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Is There A Real Estate Bubble in Switzerland?

Author

Listed:
  • Diego Ardila
  • Peter Cauwels
  • Dorsa Sanadgol
  • Didier Sornette

Abstract

We have analyzed the risks of possible development of bubbles in the Swiss 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.

Suggested Citation

  • Diego Ardila & Peter Cauwels & Dorsa Sanadgol & Didier Sornette, 2013. "Is There A Real Estate Bubble in Switzerland?," Papers 1303.4514, arXiv.org.
    • Handle: RePEc:arx:papers:1303.4514
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    References listed on IDEAS

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    1. Bourassa, Steven & Hoesli, Martin & Scognamiglio, Donato, 2010. "Housing finance, prices, and tenure in Switzerland," MPRA Paper 45990, University Library of Munich, Germany.
    2. Peter Cauwels & Didier Sornette, 2012. "The Illusion of the Perpetual Money Machine," Swiss Finance Institute Research Paper Series 12-40, Swiss Finance Institute.
    3. Didier Sornette & Ryan Woodard, & Wanfeng Yan & Wei-Xing Zhou, "undated". "Clarifications to Questions and Criticisms on the Johansen-Ledoit-Sornette bubble Model," Working Papers ETH-RC-11-004, ETH Zurich, Chair of Systems Design.
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    7. Jiang, Zhi-Qiang & Zhou, Wei-Xing & Sornette, Didier & Woodard, Ryan & Bastiaensen, Ken & Cauwels, Peter, 2010. "Bubble diagnosis and prediction of the 2005-2007 and 2008-2009 Chinese stock market bubbles," Journal of Economic Behavior & Organization, Elsevier, vol. 74(3), pages 149-162, June.
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    11. Fry, J. M., 2009. "Bubbles and contagion in English house prices," MPRA Paper 17687, University Library of Munich, Germany.
    12. D. Sornette & P. Cauwels, 2012. "The Illusion of the Perpetual Money Machine," Papers 1212.2833, arXiv.org.
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    Cited by:

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    2. Darrell Jiajie Tay & Chung-I Chou & Sai-Ping Li & Shang You Tee & Siew Ann Cheong, 2016. "Bubbles Are Departures from Equilibrium Housing Markets: Evidence from Singapore and Taiwan," PLOS ONE, Public Library of Science, vol. 11(11), pages 1-13, November.

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