Salient to Investors:
- Governments from Singapore to Dubai to Hong Kong are moving to cool overheated property markets and avert property bubbles.
- Switzerland is having its biggest property boom in two decades, with prices pushed higher by the influx of 50,000 people a year. The UBS Swiss Real Estate Bubble Index remained in the risk zone for a second quarter in Q4 2012, with Zurich, Geneva and Lausanne at most risk of a bubble.
- Janwillem Acket at Julius Baer said the SNB order to banks to hold additional capital buffers is a warning them that they were overgenerous with their credit lending and to be more restrictive.
- Alexander Koch de Gooreynd at Knight Frank said even at its current level, the buffers will make mortgages more costly and require higher down-payments, affecting the market below 5 million francs. De Gooreyn predicts home prices will decline 2 to 5 percent over 2013 because there’s not as many international people.
- Christian Kuendig and Cynthia Chan at Fitch said the measures on their own are unlikely to significantly slow down mortgage lending growth as mortgage rates will still be significantly lower than in the early 1990s, the peak of the last real estate cycle, even if the higher cost of capital were to be fully passed on to borrowers.
- Matthias Holzhey and Fabio Trussardi at UBS said the direct influence of the buffer on mortgage rates may be low, with costs increasing less than 0.1 percent – more important is that the signal being sent so risk premiums will increase.
- Alexander Koch at UniCredit said the SNB move is a first step.
- Dirk Becker at Kepler Capital Markets said the impact on larger banks like Credit Suisse and UBS will be so small and manageable, but the effect on smaller banks is more delicate because Swiss mortgages are their core business.
- Michael Landolt at the Swiss homeowners association said mortgage rates will increase but still be historically cheap, saying it’s very Swiss that everyone has to pay for the shortcomings of a few, as all mortgage borrowers are paying for the fact that banks are undercapitalized – the regulators could have applied the rules only to the banks that are lending too aggressively.
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