PurposeSwitzerland boasts arguably the highest density of green properties in the world. In 2008, more than 15 percent of total new construction received the Swiss energy building label Minergie. The spatial distribution of these green buildings, however, is highly heterogeneous. In some regions, more than half of the new dwellings are built according to the Swiss green building standard. In others, this share is still negligible. The purpose of this paper is to identify the determinants of the distribution of green housing.Design/methodology/approachFor 2,571 Swiss municipalities, the author computes the green building share of new residential buildings. Data are collected for several variables measuring demographic, geographic, social, cultural, and political aspects that – according to the authors' hypothesis – may influence green building activity. Count regression is used to estimate the impact of these variables on the demand for green buildings.FindingsIt is found that differences in income levels and cultural affiliation between Swiss municipalities account for the largest part of the variation in green building activity. The impact of homeowners' stance on environmentalism is highly significant but less important. Government subsidies do not seem to trigger additional green housing activity.Originality/valueThe paper presents one of the first empirical analyses regarding the determinants of green building activity. Thanks to a comprehensive dataset, the authors are able to investigate the impact of potential drivers of “green housing” construction activity. The regional variation in governmental incentives is analysed and delivers valuable insight for policymakers interested in spurring the development of green buildings.

Property derivatives, Property spread, Arbitrage free price bounds, Market frictions, Halifax House Price Index,

Economists have forcefully argued for the introduction and use of property derivatives as a hedge against house price risk (e.g. Shiller and Weiss, 1999). The rationale for these financial instruments seems clear, as many households are heavily invested in housing and standard financial instruments offer a poor hedge. In practice, however, most of the property derivatives available have been targeted to meet the needs of institutional investors, not those of owner-occupiers. Building on the recent launch of the first Swiss property derivative, we here propose index-linked mortgages tailored to retail consumers. The payments of these mortgages depend on the corresponding housing market performance. We further discuss the stabilization of the homeowner's net wealth, price the instruments, and quantify the expected decrease in the mortgage default risk achieved by these immunization effects.

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The recent real estate bubble was fuelled by non‐risk‐adjusted lending policies, low interest rates, and complex finance vehicles. Mortgage‐backed securities (MBS) played a crucial role in the crisis. These vehicles were praised as liquid capital market instruments that allowed mortgage lenders to replenish their funds, which could then be used for additional origination activities. However, in some forms, securitized mortgage pools are highly complex and hard to price. It turned out that MBS were not able to deal with the risks of the real estate market appropriately. The painful burst of the real estate bubble highlights the urgent need for instru‐ments that provide more transparency and allow better mitigating of both house price and commercial property risk. Property derivatives, currently emerging in the US and the UK, address real estate prices directly and make them more transparent. Thus, they facilitate a more efficient risk allocation. We illustrate the possibilities and limitations of property derivatives with respect to the current subprime crisis. Copyright © 2009 Wilmott Magazine Ltd

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