Index points to Swiss property bubble risk

For the first time since the early 1990s, there is a risk of a real estate bubble in Switzerland, an indicator developed by Swiss banking giant UBS shows.

Index points to Swiss property bubble risk

The latest Swiss Real Estate Bubble Index, released on Monday,  inched into the "risk" zone in the third quarter, reflecting "the continued increase in imbalances on the Swiss housing market," UBS said in its index report, pointing out there had been a "sharp rise" in real estate prices compared to the previous quarter.

According to the index, Davos in eastern Switzerland had seen a real estate price increase of 7.6 percent in the third quarter, while prices were up 5.1 percent in Zug, in the centre of the country, and 3.8 percent in Lausanne and in Switzerland's financial hub, Zurich.

The situation had eased somewhat in Geneva, where prices rose only 1.8 percent, UBS said, but stressed: "this is still significant given the high price level."

The UBS index has five categories — slump, balance, boom, risk and bubble —  and the third quarter marked the first time since the early 1990s that it hit "risk", UBS said.

"Although the index only just exceeded the risk zone threshold, further price rises should increasingly be seen as overvaluation," it cautioned.

While population growth made some level of price increases reasonable, UBS lamented that "the high price level is increasingly being supported by the demand for real estate as an investment."

At the same time, "household mortgage debt is showing no signs of abatement, UBS said.

This represents a dangerous trend, as both drivers could easily be thrown into reverse and therefore trigger a price correction."

"Declining consumer prices and stagnating income (. . .) do not form a basis for sustained real estate price increases," it cautioned.

The UBS warning came after ratings agency Standard and Poor's in July lowered its outlook on nine smaller regional Swiss banks, citing the impact they might soon feel from what appeared to be a growing real-estate bubble.

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Why are German Christmas markets opening so early this year?

Most German Christmas markets don’t begin business until the end of November. But in some cities, the winter wonderlands are opening earlier than ever. What's going on?

Why are German Christmas markets opening so early this year?
Visitors stroll through Essen's Weihnachtsmarkt, which opens on Wednesday. Photo: DPA

The downtown Duisburg Christmas market is in full swing this year, 17 full days before the first Sunday Advent. This is earlier than ever, at least in the Ruhr area of North Rhine-Westphalia. Churches across Germany are expected to criticize this growing trend, yet many cities are defending their choices. 

“The Christmas market in Duisburg will open this year on November 14th, one day ahead of the Christmas markets in Essen and Oberhausen. The opening hours of the Christmas markets are mainly due to high demand from visitors,” a city project manager in Duisburg explained.

READ ALSO: 8 of the most beautiful German Christmas markets

Four women toast each other with Glühwein at the opening of the Freiburg Christmas market. Photo: DPA

Local church representatives collaborated with the city and agreed with the dates in Duisburg, he added. Additionally, the market recognizes important holy days like Totensonntag (Sunday of the Dead), Christmas Eve and Christmas Day, according to the city. 

“We are trying to meet the needs of our retailers, the inner-city trade and, above all, the demand of visitors,” he said.

The story is similar for Essen's early Christmas market. It will be closed for Volkstrauertag (this year on November 17th) as well as Totensonntag (November 24th).

And Essen and Duisburg are not alone with their very early Christmas markets. Even in Catholic-leaning Austria, marketplaces are getting a head start. For example, the Wiener Weihnachtstraum (Viennese Christmas Dream) opens November 15th.  

Even in Berlin, where big markets open only after Totensonntag and stay until the New Year, a similar phenomenon is playing out. The so-called Winterwelt (Winter World) at Potsdamer Platz, which is hardly distinguishable from a real Christmas market, has been open since November 2nd. 

Even more extreme, the Bayreuther Winterdorf (Bayreuth Winter Village) opened on October 17th this year. The marketplace proudly calls itself the first Christmas gathering “in the whole of Germany and certainly all of Europe.” 

READ ALSO: Everything you need to know about preparing for Christmas 

A photo of the Christmas market in Bielefeld, North Rhine Westphalia. Photo: DPA

Nevertheless, the churches see the early Christmas markets as a commodification of important Christian holidays. Ulrich Lota, a spokesperson for the Diocese of Essen, says the markets are an advertising tool to lure people into the city and away from online shopping. 

“It is important to remember, even amongst the commerce and consumption, that Christmas is not just some cultural holiday at the end of the year, but the celebration of the birth of Jesus,” she said. 

However, churches don’t want to strictly forbid something that brings many joy during the season. 

Christmas markets in Freiburg, Bochum and Dortmunder, as well as the Salzburg Christkindlmarkt in Austria and the Weinachtsdorf am Bellevue in Zurich are all open as early as November 21st, the Thursday before Totensonntag.

In most cities, however, the Christmas markets open only after Totensonntag. Cities like Kassel, Frankfurt am Main, Cologne, Hamburg, Hanover, Bielefeld, Potsdam, Cottbus, Rostock and Lübeck hold off on the Glühwein and other classic Christmas treats until November 25th. 

In Erfurt, Weimar and Leipzig, the celebrations start on November 26th, and in Munich on Marienplatz and in Stuttgart only a day later on November 27th. The Dresden Striezelmarkt begins on Wednesday before the First Advent.

The Mainz Christmas Market opens on November 28th, and the famous Nuremberg Christkindlmarkt kicks off on November 29th, the Friday before the First Advent.