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Swiss Real Estate > Swiss Housing Market > Flashcards

Swiss Housing Market Flashcards

Structure and Challenges - PD Dr. Frank Bodmer

1
Q

What are the two peculiarities (Eigenheiten) of real estate markets?

A

1 limited supply of land
- new land is the exception
- building land has to be obtained by using agricultural land or forests

2 RE asset that provides a service to a costumer
- RE held by investors, which expect an adequate ROI
- dwellings used by hh (shelter basic need)

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2
Q

Which two markets exists according to Bodmer in RE?

A
  1. Asset market
  2. Space market
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3
Q

Which are the fundamental challenge for the Swiss housing market?

A

1 Providing a growing population with affordable housing of good quality

while

2 protecting the natural environment

(both are political goals)

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4
Q

Which are the 5 goals for public policy?

A
  1. sufficient supply
  2. affordable prices and rents
  3. limitation of land use
  4. promotion of private ownership
  5. financial stability
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5
Q

How does the market mechanism works?

A
  • supply and demand
  • in the most liberal version, state just:
    -> is providing a secure legal environment
    -> stable economic conditions
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6
Q

What kind of State interventions exists in RE?

A

1 Rules and limitations for land use and buildings
2 Intervention in segments of the housing markets
- rental market
- home ownership
- foreign ownership
- touristic use

3 Public supply
4 income support for lower income households

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7
Q

What kind of tradeoffs can appear by try to reach a goal in RE?

A
  1. Limiting land use for housing: protects the natural environment -> reduces supply of building land -> higher prices for building land and for housing
  2. Rent regulation: protects rentners but might hinder supply for new housing or segmentation of the market -> lower rent for tenants -> higher rents for many hh looking for new housing
  3. Promoting home-ownership reduces the average cost of housing and increases demand.
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8
Q

How many cantons and municipalities does Switzerland have?

A

26 cantons
2’000 municipalities

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9
Q

Which are the largest cities in Switzerland?

A

Zürich, Geneva, Basel, Lausanne and Bern

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10
Q

What are the challenges of urban sprawl (Zersiedelung)?

A
  1. high land use, high infrastructure requirements, high energy use
  2. aesthetically unsatisfactory
  3. single-family houses still preferred
  4. in practise, most hh rent appartments
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11
Q

Can you tell me some kind of land use in CH?

A
  1. agricultural area
  2. forest area
  3. uproductive area
  4. settlement area (Bauland)
  5. residential area
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12
Q

Which kind of land use did increase strongly at the cost of another kind of landuse?

(aggricultural, forest area, unproductive area, settlement area, residential area)

A

settlement area at cost of aggricultural land

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13
Q

dwellings vs. households

A

The difference of dwellings and households is made up of second homes (= dwellings for the non-resident population and tourist accommodation).

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14
Q

How did the m2 per person in CH evolve? and how many m2 is it currently?

A
  • increased, but after year 2000 only slightly
  • ca. 45m2
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15
Q

There are 3 figures:
- living spaces
- gdp
- population

Which of these three had the biggest growth?

A

living spaces

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16
Q

Market of building land:
why is the supply of land more or less limited?

A

due to zoning regulation

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17
Q

Market of building land:
Why among other things is land held by owners who don’t want to use it or sell it?

A

expectation of further price increase

18
Q

Market of building land:
How can additional land be made available? and who is responsible?

A
  • additional land through rezoning
  • mostly responsibility of municipalities
19
Q

Market of building land:
If there is more land made available, where does it mostly come from in:
- rural areas (ländlich)
- urban areas (städtisch)

A
  • rural areas: agricultural land
  • urban areas: deindustrialisation
20
Q

Market of building land:
Why does even a fixed supply of building land not mean that the supply of housing is fixed?

A
  • Densification (Verdichtung) provides elasticity: higher buildings, closer together
  • smaller apartmens further increase the elasticity
21
Q

What might be the sources of price differences in RE?

A
  • closeness to big cities
  • transport facilities to big cities
  • taxes
  • lake view
  • etc.
22
Q

What is the difference of
asset market and space market

A

asset market:
- investor trade properties based on expected return
- resutls are equilibrium prices and quantities

space market
- demand space based on rents and
- number of hh characteristics (f.e. income)
- supply provided by investors in the asset market
- results are equilibrium rents and quantities

-> quantities/ vacancies identical in the two markets

23
Q

How is the equilibrium in asset markets and space markets showed?

A
24
Q

How do you calculate the price of a property?

A

sum of the discounted future rental income

P = Price
R = Rent
Ret = desired real return in percent
T = lifetime

25
Q

How do you calculate the desired real return (Ret)?

A

Ret = r + rp

r = i - infl

r = real interest rate on risk-free investments
rp = risk premium
i = nominal interest rate
infl = inflation

26
Q

How do you calculate the price of a property with a very long life, constant rent and a constant interest rate

A

P = R/Ret

P = price
P = R / Ret
Ret = desired real return

27
Q

Price and Rents: which one does determine the other?

A

Rents determines the price, not the other way round

28
Q

What kind of Ratio is used to assess (bewerten) overall valuation levels and bubble risks?

A

P/I Ratio (Price income ratio)

29
Q

Trends and cycles in the Swiss housing: Economic development, resident population - how’s the development since 1900 and 1945

A

1900 - today: almost trippled
1945 - today: doubled

30
Q

Empty dwellings are usually an indicator for crisis, as in the 1970 and 1990. Why was 2015 an exception?

A

because of high construction

31
Q

The role of interest rates: what impact did low interests have?

A

low interest rates led to search for return, mostly by pensions funds and insurance companies “Anlagenotstand”

32
Q

Market shares in CH: what is more dominant? Renting or owning?

A

still renting (since 1970 betwen 55 - 60%) - the share of owner-occupied housing increased steadily until 2015 and since is falling again

33
Q

Market share: renting vs. owner-occupation, CH vs. European countries?

A

Switzerland is a renting country -> it is quite the exception in Europe (more owners)

34
Q

Market share: Who are the owners of rental property?

A

Private persons: more than 50%
public and cooperative owners the rest

35
Q

Why are rents adjusted only very infrequently?

A

Because of usual long term contracts

36
Q

rental market and rent regulation: what is the difference between
“moderate system” vs. strict system and which systems is in CH characterized?

A

moderate system
rent for new contracts reflects market conditions
strict system
rent falls signifcantly below market levels over time

-> in CH moderate system

37
Q

What does limit the purchase of residential property by foreigners?

A

Lex Koller

38
Q

What are the effects of “Lex Koller”

A
  1. Limiting foreign assets demand alone will lower prices and increase rent
  2. Limiting foreign space demand will lower prices and rent
39
Q

What did the second-home initiative change?

A

limitation of the construction of second homes in municipalities - with a share of second homes of 20% or more

40
Q

housing policy: what wants the political left and the political right?

A

political left
- rent regulation stricter
- limit rent increase
- limit the possibility to tear down, to avoid a loss of cheaper flats

political right
- lower barriers for housing development, by limiting the possibility of stopping building projects through court action

Swiss Real Estate (4 decks)

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