Trends in property market


Trends in property market
Price trends in the property market are driven by several dynamics, such as interest rates, shortage of supply, increasing regulation and so on.

The average price of a home in Switzerland today is CHF 850,000, which is 70% more than in 2000, when the average price was CHF 500,000. Over the past 15 years, however, average incomes have grown by less than 20%, resulting in a sharp fall in people’s ability to buy a home. Real prices have almost reached the level last seen at the beginning of the 1990s when Switzerland’s property bubble burst. Nevertheless, it seems that speculation was a far greater factor at that time than it is today. Currently, market fundamentals account for two thirds of price increases. All the indications are that this time things are different. Or at least that was the case before the SNB’s decision to abolish the floor rate between the Swiss franc and the euro. This may lead to increased property speculation as a result of lower interest rates, with mortgage rates that will not rise and may even fall (according to think-tank Avenir Suisse). A further consequence was reported in Le Temps: “The lowering of already negative interest rates will put downward pressure on mortgage rates. Renters could benefit, too, if the reference rate, held at 2% in December, is cut to 1.75% at the beginning of March. The average mortgage rate would have to fall to 1.87% to trigger a quarter-point cut in the reference rate.”

While the decision was a complete surprise to some, for others the surprise lay rather in the timing. Indeed, it should be remembered that when introduced, the floor rate was announced as a temporary measure. The decision has prompted somewhat differing reactions and explanations. You can find several reactions in The Economist.

Having looked at some predictions, let’s turn now to the latest statistics. It’s worth taking a look at the figures published by the Swiss Federal Statistics Office on 16 December 2014. Also of interest are some recent figures from France. published the results of a survey of buyers in the French luxury property market. These were its main findings:

49% wish to purchase a primary residence compared with 86% of the conventional market
39% are looking for a property costing under EUR 1.5 million
28% are foreign (principally Belgians, Swiss and Britons)
75% already own more than two properties
72% are employed
32% have a net annual income of EUR 200,000 or more, compared with 45% in April 2014

For buyers of high-end property, the main reasons for delaying their decision to purchase were overvalued prices (33%), limited choice (25%) and the economic climate (14%), followed by personal and professional situation, tax policy, foreign exchange rates and bureaucracy.

Also of note, 59% of conventional buyers and 69% of high-end buyers believe that the situation in France will deteriorate in the next six months.

Conventional buyers of new properties had the following profile:
56% are under 35
40% have a modest income
61% are first-time buyers
63% have difficulty in obtaining a mortgage
51% are looking for a property costing between EUR 100,000 and EUR 200,000.