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Old 20.01.2015, 16:49
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Re: Impact of SNB decision on real estate market

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This is exactly the kind of misinformation that floats around from typical "survivors" and feeds an inevitable bubble.

History means nothing when a bubble burtst. That's the whole idea of a bubble, no one sees it coming!

Just because you saved more than the deposit you put down over however long you've owned you're property it doesn't make you less susceptible to any future market turbulence.

Buying property of any kind in Switzerland is a leveraged investment just like any other leveraged investments around the world. And we are seeing as we speak what is happening with all these leveraged "investments".

Leverage is gonna be the next big boom and bust. Why because the mainstream doesn't see it coming! Because it allows people to buy things they can not afford to buy without such leverage. Because it it allows unsustainable prices to be reached because rates are so low "It's silly not to have one".

I rest my case
The USA has always run on a system of 'buying what you don't need with money you haven't got' and there are dozens of websites devoted to the demise of the dollar.

You can either get on with living or worry.

You forgot to mention a massive meteorite impact. You might like to add that to your list of gloom...
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  #22  
Old 20.01.2015, 17:06
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Re: Impact of SNB decision on real estate market

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You can either get on with living or worry.

You forgot to mention a massive meteorite impact. You might like to add that to your list of gloom...
There is a difference between getting on with living and becoming complacent.

Herd mentality is the source of all bubbles. Just get on with it and do what everyone else is doing. It'll be alright...

*When the bubble bursts*

Oh we never thought this would happen, no one did, everyone was at it, there was no other way.

*wait for it*

We were misold, we are a victim, nobody told us about the risks.

Well you've been told.
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  #23  
Old 20.01.2015, 17:28
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Re: Impact of SNB decision on real estate market

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True mortgage rates are getting silly, look here.

If you already own a house and plan to stay there for a long time then think about changing any 3 month LIBOR mortgages to long term fix; the 8 year rates are anyway approaching the 3 month LIBOR mortgages rates.
Whilst this is good advice, i think it is very unlikely LIBOR rates will go up any time soon, there is more chance of downside than upside at present (famous last words....)

I think it would be better to wait and fix as late as possible and whilst you may not get the absolute best rate, you'll still get a good rate and the difference would be minimal.

By fixing now, who knows what the situation will be in 8 years time, and unless you can pay off your mortgage or find alternative arrangements, you are a bit at the mercy of the banks.
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Old 20.01.2015, 17:36
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Re: Impact of SNB decision on real estate market

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land is the one thing they don't make anymore
As in, we're already past peak-land?

There is plenty of land. What is limited is land that can be built on, and indeed the size (especially height) of buildings that can be built on that land. So its more a zoning issue (that politicians control) than a resource that is naturally running out.
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Old 20.01.2015, 17:41
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Re: Impact of SNB decision on real estate market

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As in, we're already past peak-land?

There is plenty of land. What is limited is land that can be built on, and indeed the size (especially height) of buildings that can be built on that land. So its more a zoning issue (that politicians control) than a resource that is naturally running out.
The reason why German house prices always fall over time is that land is not rationed in the same way. Who wants a 25 year old house when you can get a new one for the asking price of the old one.
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Old 20.01.2015, 17:42
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Re: Impact of SNB decision on real estate market

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Whilst this is good advice, i think it is very unlikely LIBOR rates will go up any time soon, there is more chance of downside than upside at present (famous last words....)

I think it would be better to wait and fix as late as possible and whilst you may not get the absolute best rate, you'll still get a good rate and the difference would be minimal.

By fixing now, who knows what the situation will be in 8 years time, and unless you can pay off your mortgage or find alternative arrangements, you are a bit at the mercy of the banks.
About "it is very unlikely LIBOR rates will go up any time soon, there is more chance of downside than upside at present"

Problem is the three month rate offered by banks is a base of x % plus the 3 month Libor.
Once the rates go negative (as now) then the banks do not reduce your existing 3 month LIBOR below the base x %; so there is no possibility of a downside unless you are able to change to another mortgage supplier.
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  #27  
Old 20.01.2015, 17:48
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Re: Impact of SNB decision on real estate market

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I was curious what people thought the impact of the strong Swiss franc would be on property prices here (Canton Zug or Switzerland in general). [...]
One way of thinking about this is to view it from two frames of reference: how will prices change relative to an internationally tradable basket of stuff, and how will the price as denominated in CHFs change.

