I think you analysed it very nicely. I see similar in Geneva where anything up to ~2.5M is selling like hot cakes, absolutely bonkers
It starts to smell to me like when taxi drivers give out share tips: I am repeatedly told by people in my extended circle and who are going through the purchase process that prices are eye wateringly high but it is still cheaper to buy than to rent due to the low interest rates.
If interest rates do go up the potential downside is huge. By my maths the cost to own a house bought for 2.5m with 80% loan and 1% fixed interest is ~5000 CHF / month, including tax on deemed rent but excluding opportunity cost (since most folks do not think about that).
It would cost 5-5.5k per month to rent a similar property.
If interest rates are 3% in 15 years’ time, anyone buying the house for 2.5M would have a cost to own of 7-8k CHF / month. To get back to 5000 CHF / month would require the price of the house to come down by ~1M CHF