Boom risks taking Swiss real estate sector off-piste

In a country that prides itself on economic stability, phrases such as “too big to fail” can grab attention in Switzerland, especially when spoken by the head of the financial watchdog.

But that warning this week about the country’s mortgage market by Mark Branson, the chief executive of the Swiss market supervisor (Finma), hardly came out of the blue.

In recent months, several red flags have emerged about the health of the Swiss real estate sector, as prices for buy-to-let properties have continued to rise amid stagnating rents and increasing vacancies.

In his annual speech to the media, Branson outlined his concerns and called for action.

“The mortgage market is critical to the stability of the Swiss financial centre. It is too big to fail,” he said. He also stressed that mortgage crises have a proven history of rippling across the economies they infect.

Finma’s common practice of intervening to rein in individual institutions that take on too much risk “is not enough to counteract the generalised overheating trends we are currently seeing”, Branson said. “As a result, action is needed now.”