Prices should adapt to be the same relative to the tradable basket of stuff, except to the extent that relevant CHF-denominated prices are "sticky", whether due to contracts or psychological factors. And stickiness can be rather a large factor.

For a rough medium-term prediction for property, I'd probably look at what happened to Swiss shares in the day after the currency swing last week. Taking very rough figures: CHF up 20%; share prices down 10% denominated in CHF but up 10% vs internationally tradable basket of stuff.

If getting a mortgage, I would split the thing in to two components to think about it: value of the property asset, and value of the CHF liability (mortgage). The latter has already increased by the full amount of the CHF appreciation. Unless you think the former has too (ie property prices in CHF are perfectly sticky), your position has deteriorated.

If I was in the position with an option to back out, I would probably do so, but I guess the best question for you is whether the deal still represents good value for you.

This reminds me - I was reading the FT in the UK last week, and it is such an alien culture. It's all "we need inflation so our massive debts go down in real terms". Whereas here there is culture of not racking up debts in CHF, not buying stuff until you can afford it, etc. Maybe something to consider when deciding whether to take on a large mortgage in the first place.
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  #28  
Old 20.01.2015, 18:02
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Re: Impact of SNB decision on real estate market

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land is the one thing they don't make anymore

when you start to see lots and lots of empty houses / apartments in zurich then it's time to worry, all the while you have people fighting to rent that overpriced concrete box we'll be fine

eta

Just as a side note, in the time we've owned our place we've already 'saved' more then the deposit we put down with the cost of the mortgage compared to our old rent
well actually, they are making lots of it by re-zoning and also re-developing. it is surprising to see how much land is available even in hot spots such as London.

i think we've also reached the point where there are lots of empty places in zurich...
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  #29  
Old 20.01.2015, 20:10
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Re: Impact of SNB decision on real estate market

I see it as a good time to buy property in Switzerland. You are investing in an asset that is held in CHF. The CHF is historically and will probably continue to be a safe haven currency. Any investment you make in CHF, and sell later, will incur a reasonable return if you have to turn that CHF asset into your home currency for example. Of course it depends on your personal circumstance, quality of the asset, amount of liquid assets (capital) and long term investment strategy.
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  #30  
Old 20.01.2015, 22:43
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Re: Impact of SNB decision on real estate market

Anyone who thinks that the bubble-like rise in house prices correlated with equally strong market fundamentals is kidding themselves. This housing market could have a significant contraction over the coming years. Taking a 10 year horizon I think the OP made a sensible decision.
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  #31  
Old 20.01.2015, 23:47
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Re: Impact of SNB decision on real estate market

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Anyone who thinks that the bubble-like rise in house prices correlated with equally strong market fundamentals is kidding themselves. This housing market could have a significant contraction over the coming years. Taking a 10 year horizon I think the OP made a sensible decision.
it is clearly in bubble territory, though what we've learned from the UK, IE and AU bubbles is that the bubbles can go bigger and last longer than people expect - especially the bears.

arguably some part of it is a fundamental change (bilaterals, immigration, right for EU-B to buy) which has resulted in massively higher demand. real estate is a classically cyclical market and i guess in many hotspots supply has caught up and may overshoot in the next few years.

the popping of the bubble may yet be averted by the continued low-interest rate environment which will continue to inflate the bubble and pull more people onto the bandwagon (don't you love mixed metaphors?).

the question is whether there will be an adverse fundamental shift in the house market in the future (cancellation of bilaterals, immigration block, block EU purchasers) or with switzerland's economy in general (BEPS, monetary policy change).

also the question of whether swiss earnings can catch up in real terms to make affordability more reasonable (seems unlikely, IMO) or perhaps in nominal terms though CHF debasement (SNB did a good job so far with the currency cap, and probably laid the foundation for future permanent debasement of CHF)

this last option (which incidentally, i also predicted for the UK housing market) seems like a distinct possibility.

of course, the one thing that could create an immediate pop is a large hike in interest rates (seems unlikely in the short term), huge spike in unemployment or immigrants leaving as jobs disappear.
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  #32  
Old 21.01.2015, 00:47
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Re: Impact of SNB decision on real estate market

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Sorry to read you pulled out of the purchase. If they get iffy with returning the deposit push for it. They should return it less expenses they have incurred. Although I have heard tales of people losing CHF30,000 deposits.
They only had the money for 5 days. The agreement said that there will be deductions only if I've customized the apartment in any way (through their architects). So, I should be okay.

