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Old 30.09.2014, 23:33
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Is it a good time to buy a property in Geneva?

We have been renting in Geneva for almost 4 years and paying close to 3000 CHF/m. I am hearing that owning a property would cut down the monthly expenditure significantly. I am contemplating buying a property but I am not sure if its a good time to do so considering the property prices have risen so much off late. Looking around in Geneva, I am seeing 2 bed apartment priced 750k plus and houses prices 1.2m plus. I looked around a few areas in Vaud like Nyon, Morges and Lausanne but nothing is affordable there either.

Do you think I should bite the bullet and go for a property in Geneva? I am hearing in this forum that prices are correcting so would it be better to rent for another year and see how prices go? Are there any areas which are easily commutable to Geneva where there is better value? I want to be within the Swiss border and not venture into France
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Old 02.10.2014, 09:33
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Re: Is it a good time to buy a property in Geneva?

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We have been renting in Geneva for almost 4 years and paying close to 3000 CHF/m. I am hearing that owning a property would cut down the monthly expenditure significantly. I am contemplating buying a property but I am not sure if its a good time to do so considering the property prices have risen so much off late. Looking around in Geneva, I am seeing 2 bed apartment priced 750k plus and houses prices 1.2m plus. I looked around a few areas in Vaud like Nyon, Morges and Lausanne but nothing is affordable there either.

Do you think I should bite the bullet and go for a property in Geneva? I am hearing in this forum that prices are correcting so would it be better to rent for another year and see how prices go? Are there any areas which are easily commutable to Geneva where there is better value? I want to be within the Swiss border and not venture into France
Consider this:
http://en.comparis.ch/immobilien/preisentwicklung

Since 2007 until 2014, prices average in Geneva have raised +46%... (on prices probably already high, as it's Geneva).

Seems to me that it's absolutely insane price hike.

Also, governments have applied many measures to lower prices (such as impossibility to use 2nd pilar to pay mortgage, effective since 1 month). So obviously it won't be instant, but i'm suspecting that + interests rate which will raise, etc... that the trend will be surely prices lowering or at least stagnating.

If you use the same calculator, it says from 2013 to 2014, prices have lowered in Geneva -3%...
-3% in 1 year, for something worth 700K, that's a lot! (21 000chf!!).

So... up to you.

For my humble opinion it's an insane gamble with extremely limited chances of property prices raising and extremely chances of losing money.

But i'm not a professional and I don't have a cristal ball.
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Old 02.10.2014, 11:16
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Re: Is it a good time to buy a property in Geneva?

Thanks for the info and the link to comparis. Its very interesting to note that the prices of flats have risen a lot more than house between 2007 and now.
Flats +46% Houses +16%.
Also striking to note that between 2013 and now, Flats are down 3% while Houses are down 6%.
So it seems flats appreciate much more quickly than houses and are also more resilient in the downturn.
Would that mean its better to buy a flat than a house?
Generally its houses that are more in demand than flats
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Old 02.10.2014, 12:02
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Re: Is it a good time to buy a property in Geneva?

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Thanks for the info and the link to comparis. Its very interesting to note that the prices of flats have risen a lot more than house between 2007 and now.
Flats +46% Houses +16%.
Also striking to note that between 2013 and now, Flats are down 3% while Houses are down 6%.
So it seems flats appreciate much more quickly than houses and are also more resilient in the downturn.
Would that mean its better to buy a flat than a house?
Generally its houses that are more in demand than flats
I would be careful with those type of analysis...
Even the original statistics are an average, just to give you an overall idea, nothing more....

You'd have to take a property, compare it's price to the market, etc...to be more accurate.

For example, maybe flats were cheaper so everybody rushed into them, raising market prices... and indirectly rents (as owner could easily profit more)... Leading to this situation...
As for houses, as maybe they were more pricey since start, they were a bit less touched by this trend...

As for lowering prices of flat, maybe also banks are no longer giving easy mortgage, which could also influence...(for example the bank could know that flats are more in bubble than houses in that area).

Houses is so different there, because obviously its for rich person anyway (around geneva) as often they are worth millions... A different market probably with people who can always afford, no matter the mortgage situation...

Well the next move for you is to calculate risk, compare rent vs mortgage, and include possible lost of value (= possible loss of money) and possible extra money you'll need to provide if the property value collapse.
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Old 02.10.2014, 16:25
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Re: Is it a good time to buy a property in Geneva?

Can you please elaborate on "possible extra money you'll need to provide if the property value collapse".
What extra money would one have to contribute in such a scenario?
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Old 02.10.2014, 16:40
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Re: Is it a good time to buy a property in Geneva?

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Can you please elaborate on "possible extra money you'll need to provide if the property value collapse".
What extra money would one have to contribute in such a scenario?
See this: Type of mortgage on current rates
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Old 02.10.2014, 17:17
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Re: Is it a good time to buy a property in Geneva?

Ah I see. So one has to maintain at most 80% LTV. That is indeed a huge risk in a falling market. What is not clear from that post is how frequently one is required to make up the shortfall. Do the banks review the value of the property every year to determine the market value and hence the shortfall?
This will have a major bearing on my decision. I was hoping to fix the mortgage for a long time considering interest rates are at historic lows. One could think of riding out a downturn by holding on to the property but if you have to make good the shortfall in property value then thats a deal breaker
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Old 02.10.2014, 21:18
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Re: Is it a good time to buy a property in Geneva?

