ZURICH (Reuters) - The Swiss government said on Wednesday prospective home owners should no longer be allowed to use pension funds as down payments for property, in a move it hopes will dampen an overheated Swiss real estate market.
Ultra-low interest rates, immigration and Switzerland’s appeal as a safe haven for financial investors have helped drive up mortgage lending, and Swiss officials have used a variety of supply- and demand-side measures to fight rising property prices since last February.
Swiss banks normally require roughly a fifth of the purchase price of property in cash, funds which many home-buyers help to finance out of their pension funds.
In a surprise move, the government said on Wednesday it wants to close this loophole, partly to minimise the risk of pensioners drawing welfare or other subsidies if their retirement savings have gone towards property purchases.
“We hope for a certain dampening effect (on the housing market) from this measure,” Swiss economy minister Johann Schneider-Ammann told Swiss broadcaster SRF.
The measure is part of proposed reforms to Switzerland’s pension system, and will also limit an existing option to draw pension money early when setting up a new business. The proposals require parliamentary approval.
The Swiss National Bank, hamstrung by rising housing prices because it cannot lift interest rates due to a cap it has set on the Swiss franc, has long fretted about rising Swiss house prices and bank lending.
In January, the government doubled the level of capital banks must hold against their mortgage book, on the advice of the SNB, after an attempt last year to cool the housing boom did not do the trick.
Swiss banks said on Tuesday they would tighten requirements for mortgage loans voluntarily, hoping to preempt measures being readied by the government, which fears the high debt levels could provoke a crash if the economy went into recession.
Switzerland’s home-owner’s lobby criticised the Swiss government’s proposals on Wednesday, saying it would only widen the gap between those who can afford property and those who cannot.
Home ownership is a luxury in tiny Switzerland, where the alps cover nearly two-thirds of the country’s surface. Only a third of residents own their own homes, according to government statistics, which is low compared to other countries.
Reporting by Katharina Bart; Editing by Alison Williams