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Old 16.02.2009, 16:52
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Swiss (city) housing outlook - Any ideas?

Hello Everyone,

I had been knee-deep in a Basel house hunt last year and decided a few months ago to stop looking to purchase. I am going to outline my thinking and I would very much appreciate hearing some other perspectives.

My husband and I are based in Basel. We were planning to purchase a home with a 3-5 year time line to sale in mind. We had found a few interesting homes that with a stable real estate market would be worth considerably more than purchase price with mostly cosmetic upgrades.

It is primary our time line for selling that concerns me. I fully expect housing prices in Switzerland (meaning Swiss cities - specifically Basel) to drop within the next few years.
- Interest rates are very low right now. Given some inflation those rates could move up very quickly. From what I have seen, housing prices in Switzerland are inversely correlated with interest rates. (There was a Swiss house price crash in the 90's when the interest rate went up to, I believe, 7% or so.)
- Layoffs: Basel has certainly been hit with job losses at the Pharma companies. CIBA has been purchased by BASF - I have trouble envisioning that to mean an increase in CIBA jobs here. On the more speculative side, if Novartis was to purchase Roche it would rain down job losses. I mention this one because they were blocked for 5 years from trying to buy up more than the 25% they already own and the 5 year ban would be up in (I believe) 2-3 years.
- I will also mention the Swiss banking industry and banking secrecy being under attack, though this is I'm sure food for a whole other conversation/debate. I am a bit nervous about Swiss real estate in the long-term because I don't believe that the attack on banking secrecy will stop with the US going after UBS.

* I have HEARD that banks are talking about increasing the minimum required down payment to 30% from 20%. Has anyone else come across this information? If this is true, it sounds to me like the banks are expecting much harder economic times and more foreclosures to come. The jump in down payment required would also limit the number of buyers for our <1million chf 'starter home'.

Thanks for reading. I would really appreciate any comments or ideas.
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Old 16.02.2009, 17:02
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Re: Swiss (city) housing outlook - Any ideas?

Another thing to factor into your calculations is any tax penalties that might be levied on properties sold within a short period of ownership. Many cantons levy such a penalty to discourage speculation.

I don't know what the regs are in Basel, but here in SZ property sales incur an extra tax penalty in the first five years of home ownership. We have been waiting to sell our home until we hit the 5 year mark, as doing so earlier would have seen much of any profit wiped out by the extra taxes.

To give you an idea of how prices in a given area have developed since 2000, look at the 'Gemeinde Rating' link on the Homegate site... but remember, that is historical data - and I would expect things to be quite different in many markets going forward.
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Old 16.02.2009, 18:27
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Re: Swiss (city) housing outlook - Any ideas?

I would think carefully about buying unless you're here for the long haul. It's expensive to buy, it's hard to make a quick profit and the market isn't that liquid at the best of times be so finding a buyer on resale can take a long while even at the best of times. You would be lucky to see much appreciation over three years (you'll do well if you keep pace with inflation) which makes the taxes meloncollie mentioned a big deal. All the economic stuff you mention are relevant but not as relevant as say, the UK and the US where boom and bust makes timing of entry and exit really critical and recession hits a lot of people because home ownership is so high. Prices here are a lot less volatile. But buying here is a big decision. The market dynamics just aren't geared to making a quick buck.
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