While property is an emotional investment, it’s also a financial one. Whether it’s a primary home or a home away from home, property has proven to be a reliable investment over the long-term.

Looking back

Over the long term, our homes are a safe store of value – and while the property market is not immune to downturns in the economy, over the long-term the property market remains a steady performer. The deep UK recession in 1991–92 saw inflation surge to almost 10% and interest rates rise to 15%. As the economy contracted and unemployment rose, house prices fell across the country. The property market suffered another substantial drop during the recession caused by the 2008 financial crisis.

However, over the past 30 years, property values in prime central London have been driven by demand, dominated by international buyers, who have been able to respond rapidly to the evolving environment. Prices have also largely been driven by changes in government policy, including increases in stamp duty for investment properties (figure 1).

Figure 1: The politics of housing

Government policy has driven sales volumes in the UK housing market over the past decade.

Source: Knight Frank and Macrobond. Date: April 2020.

The chart shows that government policy has driven sales volumes in the UK housing market over the past decade. The data from 2007 through to today shows how the sales volumes react when new policy is announced.

French property prices also saw dips in 1991–92 followed by a slow recovery over six years, and again in the 2008 financial crisis but with a swifter recovery. The British second-home buyer saw their purchasing power reduced after the crisis, dampening volatility in those markets.

By contrast, Swiss property prices held steady during this period. The reason is largely because the Swiss franc is a currency of choice in times of stress and the Swiss property market was heavily dominated by domestic buyers (figure 2).

More recently, the economic cycle is still a strong factor in price movements, but government policy has played an increasingly prominent role in property values.

Figure 2: Flight to safety

Switzerland’s property market tends to perform well during challenging times.
Source: Wüest Partner AG.
A chart showing Geneva Prime (+1.9%), Zurich Prime (+6.7%) and Swiss average (+2.7%) price growth since 2000. The Swiss average price growth has slowly and consistently been climbing since 2000.

Real estate offers a sense of comfort when looking to preserve and grow wealth. Whether buying a second home, an investment property or giving your children a head start in life, there’s a lot to think about – particularly when you haven’t grown up in the country where you are purchasing. Every jurisdiction has its own regulations and taxes, depending on how you intend to use the property and eventually either sell or pass it on.

It’s important to consider your financial goals and explore the various options with your professional advisers so you can structure any purchase in the best possible way. At J.P. Morgan, we’re finding solutions to help you navigate today’s challenging environment, ensuring you are driving efficiency from both sides of your balance sheet as well as taking advantage of low interest rates as we have the capability to finance high-value residential real estate in certain jurisdictions.

Visit us online at JPMorgan.com/high-value-mortgages

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Webcast: In conversation: J.P. Morgan Private Bank & Knight Frank


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