Switzerland’s property market is at greater risk of overheating, raising the question as to whether authorities have done enough to curtail the boom.

The UBS Swiss Real Estate Bubble Index rose to 1.23 points in the fourth quarter from 1.2 points in the third, according to a statement from UBS AG (UBSN) today.  A reading above 2 indicates a bubble.

“The potential for correction has increased further,”Matthias Holzhey and Claudio Saputelli at UBS in Zurich said.

The Swiss National Bank (SNBN)’s policy of zero rates, in place since August 2011, has kept down the cost of taking out a mortgage. Coupled with high immigration from neighboring European countries that has fueled a strong increase in real estate prices in Switzerland.

Growth in mortgages has exceeded that of economic output since 2009, and last year price gains of homes and apartments outstripped advances in incomes, according to the central bank.

Concerned Switzerland could fall victim to a real estate crisis similar to that of the 1990s, the government last year forced banks to build up a countercyclical buffer of 1 percent of mortgage-related assets. After that failed to prevent a further deterioration of the mortgage market, it last month doubled the requirement to 2 percent. Even so, it refrained from raising it to the maximum 2.5 percent. Banks have until June 30 to comply.

http://www.bloomberg.com/news/2014-02-05/swiss-housing-market-bubble-looms-closer-ubs-says.html