Dynamics of a Protected Housing Market: The Case of Switzerland

Abstract

This study posits that there may be a strong relationship between the high degree of protectionism of the Swiss housing market and its stability. The article provides an overview of the Swiss housing policies that, it is argued, are highly conservative in the context of an international comparison. The stability of the Swiss housing economy is empirically tested. Based on the time-period from 1990 to 2009, in which two substantial crises occurred, house prices and construction activity are modelled. The emerging results, which are admittedly based on a very short time-series, are nonetheless consistent with previous theoretical and empirical research. Furthermore, the findings indicate that the Swiss housing economy operates in accordance with fundamentals. Based on a tentative approach that measures the occurrence of the crisis with annual indicator variables, no effects of the crises on the Swiss housing market can be detected.