It is impossible to tell if house prices will go up or down. The central bank and CH government are trying to cool things down, so most likely hot spots like Geneva will stagnate or fall - but perhaps a bunch of rich Russians will move in and bump the prices up - one never knows.

What we know is that interest rates are very low, and rents are very high.

Back of the envelope calculations show that borrowing 1M costs just over 1K a month, and that is a lot cheaper than renting at 3K a month.

So it all depends on your appetite for risk.

Last edited by WilliamTell; 02.10.2014 at 21:19. Reason: Grammar
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Old 03.10.2014, 10:19
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Re: Is it a good time to buy a property in Geneva?

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It is impossible to tell if house prices will go up or down. The central bank and CH government are trying to cool things down, so most likely hot spots like Geneva will stagnate or fall - but perhaps a bunch of rich Russians will move in and bump the prices up - one never knows.

What we know is that interest rates are very low, and rents are very high.

Back of the envelope calculations show that borrowing 1M costs just over 1K a month, and that is a lot cheaper than renting at 3K a month.

So it all depends on your appetite for risk.
true but that's a short sighted calculation (rent vs mortgage).
Like I said, in 1 year one would have lost 21000chf of property value (provided it's sold at that time, etc...).

21000chf/12 that's a lot of money which should be spread on the calculations of rent vs owning....
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Old 15.10.2014, 11:45
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Re: Is it a good time to buy a property in Geneva?

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Do the banks review the value of the property every year to determine the market value and hence the shortfall?
This will have a major bearing on my decision. I was hoping to fix the mortgage for a long time considering interest rates are at historic lows. One could think of riding out a downturn by holding on to the property but if you have to make good the shortfall in property value then thats a deal breaker
You'd have to read the terms and conditions very closely. The margin call / LTV of 80% clause is always there but rarely used in practice. I say rarely because you don't often have a 20-30% correction in house prices.

When it does happen however and depending on the banks exposure they will want to cover themselves and when this happens that is when they will just ask you to stump up the cash or force you to sell your house / locking in a loss. It's not normally in the bank's own interest to start liquidating all assets like that because it will result in bigger drops and eventually they start incurring losses themselves rather than just their customers.

Borrowing money from the bank to buy a house or any asset for that matter is a leveraged investment which is a two edged sword allowing you to benefit greatly when prices are going up in return for a relatively small deposit but the risk is also higher as you could theoretically lose the whole deposit or a significant part of it if prices correct.

I tried to google for examples when this happened but without anything useful being returned which is interesting as nobody really talks about it until it happens. The last article I found which was on the FT was back in 2009 and related to Buy-to-let mortgages. (see article: here)

From memory this also happened to people who had multi-currency mortgages which is where the scenarios are most likely to happen. As the prices might not necessarily drop but the currency rate might change. Example: Expat with a job in Switzerland buying a property in his home country in Europe somewhere using a CHF denominated mortgage against a property priced in EUR, if the CHF strengthens by 20% (exchange rate goes from 1.44 to 1.2 which did happen ), then straight away a property worth EUR100k is now only worth CHF120k rather than CHF144k and so the client has to stump up the difference.
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Old 15.10.2014, 12:12
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Re: Is it a good time to buy a property in Geneva?

My humble opinion is at this stage one does not buy a house in CH to make a lot of money short –term from value appreciation, but for other reasons.
One can profit from:
-Low interest rates and save on the monthly expenses, I saved 50% by buying a house(instead of renting a flat) recently in Ticino and bare in mind my mortgage is fixed 10 years, thus more expensive than the 3-5 or floating rate mortgages
-Take advantage of the 2nd pillar pledge- although now is gone or going, I still made in in the end of April
-Take advantage of actually owning a property in CH now that one is here, one has a permit and you can get a CH mortgage, another story if you move and try to buy from abroad
-Take advantage of having a permanent place in CH and thus easier to return if one decided to leave and come back, although a house does not grand a permit.
- Perhaps also manage the risk of the new permits issuance quota when and if it happens the job market could flourish for the already permit
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Old 15.10.2014, 12:34
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Re: Is it a good time to buy a property in Geneva?

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-Low interest rates and save on the monthly expenses, I saved 50% by buying a house(instead of renting a flat) recently in Ticino and bare in mind my mortgage is fixed 10 years, thus more expensive than the 3-5 or floating rate mortgages

A quote from Nassim Taleb springs to mind when I read things like this... "Eat like a chicken and shit like an elephant"

Another one is "Picking up pennies in front of a teamroller..."

See: (http://en.wikipedia.org/wiki/Taleb_distribution)
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Old 15.10.2014, 12:45
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Re: Is it a good time to buy a property in Geneva?

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A quote from Nassim Taleb springs to mind when I read things like this... "Eat like a chicken and shit like an elephant"

Another one is "Picking up pennies in front of a teamroller..."

See: (http://en.wikipedia.org/wiki/Taleb_distribution)




I believe if you are referring to my case you are lucking many information of the asset type, cost, personal circumstances to make such generic statements
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