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Old 31.03.2016, 10:39
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Buying a house, become a distant dream

Interesting topic in 20min, for a change. Although, it lacks data and decent analysis to be relevant.

They start with headline "A couple with annual income of 100,000 francs find nothing (to buy) in 65% of municipalities in Switzerland."

Source:
https://translate.google.com/transla...285&edit-text=

They illustrate also the evolution of property prices vs salaries:

(Source: homegate OFS)

They say how prices have evolved in the last 14 years, and how a family with 2 children and 100K annual income could buy in 70% of the territory. Now, that can hardly do that in 33% of the territory, probably very remote areas.
They conclude:
The market is falling "short of breath" and property prices might accuse corrections up to 20% in Zurich and Geneva Area.


Comments:
- Numbers and sources are unclear. For example, they claim salaries have increased +15% in the last 14 years. I'd like to see the details, especially that in VD area, in my company it's the opposite trend. Salaries were much higher, "Swiss style" and they tend to be reduce "European style". Of course it depends on employee profile, experience, negotiation... But cleary they ain't hiring and offering salary as before.

-Comparing the entire Swiss territory at once is not really relevant. Since it's a market with several sought after area, I wonder if it's that relevant to include properties in Zurich vs the igloos in Grisons in the same study... Maybe they should have compared canton, at least, even if prices can change a lot inside one canton.

-The overall conclusion seems to go for other more solid information, like the report from Credit Suisse: they tend to indicate property prices will fall soon, and they admit the market has already shown signs of cycle change.

-Owning is that really a "dream"? They don't mention renting vs owning, as a pure financial comparison.

-They also claim the market is not regulated. My interpretation of it, is that its extremely regulated. In fact since most people own a debt rather than the property, I think that's show that banks are regulating everything, while keeping their income under control...


Any other comments?


PS: In the analysis some Swiss have complained about expats being the root cause of that price inflation. Even if that's probably part of it, it's not all. And some other Swiss, who sold their property at a much higher price have well profited from the situation. So please no derivation towards expats or who's guilty or not. The market is as it is, it's evolving and that's what interesting here.
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Old 31.03.2016, 10:47
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Re: Buying a house, become a distant dream

And the good news is - they will probably find something great in the 35%.
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Old 31.03.2016, 10:47
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Re: Buying a house, become a distant dream

Interesting statistic.

I agree with what you say about salaries. As far as I can see these are static at best for us old timers and the young folks who are now starting are getting lower salaries than would have been the case in our time. Also, I remember the time maybe 15 years ago when it would be normal to get something like a 3% raise a year and you'd feel offended if you didn't. Today much smaller raises are being sold as great signs of appreciation while many of us haven't seen any raise in more than 5 years.

So I'd say median wages are decreasing but average wages may indeed be on the rise due to movement at the extremes.

I think part of the rise in prioces is due to low interest rates. An increae in rates might bring prices to more realistic levels, benefitting those of us who have saved up a bit. Another part is demand and supply, with the demand side having grown faster than the supply side. This is a political problem, and not one I see a direct solution to as I'm not much of a fan on destroying green countryside for houses.
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Old 31.03.2016, 10:48
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Re: Buying a house, become a distant dream

A little OT but it's the same in a lot of areas in the UK - people can't afford to buy. The average age of first-time buyers when I bought my own first house was 31. It shot up (if memory serves, to 36/37 a couple of years ago). My friend and her husband have just bought their first house and she's 38. Both have professional careers.
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Old 31.03.2016, 10:49
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Re: Buying a house, become a distant dream

Property can never be unaffordable for very long, people die & properties get sold. No doubt in 14 years time it will be very different with people crying how they have been wiped out by loosing their 20% deposit & their Banks are demanding a further 20% security.

A 20 / 30 year graph would be interesting, however the story would fall to pieces, property goes from undervalued to overvalued to undervalued.

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Interesting topic in 20min, for a change. Although, it lacks data and decent analysis to be relevant.

They start with headline "A couple with annual income of 100,000 francs find nothing (to buy) in 65% of municipalities in Switzerland."

Source:
https://translate.google.com/transla...285&edit-text=

They illustrate also the evolution of property prices vs salaries:

(Source: homegate OFS)

They say how prices have evolved in the last 14 years, and how a family with 2 children and 100K annual income could buy in 70% of the territory. Now, that can hardly do that in 33% of the territory, probably very remote areas.
They conclude:
The market is falling "short of breath" and property prices might accuse corrections up to 20% in Zurich and Geneva Area.


