Macroprudential measures like the counter-cyclical capital buffer, which limits bank lending for home loans, were becoming increasingly important to keep the housing market from overheating, Zurbruegg said on Wednesday.
Such measures have "reduced momentum on the credit and real estate markets in the last three years. But it is still too early to give the all clear," he said in remarks prepared for a conference in Bern.
Swiss house prices have risen by more than 50 percent since 2000, partly stimulated by the low interest rates imposed by the SNB to dissuade investors from holding safe-haven francs.
The SNB has frozen its reference interest rate at -0.75 percent since January 2015 to reduce appetite for the franc, whose rise has threatened Switzerland's export-reliant economy.
Zurbruegg said the SNB needed to keep interest rates low, despite the risks it presented for financial stability.
"A higher interest rate level domestically would result in further appreciation of the Swiss franc," Zurbruegg said. "This would cause a slowdown of economic growth and put the prices of goods and services under pressure.
"The low reference rate maintained by the SNB is therefore necessary from a monetary policy perspective in the context of the low interest rate environment worldwide and the strong Swiss franc."
Still, he noted low interest rates had contributed to a build-up of imbalances in the Swiss real-estate and mortgage market, with growth in borrowing outpacing economic growth.
The amount of loans outstanding has mushroomed from 110 percent of Swiss GDP in 2000 to 145 percent last year, making the country's lenders more vulnerable to a sudden crash in housing prices or interest rate hikes.
A sharp interest rate rise to cool the housing market could damage the rest of the Swiss economy, Zurbruegg said.
Measures like the counter-cyclical capital buffer - which requires banks to hold 2 percent of their risk-weighted mortgage loans for Swiss residential property in equity, had helped cool the market, he said.
Other measures like minimum down payments for buyers and set periods for repayments had also helped, he said.
"Macroprudential instruments have become a key instrument in the toolbox of central banks and regulators," Zurbruegg said.
"However it would be presumptuous to assume [they] might be able to curb all risks to financial stability."
(Reporting by John Revill; Editing by Michael Shields)
By John Revill