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Old 29.10.2015, 13:25
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Switzerland after black swan event

I work in a the financial world and know exactly the impact the removal of CHF/EUR floor had on many lives. The shares of publically traded company plunged from $14 per share to $1 per share…JPM closing down their operation in Geneva and 2000 people will either have to relocate or lose their jobs in two years, CS and DB are restructuring and firing thousands of people… YET-surprise, surprise, the Swiss property market is standing strong and not dropping much…would you agree? And if yes why do you think it is?
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Old 29.10.2015, 13:53
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Re: Switzerland after black swan event

Hot money seeking a home.


But it is very interesting phenomenon. Since you work in Finance industry, what more interesting things can you tell us post de-pegging?


Also, why SNB de-pegged in the first place?
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Old 29.10.2015, 13:56
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Re: Switzerland after black swan event

Some reasons why the property market remains strong and valuations stay high:
1. Population growth of about 1% per year, mostly from immigration, increases demand for housing.
2. Positive real return on rental housing vs. no return on Swiss government bonds.
3. Available credit to finance property.
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Old 29.10.2015, 14:03
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Re: Switzerland after black swan event

He-he, surprise-surprise, did you expect houses and flats will sell like candy just because the EUR is in deep shit and CS slashed some 2000 jobs?

People don't need to sell their properties in CH, there is no speculation on buying/selling and people who buy they buy long term. If prices drop 50%, nobody will sell, everybody will keep the homes unless they are forced to sell and are happy with 50% loss. But most people will never be pressured to sell even if prices drop.

For the last 5 years I read on EF how prices will slash and properties will be cheap...
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Old 29.10.2015, 14:07
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Re: Switzerland after black swan event

maybe your perception is worse because in your sector it was felt more heavily, like in the touristic sector. but it hasn't changed things that much, i mean 10 cents different now... for someone who is looking to buy luxury property in switzerland to park some money doesn't make much of a difference even if it loses some value. for normal homes, most people hasn't seen any change in their purchasing power i guess? salaries have even increased and i guess you can still get credit like before. 2000 people have lost their job in the banks, 100'000 have come to switzerland to live and work in other sectors so they don't matter that much.
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Old 29.10.2015, 14:09
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Re: Switzerland after black swan event

You can also add:

4. No crazy 105% lending so people don't fail to pay their mortgage at the slightest problem.
5. Hardly any long term unemployment.
6. Strong rental market - if a seller can't get the right price, they can always rent it out.
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Old 29.10.2015, 14:12
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Re: Switzerland after black swan event

I know that bankers think that they are very important... and the defining factor of the Swiss economy. Fact is that only 2.2% of the workforce are bankers. The 10% of the GDP this 2.2% generate is substantial, but even if all banks left Switzerland would houses not become worthless...
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Old 29.10.2015, 14:17
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Re: Switzerland after black swan event

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Hot money seeking a home.


But it is very interesting phenomenon. Since you work in Finance industry, what more interesting things can you tell us post de-pegging?


Also, why SNB de-pegged in the first place?
I don’t have any indies information but what I know is.... Russia had a play here... the Swiss bank accounts were getting so fat, so fat from all Russian oligarch with fleeing away from their crazy ass dictator putin that they were ready to invest with negative rates as long as they had some sort of security, Swiss SNB was fighting this phenome as hard as they can but eventually they had such gigantic pool of CHF that they could no longer maintain the peg.
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Old 29.10.2015, 14:18
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Re: Switzerland after black swan event

Could someone explain a "Black Swan" event please?
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Old 29.10.2015, 14:19
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Re: Switzerland after black swan event

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I know that bankers think that they are very important... and the defining factor of the Swiss economy. Fact is that only 2.2% of the workforce are bankers. The 10% of the GDP this 2.2% generate is substantial, but even if all banks left Switzerland would houses not become worthless...
tel me your views on export industy, then.
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Old 29.10.2015, 14:19
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Re: Switzerland after black swan event

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Hot money seeking a home.
If you live outside of Switzerland, it can be difficult to very difficult to purchase property here:

"The Swiss have for a long time restricted the sale of property to foreigners. The Federal government has set an annual quota of permits to be given to those non-resident foreigners seeking to acquire property in Switzerland. These permits are in certain Cantons and, even then, are often restricted to those considered to be tourist resorts. Some Cantons also restrict the size of property that a foreigner can purchase and sometimes the re-sale of property may carry restrictions."

http://www.globalpropertyguide.com/E...d/Buying-Guide
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Old 29.10.2015, 14:21
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Re: Switzerland after black swan event

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I work in a the financial world and know exactly the impact the removal of CHF/EUR floor had on many lives. The shares of publically traded company plunged from $14 per share to $1 per share…JPM closing down their operation in Geneva and 2000 people will either have to relocate or lose their jobs in two years, CS and DB are restructuring and firing thousands of people… YET-surprise, surprise, the Swiss property market is standing strong and not dropping much…would you agree? And if yes why do you think it is?
You need ask why the CHF is so strong against the euro.

