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Finma warns of real estate bubble

The financial watchdog has cautioned against a real estate bubble that could lead to a crisis on the Swiss property market.

This content was published on July 4, 2010 - 15:18

Patrick Raaflaub, head of the financial market supervisory authority (Finma), says low interest rates, strong demand for housing in some regions of the country and a conviction among potential buyers that real estate investments are not a risk were the perfect ingredients for a bubble.

It leads to a rapid increase in valuations of real property until they reach unsustainable levels.

In an interview with the NZZ am Sonntag newspaper Raaflaub said his agency would be vigilant.

However, he added it was difficult to talk banks into a more restrictive mortgage policy.

“But once the interest rates are rising and prices continue to drop the real estate bubble will burst,” Raaflaub said.

swissinfo.ch and agencies

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