Comments:
- Numbers and sources are unclear. For example, they claim salaries have increased +15% in the last 14 years. I'd like to see the details, especially that in VD area, in my company it's the opposite trend. Salaries were much higher, "Swiss style" and they tend to be reduce "European style". Of course it depends on employee profile, experience, negotiation... But cleary they ain't hiring and offering salary as before.

-Comparing the entire Swiss territory at once is not really relevant. Since it's a market with several sought after area, I wonder if it's that relevant to include properties in Zurich vs the igloos in Grisons in the same study... Maybe they should have compared canton, at least, even if prices can change a lot inside one canton.

-The overall conclusion seems to go for other more solid information, like the report from Credit Suisse: they tend to indicate property prices will fall soon, and they admit the market has already shown signs of cycle change.

-Owning is that really a "dream"? They don't mention renting vs owning, as a pure financial comparison.

-They also claim the market is not regulated. My interpretation of it, is that its extremely regulated. In fact since most people own a debt rather than the property, I think that's show that banks are regulating everything, while keeping their income under control...


Any other comments?


PS: In the analysis some Swiss have complained about expats being the root cause of that price inflation. Even if that's probably part of it, it's not all. And some other Swiss, who sold their property at a much higher price have well profited from the situation. So please no derivation towards expats or who's guilty or not. The market is as it is, it's evolving and that's what interesting here.
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Old 31.03.2016, 10:51
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Re: Buying a house, become a distant dream

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And the good news is - they will probably find something great in the 35%.

Also, that 35% is a reference to the number of municipalities, not the area covered. Which means, perhaps, that more than half of Switzerland is perfectly within reach of people on normal incomes.


OK, not the fancy bits with the sushi bars and wellness spas, but who wants to live somewhere so soulless anyway?
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Old 31.03.2016, 10:57
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Re: Buying a house, become a distant dream

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Also, that 35% is a reference to the number of municipalities, not the area covered. Which means, perhaps, that more than half of Switzerland is perfectly within reach of people on normal incomes.


OK, not the fancy bits with the sushi bars and wellness spas, but who wants to live somewhere so soulless anyway?
The problem is that the affordable areas are mostly not the areas where most jobs are, and Switzerland is becoming more and more like the UK with people commuting an hour or more each way just to be able to earn enough money in the expensive bits to somehow just about survive in the cheap bits.
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Old 31.03.2016, 11:00
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Re: Buying a house, become a distant dream

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And the good news is - they will probably find something great in the 35%.
Very true. On the other hand, it's not given to everyone:
-Lifestyle
-Remote area might have less access to health, services
-Proxitimity to jobs (good luck finding decent, well paying jobs in IT in Jura )
-Latest 2016's tax deductions for commuting, often capped around 3K now, as opposed to approx 12K max until now (depending on cantons decisions).

So while it's certainly true that the still cheap area might be wonderful to live in, it's not available for a majority of employees...
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Old 31.03.2016, 11:02
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Re: Buying a house, become a distant dream

With limited supply and increasing demand the end result is prices rise.

Why is the demand increasing?
Low interest rates means that it is "cheap" compared to renting. However it is only "cheap" while rates remain low.

How will demand decrease?
A rise in interest rates and/or a glut of property on the market.

Are either likely?
Interest rates are likely to remain relatively low for the foreseeable future. Monthly affordability will drive an increase of properties on the market - as costs increase more people will look to liquidate. Until wages contract and/or rate rise affordability remains OK.

How can you be so sure?
10 year fixed rates are <1.75% - which means the major institutions don't believe it will rise much in that time. 10 years is a "traditional full economic cycle" - from one boom to the next

Should I buy?
If you share my opinion - and want to live in a house that you own - and earn a strong salary then it makes sense - as long as long term costs remain 1/3 of your Gross salary. And also assuming you buy with the same mindset as the local market.

Personally I wouldn't buy an apartment (due to less control over renovation costs and general maintenance) - especially where prices are already overheated.
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Old 31.03.2016, 11:06
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Re: Buying a house, become a distant dream

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Also, that 35% is a reference to the number of municipalities, not the area covered. Which means, perhaps, that more than half of Switzerland is perfectly within reach of people on normal incomes.


OK, not the fancy bits with the sushi bars and wellness spas, but who wants to live somewhere so soulless anyway?
True, it's about communes (municipalities) and not territory.
Which, as you said, is also flawing the result or changing the perspective of it.

