The 20% equity isn’t something that’s required by law, it’s just “best practice” among banks. The chances of them liquidating your house when you have a safe job and always pay on time aren’t that high imho, even within a crash.
There is no “margin call” mechanic going on here. banks won’t just scare away customers that easily.
I’m confident that won’t happen
a) prices increased c. 10% in our region since we bought
b) We bought 130k below the max. market value the bank was willing to finance
c) we invested (or spent, who knows…) 200-250k in equity
Or am I missing something? My thought was that
a) we won’t pop-up in a stress test and
b) the amortisation part is already done when renewing the mortgage in 8 years
The last time we had “high” prices in 1990, it took 10 years to reach the bottom. And you would think going from 6000 to 4000 per sqm was a solid reduction, 33%! But when I told this to my boss, who is a ca. 55 y.o. Swiss, and who bought his house at that time, and who works in real estate, he said that he does not recall any such dip in prices. He said “maybe it was 10%”. Of course, he just might be wrong.
But applying this historical data to our current situation, if the dips start soon, how long it will take and what level do you expect it will reach? Do you think the prices can go down by 30%? Or just 10%? If 10%, then we’re just gonna go back less than 1 year, which would mean the wait was pointless.
And if we look at the total UBS bubble index, which includes other factors than just price, we can see that according to them we’re only in the “overpriced” range.
Don’t get me wrong, I’m super frustrated about not being able to afford real estate. Intuitively, it seems wrong that it costs so much that most people have to take huge loans to afford it. I’m just not too optimistic about the price drops or the speed at which it could happen. We would need to see some major shitshow of unforeseen scale in order to witness a crash in prices by 50% or more. And honestly, only then could I afford any of the Swiss real estate with clear conscience. Otherwise it just seems like a leveraged bet on the prosperity of the country for the next 30+ years.
As with everything in CH probably depends a lot on the canton.
In and around ZH we might not see any significant drops.
But elsewhere it might have already started to happen (I overheard some people chatting about Davos and such - probably also not low demand area, but apparently feeling it).
Geneva and Zurich would be high-risk. Ticino not. Although when I look for real estate in Ticino, I don’t get the impression like it’s cheap. Cheap real estate in Ticino looks really crappy and nice ones are scarce and much more expensive.
It is helpful to look at the data underlying the UBS bubble index, which is a made up composite
The 3 charts below support the view that things took off with introduction of low / negative interest rate circa 2009.
Even if the population and demand keep growing, at a certain point the current prices just stop being affordable.
Example: our friends nearly pulled out of a 2M purchase when the 10 year rate went to 1.2% as it blew their monthly budget. They would never have bought at 3% (interest cost on 80% loan becomes 4k /month instead of 1.6k)
The regional analysis is based on how the local price-to-rent ratio has changed over the past five years. Regions where this ratio experienced a disproportionately sharp rise have an increased correction risk.
I guess then realty prices went up more than rents. Although whenever I look for some attractive flats to rent, I tend to find places which cost 4’000 CHF or more. So not sure about rents being in check. Maybe for the low standard flats. But the attractive ones are in high demand, I guess.
around back to 2019 levels, where the sqm-prices skyrocketed from 6000 to 7000 CHF in 0 years, at near-0% inflation. This was all because of the negative interest rate was introduced in 2015 + 3yrs pickup on the housing market - or I can expect them to just stall like it did 2015-2019.
On a long-term average, a yearly 2% appreciation would be in order. We are way above that currently.
Friends who bought something in Affoltern am Albis for 850 four years ago are now selling it for 1.1M. That’s just not reasonable. But I might just be wishful Anyhow, the 3% 10-yr kills all options anyway.