SNB Reiterates Warnings About Overheated Swiss Housing Market

(Bloomberg) -- The Swiss National Bank reiterated its concerns about an overheating property market and warned that home prices could be at risk of a correction.

In its quarterly monetary policy statement, it said that imbalances in mortgages and housing persist and noted the increases in prices for single-family homes and residential investment properties.

“Owing to the strong growth in recent years, this segment in particular is subject to the risk of a price correction over the medium term,” the central bank, which has repeatedly issued warning, said on Thursday. “The SNB will continue to monitor developments.”

While such language wasn’t in the SNB’s monetary-policy statement in December, broadly similar comments did feature in the statement by Vice President Fritz Zurbruegg that accompanied the decision at the time.

“As prices over this period have increased more strongly than fundamentals such as rents, risks have accumulated in this segment; it is thus especially vulnerable to a substantial correction in the medium term” - Zurbruegg, Dec. 14, 2017

Separately on Thursday, Moody’s Investors Service warned that Swiss banks are “highly exposed” to residential real estate, though it added that their “resilient” credit profiles provide a significant buffer.

“While Moody’s expects a relatively smooth cooling of the housing market in Switzerland, fundamental drivers for further house price increases remain in place, in particular low interest rates,” the rating company said. The SNB left its key interest rates unchanged on Thursday.

To contact the reporter on this story: Fergal O'Brien in Zurich at fobrien@bloomberg.net.

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net, Zoe Schneeweiss, Brian Swint

©2018 Bloomberg L.P.