One of the downsides of such a successful economy is a strong currency. Yes, this will bring problems to sectors dependent on exports. But the general indicators remain good and so does the property market. It is part of the Swiss mentality to expect a total collapse of the Swiss economy. I've been listening to this mantra for over 30 years on a weekly basis...
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Old 29.10.2015, 14:22
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Re: Switzerland after black swan event

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Some reasons why the property market remains strong and valuations stay high:
1. Population growth of about 1% per year, mostly from immigration, increases demand for housing.
2. Positive real return on rental housing vs. no return on Swiss government bonds.
3. Available credit to finance property.
all those are good points, however it needs more brainstorming.
1. Population growth of about 1% per year, mostly from immigration, increases demand for housing. ( the immigrants in general are not in position to buy a flat/house....
2. Positive real return on rental housing vs. no return on Swiss government bonds. Agreed
3. Available credit to finance property.[/ Its not easy to pay 25% down payment.
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Old 29.10.2015, 14:23
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Re: Switzerland after black swan event

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Could someone explain a "Black Swan" event please?
Comes from the book Black Swan, which discusses unpredicatble and rare events (never seen it before so it cant exist...) that can have far reaching effects. Largely concerned with finance, the book supposedly predicted the 2008 crash.

Not sure the scrapping of the Euro peg was unpredicatable, since it could not have gone on forever - so not really a good example from the OP.

Last edited by JoMiFa; 29.10.2015 at 14:26. Reason: typo
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Old 29.10.2015, 14:24
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Re: Switzerland after black swan event

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He-he, surprise-surprise, did you expect houses and flats will sell like candy just because the EUR is in deep shit and CS slashed some 2000 jobs?

People don't need to sell their properties in CH, there is no speculation on buying/selling and people who buy they buy long term. If prices drop 50%, nobody will sell, everybody will keep the homes unless they are forced to sell and are happy with 50% loss. But most people will never be pressured to sell even if prices drop.

For the last 5 years I read on EF how prices will slash and properties will be cheap...
that is exactly what I am trying to understand. Why is that??
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Old 29.10.2015, 14:28
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Re: Switzerland after black swan event

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Could someone explain a "Black Swan" event please?
A catastrophic event that can't be avoided or risk evaluated reliably.

So the idea is that some very bad things happen that would be far too costly to try and handle fully, and are very difficult to predict. There's a lot of theory around how to work out a survival strategy rather than a more comprehensive insurance policy.

E.g. you could build your house to be totally flood proof in case Lake Zurich rises 50m for some reason. But it's so unlikely, and costly, there's no point - just make sure you know which is the safest direction to drive!
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Old 29.10.2015, 14:29
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Re: Switzerland after black swan event

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Not sure the scrapping of the Euro peg was unpredicatable, since it could not have gone on forever - so not really a good example from the OP.
Though the fact that I try and rationalise something retrospectively as unpredicatble that I did not predict myself makes it more BlackSwanish......
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Old 29.10.2015, 14:33
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Re: Switzerland after black swan event

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that is exactly what I am trying to understand. Why is that??
I think I was clear. I'll try again:

Limited supply. New builds are very few in urban areas and where there are they represent only a fraction of the demand. This is to keep the market strong and to avoid speculation.

Small market. People buy once and they keep it. There is no upgrading/downsizing. If there is, there are big costs behind it. Notary fees, canton fees etc. So people buy once and they keep it.

Investments. People don't need the money to start businesses or whatever. They don't need the money right now to start something else. They keep the property as an investment rather than to sell it and start something else. That is why you have empty properties for sale for years because owners don't need to sell for a lower price. They want X money, if somebody pays, good, if nobody pays - who cares. They are not pressed to sell. They will rent it out. Instantly they will get 20 applications if it is a crappy apartment, more if it is good.

Credit. People never own the houses, they put 20% down and keep paying 1% amortization per year plus interest which comes to 50% of rental price! So they are happy as it is, 10 year fix etc. Even if interest goes up, guess what will happen to the rental price?
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Old 29.10.2015, 14:36
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Re: Switzerland after black swan event

The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. Early this year SNB removed CHF/EUR peg. It killed many companies and individuals, many multibillion $ companies went to bankruptcy.


http://www.atozforex.com/news/step-s...-swan-history/
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Old 29.10.2015, 14:37
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Re: Switzerland after black swan event

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tel me your views on export industy, then.
Sure. Switzerland has most jobs in SMEs, but the media is naturally always just interested in the large stock traded companies. Here is a fact: Switzerland did not suddenly get expensive in January - it has been for decades. So all the industries that rely on low wages and manual labour, for example textile production, left the country long ago. What is left is a lot of pharma, biotech and pretty much every niche high tech engineering imaginable. They never competed on price before and are less affected by the Swiss frank.

Who is:
- retail. Honestly was it always cheaper to buy abroad, but this year is the gap so large that even the conservative Swiss consumers finally start buying abroad. Swiss companies react with grey imports and the like... with limited success. Heard a story this morning on the radio: Otto's bought a large shipment of Fischer skis abroad and offered them below the Swiss recommended retail price... Fischer sent it's employees out to buy them up before the offer destroys their margin in the Swiss market! Apparently does the company threaten any foreign partner they have to not sell in bulk to Switzerland anymore... or else. Which is frankly illegal according to Swiss law.
- any company that was struggling before. I heard "the strong Swiss Frank" as the default argument for any lay offs in the country this year. A week or two ago did it hit a three digit number of people at Rieter in Winterthur. What the news did not mention: The company has been declining for decades, there was a wave of lay offs every other year. It is apparent that the cheaper Chinese competitors have caught up in technology and undercut their prices. If you want to compete internationally but stay based in Switzerland do you need to innovate and offer a better product - cause you won't be able to compete on price. But again, that's not new and cannot be all blamed on the CHF...
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