Then, as an addition, a lot of commune have changed in the last few years, but they have "merged". I have not seen any "splitting". So the trend would be to have also a comparison of number of commune 14 years ago, to the number of communes today, so that the proportion in percent is more relevant...
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Old 31.03.2016, 11:07
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Re: Buying a house, become a distant dream

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Property can never be unaffordable for very long, people die & properties get sold. No doubt in 14 years time it will be very different with people crying how they have been wiped out by loosing their 20% deposit & their Banks are demanding a further 20% security.

A 20 / 30 year graph would be interesting, however the story would fall to pieces, property goes from undervalued to overvalued to undervalued.
I think you wrote the same thing 14 years ago

There is no Swiss housing market as known in other countries. There is simply not enough buying and selling. Blame for rise in property prices? Increase in Swiss population from 6 to 8 million in the last 20 years. That's 33%!

Low interest rates are firing the current levels. There will be a correction, but as long as people need to somewhere to live and populations increase what other result can there be but increased prices. Compared to property price increases in southern UK, Swiss ones are tame...
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Old 31.03.2016, 11:10
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Re: Buying a house, become a distant dream

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With limited supply and increasing demand the end result is prices rise.

Why is the demand increasing?
Low interest rates means that it is "cheap" compared to renting. However it is only "cheap" while rates remain low.
however, rates are also reflected in rents, so rents are also comparatively low right now and will rise when rates do.
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Old 31.03.2016, 11:12
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Re: Buying a house, become a distant dream

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I think you wrote the same thing 14 years ago

There is no Swiss housing market as known in other countries. There is simply not enough buying and selling. Blame for rise in property prices? Increase in Swiss population from 6 to 8 million in the last 20 years. That's 33%!

Low interest rates are firing the current levels. There will be a correction, but as long as people need to somewhere to live and populations increase what other result can there be but increased prices. Compared to property price increases in southern UK, Swiss ones are tame...
From an investment perspective it's under 2.2% compound, which I put in the 'pathetic' category
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Old 31.03.2016, 11:13
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Re: Buying a house, become a distant dream

For those who are interested Dougal is selling his butler's butler's house

You can also buy a huge 12.5 rooms house for under 800k an hour from Zurich

With 20% deposit and 10 year fixed mortgage at 1.75% that is under 1,000chf per month interest!!

Shameless I know
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Old 31.03.2016, 11:15
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Re: Buying a house, become a distant dream

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Low interest rates are firing the current levels. There will be a correction, but as long as people need to somewhere to live and populations increase what other result can there be but increased prices. Compared to property price increases in southern UK, Swiss ones are tame...
Low interest rates are a double edged sword in our case, its meant CHF30k of hypothetical rent dumped on our joint salary that cannot be written off by mortgage interest... yes I think the hypothetical rent calculation for our property is ridiculously high
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Old 31.03.2016, 11:20
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Re: Buying a house, become a distant dream

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Low interest rates are a double edged sword in our case, its meant CHF30k of hypothetical rent dumped on our joint salary that cannot be written off by mortgage interest... yes I think the hypothetical rent calculation for our property is ridiculously high
It is a "forgotten" cost by many looking at buying - and could become worse if/when gemeindes revalue the eigenmietwert of places and ramp them up to more closely reflect market realities.
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Old 31.03.2016, 11:21
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Re: Buying a house, become a distant dream

I won't be buying as long as it costs a million bucks for a 145 m2, 4.5 room flat as is the case where I live. I live in something similar to that at the moment, and the thought of parting with 7 figures for the pleasure of owning it is rather more a nightmare.
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Old 31.03.2016, 11:22
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Re: Buying a house, become a distant dream

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How will demand decrease?
A rise in interest rates and/or a glut of property on the market.
I agree with most of your analysis -- but a glut of property on the market represents an increase in supply, not a decrease in demand. A glut could be the consequence of a decrease in demand, but it can't be the cause.
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Old 31.03.2016, 11:24
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Re: Buying a house, become a distant dream

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For those who are interested Dougal is selling his butler's butler's house

You can also buy a huge 12.5 rooms house for under 800k an hour from Zurich

With 20% deposit and 10 year fixed mortgage at 1.75% that is under 1,000chf per month interest!!

Shameless I know
Wait, the news from 20min are concluding that prices near zurich might drop by 20%
That's might be only 51 200chf/room soon
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Old 31.03.2016, 11:27
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Re: Buying a house, become a distant dream

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It is a "forgotten" cost by many looking at buying - and could become worse if/when gemeindes revalue the eigenmietwert of places and ramp them up to more closely reflect market realities.
There is a lot of competition between Gemeindes in attempting to be more attractive to good earners and thus I don't think they will shoot themselves in the foot by bringing in massive hikes in Eigenmietwert. At least not in the FDP / SVP governed ones.
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