Is There A Real Estate Bubble in Switzerland? (Diagnostic as of 2012-Q4)

17 Pages Posted: 22 Mar 2013

See all articles by Diego Ardila

Diego Ardila

ETH Zurich

Peter Cauwels

ETH Zurich; Director Quaerens CommV

Dorsa Sanadgol

ETH Zurich

Didier Sornette

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute

Date Written: March 21, 2013

Abstract

We have analyzed the risks of possible development of bubbles in Switzerland’s residential real estate market. The data employed in this work has been collected by comparis.ch, and carefully cleaned from duplicate records through a procedure based on supervised machine learning methods. The study uses the log periodic power law (LPPL) bubble model to analyze the development of asking prices of residential properties in all Swiss districts between 2005 and 2013. The results suggest that there are 11 critical districts that exhibit signatures of bubbles, and seven districts where bubbles have already burst. Despite these strong signatures, it is argued that, based on the current economic environment, a soft landing rather than a severe crash is expected.

Keywords: real estate bubble, Switzerland, interest rates, positive feedbacks, log-periodic power law, Comparis, Internet, supervised machine learning

JEL Classification: C60, C80, G01

Suggested Citation

Ardila, Diego and Cauwels, Peter and Sanadgol, Dorsa and Sornette, Didier, Is There A Real Estate Bubble in Switzerland? (Diagnostic as of 2012-Q4) (March 21, 2013). Swiss Finance Institute Research Paper No. 13-07. Available at SSRN: https://ssrn.com/abstract=2237561 or http://dx.doi.org/10.2139/ssrn.2237561

Diego Ardila

ETH Zurich ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

Peter Cauwels

ETH Zurich

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

Director Quaerens CommV ( email )

Bruges
Belgium

Dorsa Sanadgol

ETH Zurich ( email )

CER-ETH Center of Economic Research at ETH Zurich
ZUE F7
Zurich, 8092
Switzerland

Didier Sornette (Contact Author)

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC) ( email )

Scheuchzerstrasse 7
Zurich, ZURICH CH-8092
Switzerland
41446328917 (Phone)
41446321914 (Fax)

HOME PAGE: http://www.er.ethz.ch/

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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