume of residential mortgages at Swiss
banks reached 658 billion Swiss francs ($728 billion) at the end of
March, up from 635 billion francs a year earlier, according SNB
data. Over the same period, the economy grew about 2%.
Write to Neil MacLucas at neil.maclucas@wsj.com
Write to Neil MacLucas at neil.maclucas@wsj.com