10 responses

  1. iakovos
  2. BarleyFutures

    I have to disagree with the rebuttal’s Phases of a Housing Cycle (#12), especially from the pov of the marginal buyer.
    Phase 1: People who are wage-dependent don’t “jump” into housing because they are making too much money. If anything, they jump into a rising housing market because they aren’t making enough – their incomes are not keeping up with rising asset prices and rising rents, so to arrest the socioeconomic slide they take on tremendous debt in order to stabilize their monthly housing cost.
    The average person is not good at predicting inflation in advance, especially if they are temporarily feeling richer in the small gap from their rising wage to rising prices – they only hedge against inflation once there is ample evidence of it being in effect already. Thus the rush to jump into an accelerating market.
    Now if you’re speaking only for investors within the top 20%, then the rationale may be different, although “hedging against inflation” and “frontrunning the availability of cheap financing via ultra-loose monetary policy” don’t seem too awfully different at this point in time. And, of course, the top 20% do not an economy make.


  3. GeorgeDorgan

    BarleyFutures Yes, this might happen in Canada, Norway and Russia currently and was the case in the U.S. before. The term “jump” is misplaced in the case of Switzerland. I corrected the formulation.


  4. Equitykingkong

    great stuff but if I might make a suggestion… could you please include the date of your blog post


  5. Equitykingkong

    btw. DEKA  is still one of my top picks for being wrong most of the time


  6. GeorgeDorgan

    EquitykingkongMy stuff has updated the wordpress theme so that it includes the date of the page.
    Very often the date was already visible in the economic data presented.
    The relevance most often does not change only because data is a bit older.


  7. Cpersson

    If the steep appreciation of the chf leads to lower real wages (to stay competitive), do you see the Swiss housing bubble now bursting?


  8. GeorgeDorgan

    Sorry for the late response.
    You mean higher real wages: wages should go up by 0.5% or maybe 0% but inflation by -2%. Higher real wages.
    Exactly the opposite with the stronger franc the bubble has been avoided, because they do not need to hike rates for another coupe of years.
    Moreover, Swiss real estate gets expensive for foreigners. True it might burst for foreigners, but remains interesting for Swiss.


  9. GeorgeDorgan

    Equitykingkong It is done as you have seen


  10. BenniGholami

    I think the property bubble will only get worse over time. We still have a way to go before it plateaus only because there is still space for houses and villas to be built on, for now. Once all that space is utilised, people are going to want to buy the prime real estate nearer the city and that’s when the price of a home will really start to skyrocket. 


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