Jean-Pierre Roth: Real estate crisis in the United States - similar risks in
Switzerland?
Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the
Swiss National Bank and Chairman of the Board of Directors of the Bank for International
Settlements, at the Banque Cantonale Vaudoise, Lausanne, 9 June 2008.
The complete speech can be found in French on the Swiss National Bank's website (www.snb.ch).
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In the past few months, developments in the mortgage and real estate markets have
attracted increasing attention. Europe, and Switzerland in particular, have been indirectly
affected as a result of commercial bank activities in US mortgage markets. Over the past few
quarters, the European real estate market has also been affected, with a number of countries
experiencing a downturn in prices similar to that in the United States. By contrast, other
countries, such as Switzerland, have seen real estate prices rising at a steady pace.
In some respects, what the United States went through is a classical property crisis of the
type that Switzerland experienced in the early 1990s. However, the US real estate crisis
spilled over to encompass the international financial markets, endangering their stability and
prompting the intervention of several central banks. These events confirm the importance of
sound real estate market developments for the economy.
It is important to recognise that the Swiss mortgage and real estate markets are very
different from their US counterparts. Developments in the Swiss housing market have been
relatively steady, despite the strong demand pressures discernible in certain regions. At
present we do not detect any obvious signs of a speculative bubble that might culminate in a
sudden fall in prices. The main explanations for the rise in real estate prices in the past few
years have been higher expectations and good financing conditions. Around Lake Geneva
the pressures on the limited available space and the fast growth in the residential population
have acted as special stimulants. Thus there have been no speculative developments as
witnessed at the end of the 1980s. Now that the business cycle has peaked in Switzerland, it
is very likely that we will move into a phase of more moderate price increases.