Fears of Swiss Bubble as Prices Soar

11 October 2011

Swiss real estate prices are soaring as a convergence of factors push demand up steeply, but economists are not rejoicing in the joy of good fortune, rather they are ever-fearful of the damage that the expanding bubble could cause to the Swiss economy.

 

 

A rise in real-estate prices is among the greatest threats to Switzerland’s economy, said Philip Hildebrand in June. The Swiss National Bank Chairman made the remarks less than two months before the bank lowered rates to zero, which was little over a year after issuing a stark warning about the possibility of a bubble.

 

 

"As interest rates have fallen, many people who could not afford it before can buy a house," Alexandre Ziegler, an assistant professor of finance at the University of Zurich, said. "This has fueled demand and house prices, and could eventually result in a real-estate bubble."

 

 

the Swiss franc is one of the strongest currencies in the world right now, this makes Switzerland, and especially Swiss property a safe haven for global investors.

 

 

At the same time the Swiss banking system is one of the strongest in Europe, with liquidity high and the economy gaining strength, the Swiss are willing and able to capitalise on the low interest rates and buy homes. That is those that can afford to keep up with the rapidly escalating prices.

 

 

As a result of these factors demand for Swiss property is soaring and prices are rising rapidly. The average price for a mid-size Swiss apartment has risen 12.5 percent since the end of 2009, according to a study by Zurich-based research consultant Fahrlaender Partner AG. In the cantons of Zurich and Geneva, prices jumped 13.7 percent and 14.5 percent, respectively.

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