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Loans are now so cheap it's silly not to have one really. If your property is worth the same in 10 years, you will have lived far cheaper than renting and in CHF it will have been more than likely to appreciate against other currencies...
I agree about the loans being cheap. My rate is likely to be around 0.75%. However, my base salary and bonus are in USD. If there is a 2% across the company cost of living adjustment this year (as usual), my base salary conversion rate will be reset and I would make up to 20% less than last year about 20% fewer CHFs on the bonus payments. I'm sad to have had to walk away from this place, but the fact that it was already CHF 1,800 (per square meter) higher than what the bank considered "Very Expensive" scared me even more from getting in to a 7 figure CHF debt while on a USD income...
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  #33  
Old 21.01.2015, 05:10
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Re: Impact of SNB decision on real estate market

When everyone is saying here that they would hold off 'for now', how long is this period and under what conditions would you buy ?
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  #34  
Old 21.01.2015, 10:14
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Re: Impact of SNB decision on real estate market

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I agree about the loans being cheap. My rate is likely to be around 0.75%. However, my base salary and bonus are in USD. If there is a 2% across the company cost of living adjustment this year (as usual), my base salary conversion rate will be reset and I would make up to 20% less than last year about 20% fewer CHFs on the bonus payments. I'm sad to have had to walk away from this place, but the fact that it was already CHF 1,800 (per square meter) higher than what the bank considered "Very Expensive" scared me even more from getting in to a 7 figure CHF debt while on a USD income...
If you rent, you would also be hit by these FX fluctuations. And if you can buy for less than you can rent, it would seem to be the safer bet to buy. That is, assuming you're in this long term. Buying short term to speculate is not a good idea right now.
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Old 21.01.2015, 10:31
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Re: Impact of SNB decision on real estate market

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When everyone is saying here that they would hold off 'for now', how long is this period and under what conditions would you buy ?
Not everyone!

The conditions are: you need somewhere to live, have the capital then anytime is the time to buy property. Of course your property needs to fill all the location, location, location and other buying criteria. The hard part in Switzerland is finding the right place, at the right price for course.

Yes there have been and always be peaks and troughs, and if the majority of potential buyers to the OP's route, then a trough and so a small buying opportunity could occur.

Frankly, the final decision is yours alone and not what a bunch of anonymous "experts" tell you on the internet...
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Old 21.01.2015, 10:35
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Re: Impact of SNB decision on real estate market

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If you rent, you would also be hit by these FX fluctuations. And if you can buy for less than you can rent, it would seem to be the safer bet to buy. That is, assuming you're in this long term. Buying short term to speculate is not a good idea right now.
Your forgetting about the cash call you will get when your property drops in value & the mortgage exceeds 80% of valuation. Thats when the crash will occur as most people won't have a spare 20% deposit.

Mortgages that don't get paid off, seems like a very dangerous strategy to me.
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Old 21.01.2015, 10:40
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Re: Impact of SNB decision on real estate market

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Your forgetting about the cash call you will get when your property drops in value & the mortgage exceeds 80% of valuation. Thats when the crash will occur as most people won't have a spare 20% deposit.

Mortgages that don't get paid off, seems like a very dangerous strategy to me.
This is a highly unlikely scenario in Switzerland. Are Swiss banks ever going to be throwing families out on the street??
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Old 21.01.2015, 10:44
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Re: Impact of SNB decision on real estate market

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This is a highly unlikely scenario in Switzerland. Are Swiss banks ever going to be throwing families out on the street??
I don't think the shareholders will care. You forget there were cash calls in the last Swiss property crash.

Houses get repossessed here too, Banks are not a charity.

Rather like saying the SNB would never drop the peg. People with a vested interest get way too complacent.
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Old 21.01.2015, 10:50
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Re: Impact of SNB decision on real estate market

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I don't think the shareholders will care. You forget there were cash calls in the last Swiss property crash.

Houses get repossessed here too, Banks are not a charity.

Rather like saying the SNB would never drop the peg. People with a vested interest get way too complacent.
But surely there is a difference between reposessing a housed because the owner is actually defaulting on payments, and reposessing the same house because some semi-fictional valuation says its value has dropped.
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Old 21.01.2015, 11:01
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Re: Impact of SNB decision on real estate market

bank never lose they'll reposes, sell at auction, then come after you for any shortfall.

really depends on the hole I guess, I'm sure they would offer most people a nice personal loan to cover it.
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