* Property bubble index up just 0.02 points at 1.24 in Q2
* SNB, government, lenders have worked to shrink bubble
* Switzerland becoming test case, says UBS
ZURICH, Aug 5 Steps to shrink Switzerland's
housing bubble are taking effect, according to a quarterly study
by Swiss bank UBS.
Mortgage lenders, the government and the central bank have
come up with a variety of measures to combat rising property
prices fuelled by ultra-low interest rates, immigration and
Switzerland's appeal as a safe haven for financial investors.
Those include temporarily demanding more capital against
mortgage lending, plans to no longer allow pension funds as down
payments for property, and stiffer standards for mortgage loans.
"The tougher capital requirements thus far imposed on
mortgage borrowers can be regarded as a success story," UBS said
in its Swiss Real Estate Bubble Index on Tuesday.
The index - which compares a series of data sets including
purchase prices, rents and household debt - rose just 0.02
points to 1.24 points in the second quarter. It stood at 1.15 in
the second quarter of 2013.
Risks remained in hotspots like lakeside residential areas
in Zurich and Geneva, UBS said.
The Swiss National Bank (SNB), which cannot lift interest
rates due to a cap it has set on the Swiss franc, has long
fretted about rising house prices and bank lending.
In January, the government doubled the level of capital
banks must hold against their mortgage book on the advice of the
SNB, after a failed attempt last year to cool the housing boom.
Switzerland is increasingly becoming a test case for how to
control mortgage lending, said UBS.
"The regulator's credible backdrop of threats suggests that
in case of renewed acceleration of prices and debt, the
regulatory screw would be tightened further," UBS said.
Housing bubbles are also a worry in Britain and in Germany,
where Finance Minister Wolfgang Schaeuble said recently that low
interest rates were already spawning "dangerous" rises in
domestic property prices.
(Reporting By Katharina Bart. Additional reporting by Alice
Baghdjian. Editing by John Stonestreet)