This is the first year that Zurich joined the ranks of cities at risk of a housing bubble since UBS bank started its annual analysis in 2014.

The Global Real Estate Bubble Index, which surveyed 25 major cities around the world, puts the housing market into long-term perspective and is designed to track the risk of property price bubbles in those locations.

Housing bubbles are periods characterized by high demand, low supply, and inflated prices.

According to the analysis, “Zurich recorded the strongest price growth rate of all Swiss economic regions in the last decade. Its housing market has been characterized by a relatively fast supply expansion and benefited from increasing demand.

“The owner-occupied market has dried up, while the coronavirus crisis has hardly left any traces on it. In fact, housing located near Zurich's city center benefited from increasing demand.

“The high willingness to pay reflects both expectations that prices will further increase and sustained investment demand. In line with these developments, the city now joins the bubble risk ranks.

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Housing in Switzerland’s second-largest city, Geneva, is also notoriously expensive, but Zurich ranks higher in terms of real estate prices, the Index shows.

“Geneva’s housing market has recovered from losses incurred during the period between 2013 and 2016. Adding to this, low mortgage rates keep home-ownership appealing in light of inflated market rents and the city benefits from its international standing, while continuing to attract foreign nationals despite affordability constraints”, UBS said.

While Zurich figures in the seventh place in the Index, it is topped by even ‘riskier’ European cities like Munich, Frankfurt, Paris, and Amsterdam.

“The Eurozone stands out as the region with the most overheated housing markets”, the study found.

London, Stockholm and Moscow are classified as ‘overvalued’ but not at risk of a bubble, while Madrid is ‘fair-valued’.