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  #121  
Old 05.12.2011, 21:07
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Re: Housing bubble about to explode in the Arc Lemanique

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Depending of you residents permit & if you used any pension funds to buy the property that may or may not be an option.
In addition, almost all analysts predict a crash of the renting-market first (if there is a crash).

Switzerland is a very small country. Economic problems in the surrounding countries will quickly find their way here.
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  #122  
Old 06.12.2011, 09:42
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Re: Housing bubble about to explode in the Arc Lemanique

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I prefer to wait say 1yr to see where the market (and economy, and my job) is. Like lots of people around me... even in the worst case, if prices go up by say 5% (which nobody seems to believe anylonger!), it's a lower risk than lo(o)sing 75% of your capital.
This makes much sense to me.

We are heading towards very shaky times.

Real estate investments only make sense right now if you can avoid loans as much as possible, I would say below 30-40%.

You may consider buying in France as its cheaper, but the market is stalling since a few weeks, prices may go down there as quick as they went up with the CHF/EUR xchange rate.
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  #123  
Old 06.12.2011, 09:52
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Re: Housing bubble about to explode in the Arc Lemanique

There was talk yesterday of Germany losing its AAA rating.... what impact will this have on this side?
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  #124  
Old 06.12.2011, 09:58
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Re: Housing bubble about to explode in the Arc Lemanique

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There was talk yesterday of Germany losing its AAA rating.... what impact will this have on this side?
Not gloomy - if Germany loses its AAA, all other Euro countries will be pulled down as well. This will increase chaos on the markets, reduce public and private spendings, may cause bank runs, ...

Last edited by gva; 06.12.2011 at 10:01. Reason: no scaremonging intended :-)
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  #125  
Old 06.12.2011, 10:09
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Re: Housing bubble about to explode in the Arc Lemanique

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Switzerland is a very small country. Economic problems in the surrounding countries will quickly find their way here.
Really? Because 2008 didn't hit us all that hard...

I'm not saying that we won't have problems or such, but you also can't assume that we will simply because the neighbors have problems. It could also be the situation that money flees to Switzerland to escape uncertain times in Europe.
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  #126  
Old 06.12.2011, 10:36
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Re: Housing bubble about to explode in the Arc Lemanique

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Really? Because 2008 didn't hit us all that hard...

I'm not saying that we won't have problems or such, but you also can't assume that we will simply because the neighbors have problems. It could also be the situation that money flees to Switzerland to escape uncertain times in Europe.
....throwing the CHF up and "forcing" the SNB to keep the peg causing inflation....
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  #127  
Old 06.12.2011, 10:43
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Re: Housing bubble about to explode in the Arc Lemanique

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Really? Because 2008 didn't hit us all that hard...

I'm not saying that we won't have problems or such, but you also can't assume that we will simply because the neighbors have problems. It could also be the situation that money flees to Switzerland to escape uncertain times in Europe.
2008 didn't hit us as hard because of the bank rescues via public funds done by our neighbours. This round, they won't have the money to do so because of the debt problem.

This crisis WILL hit Switzerland hard. And eventually, it will have an impact on the hhousing market leading to price corrections in the Geneva and probably Zuerich areas.
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  #128  
Old 06.12.2011, 10:47
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Re: Housing bubble about to explode in the Arc Lemanique

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This makes much sense to me.

We are heading towards very shaky times.

Real estate investments only make sense right now if you can avoid loans as much as possible, I would say below 30-40%.

You may consider buying in France as its cheaper, but the market is stalling since a few weeks, prices may go down there as quick as they went up with the CHF/EUR xchange rate.
i think this is a reasonable strategy. everybody is worried about the economy and their jobs and so people are less willing to take on loans/mortgages. this in itself should push down house prices.

however, there is a countervailing consideration, and that is the desire to preserve the value of your savings in what could potentially be a high inflation environment. and we see that people have already gone this route with a flight to gold, commodities and short term bonds.

real estate is one route to acquiring assets that will (in the long term) be inflation proof. the piling into gold and commodities (and until recently, the CHF) shows the desperation to move capital into 'safe havens'.
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  #129  
Old 06.12.2011, 11:14
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Re: Housing bubble about to explode in the Arc Lemanique

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however, there is a countervailing consideration, and that is the desire to preserve the value of your savings in what could potentially be a high inflation environment. and we see that people have already gone this route with a flight to gold, commodities and short term bonds.

real estate is one route to acquiring assets that will (in the long term) be inflation proof. the piling into gold and commodities (and until recently, the CHF) shows the desperation to move capital into 'safe havens'.
This is true but given the excessive price of real estate in the region, hardly anybody can afford buying without a substantial loan which is typically a factor 4x higher than your capital. Of course this doesn't apply to rich people buying say in Cologny, but these are just the exception. Most expats are young people with a good salary but little savings.

Assuming your job will be safe during the crisis, taking a loan right now can protect you against inflation - but just until the next loan renewal (for most people this is in 5 years time) where the loan rates will have adjusted to the inflation rates. And prices may have fallen in the meantime because of rates going up, and immigration slowing down faster than building construction (there are many projects starting now in VD)
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  #130  
Old 06.12.2011, 11:28
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Re: Housing bubble about to explode in the Arc Lemanique

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You may consider buying in France as its cheaper, but the market is stalling since a few weeks, prices may go down there as quick as they went up with the CHF/EUR xchange rate.
Btw, prices in France - Pays de Gex may be affected by the layoff of 300 WHO staff, another 200-300 to come next year.
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  #131  
Old 06.12.2011, 11:32
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Re: Housing bubble about to explode in the Arc Lemanique

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This is true but given the excessive price of real estate in the region, hardly anybody can afford buying without a substantial loan which is typically a factor 4x higher than your capital. Of course this doesn't apply to rich people buying say in Cologny, but these are just the exception. Most expats are young people with a good salary but little savings.

Assuming your job will be safe during the crisis, taking a loan right now can protect you against inflation - but just until the next loan renewal (for most people this is in 5 years time) where the loan rates will have adjusted to the inflation rates. And prices may have fallen in the meantime because of rates going up, and immigration slowing down faster than building construction (there are many projects starting now in VD)
Let's say you borrow 500k to buy something. You fix mortgage for 10 years at 2.5% which is 12.5k per year + 1% amortisation gives around 17k per year in payments.

So you need only 35k of savings to protect yourself for 2 years worth of repayments. You'll probably build up this 35k from savings compared to rent within a few years.
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  #132  
Old 06.12.2011, 12:05
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Re: Housing bubble about to explode in the Arc Lemanique

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Let's say you borrow 500k to buy something. You fix mortgage for 10 years at 2.5% which is 12.5k per year + 1% amortisation gives around 17k per year in payments.

So you need only 35k of savings to protect yourself for 2 years worth of repayments. You'll probably build up this 35k from savings compared to rent within a few years.
If you don't pay down the capital your not really buying the property, paying for ever is rather like renting IMHO.
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  #133  
Old 06.12.2011, 12:09
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Re: Housing bubble about to explode in the Arc Lemanique

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If you don't pay down the capital your not really buying the property, paying for ever is rather like renting IMHO.
who said anything about not paying down capital?
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  #134  
Old 06.12.2011, 16:00
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Re: Housing bubble about to explode in the Arc Lemanique

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If you don't pay down the capital your not really buying the property, paying for ever is rather like renting IMHO.
And even then you get twice the property for the same money. Or you pay 1/2 the rent. So even if you never pay down the debt you save rent.
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  #135  
Old 06.12.2011, 16:12
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Re: Housing bubble about to explode in the Arc Lemanique

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who said anything about not paying down capital?
The figures you quoted never showed any repayment. It's normal in CH to leave 65% of the mortgage outstanding, thats why the comparison to renting look's good.
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  #136  
Old 06.12.2011, 16:40
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Re: Housing bubble about to explode in the Arc Lemanique

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Let's say you borrow 500k to buy something. You fix mortgage for 10 years at 2.5% which is 12.5k per year + 1% amortisation gives around 17k per year in payments.
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The figures you quoted never showed any repayment. It's normal in CH to leave 65% of the mortgage outstanding, thats why the comparison to renting look's good.
i think you might have missed the 1% repayment i put in the calculations. though to be fair, if you're comparing just the cost, then you need to calculate the interest only element of the mortgage plus the opportunity cost of the capital tied up.

either way, it is cheaper than renting.

while not paying off the mortgage is akin to renting insofar as you have to keep making the payments it's different in some key ways including:

- security of tenure
- cost based on purchase price and interest rates

while we don't know what rates will be. i would bet that in 25 years time, the cost of ownership will be less than the cost of renting. it wouldn't surprise me if there wasn't a single 25 year period where you would be better off renting than buying.
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  #137  
Old 06.12.2011, 16:44
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Re: Housing bubble about to explode in the Arc Lemanique

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while we don't know what rates will be. i would bet that in 25 years time, the cost of ownership will be less than the cost of renting. it wouldn't surprise me if there was any 25 year period where you would not be better off buying than renting.

I know a lot of people who have made a lot of money buying. I know a few who have lost a little in the short term.

I don't know anyone who has made any money when renting.
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  #138  
Old 06.12.2011, 17:05
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Re: Housing bubble about to explode in the Arc Lemanique

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I know a lot of people who have made a lot of money buying. I know a few who have lost a little in the short term.

I don't know anyone who has made any money when renting.
This probably explains why you think house prices will always go up.
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  #139  
Old 06.12.2011, 17:11
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Re: Housing bubble about to explode in the Arc Lemanique

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Let's say you borrow 500k to buy something. You fix mortgage for 10 years at 2.5% which is 12.5k per year + 1% amortisation gives around 17k per year in payments.

So you need only 35k of savings to protect yourself for 2 years worth of repayments. You'll probably build up this 35k from savings compared to rent within a few years.
You need to add to this the notary fees, which are usually 5% of the purchase cost. For 1.5M this is not less than 75K CHF.
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  #140  
Old 06.12.2011, 17:15
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Re: Housing bubble about to explode in the Arc Lemanique

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You need to add to this the notary fees, which are usually 5% of the purchase cost. For 1.5M this is not less than 75K CHF.
see this post:

Buying costs

1.3k on a 1m property. the notary fees were negligible in this case.
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