| Ramzi Chamat
Real estate in Switzerland continues to be a topic of major interest, not only for investors and owners, but also for anyone who closely follows the country's economic trends. In the fourth quarter of 2023, the Swiss real estate market recorded a constant increase in the prices of houses and owned accommodation, thus confirming the robustness of this sector in the current economic context. This in-depth analysis explores market trends, key figures, factors influencing construction costs and the outlook for 2024, to provide a comprehensive overview of the real estate situation in Switzerland. Let’s dive into the details to better understand this development and its implications.
In the fourth quarter of 2023, the Swiss real estate market continued its upward trend, with increases of 0.7% for house prices and 1.4% for owner-occupied homes compared to the previous quarter, according to a study conducted by the real estate firm Wüest Partner. These figures reflect the dynamics of the Swiss real estate market, but to fully understand the impact of these trends, we need to delve deeper.
The year 2023 was marked by continued demand for real estate in Switzerland, despite a significant increase in mortgage rates, from around 1.5% to levels between 2.2% and 2.8% in 2023 This increase has impacted the purchasing decision of many potential buyers, making the purchase of properties slightly less attractive in terms of borrowing costs.
Switzerland's overall economic growth was also a supportive factor, creating a favorable climate for real estate investment. In 2023, the country's gross domestic product (GDP) increased by 2.5%, boosting investor confidence.
However, this strong demand also presented challenges, such as a scarcity of supply in some urban areas. In Zurich, for example, the housing shortage reached unprecedented levels, with an occupancy rate of over 98%. This increased market pressure inevitably led to rising prices, with a 5% increase in Zurich, 4.2% in Geneva, and 3.8% in Basel during 2023.
Additionally, Switzerland's tax policy, which is favorable to real estate, served as an incentive for investors. Property-related advantages, including tax-deductible mortgage rates, strengthened the demand for real estate as a stable and profitable investment.
To fully understand the impact of rising prices, it is important to examine numerical data and consider how this manifested in different regions of Switzerland.
Switzerland's major cities were most affected by the increase in real estate prices. Zurich, in particular, recorded a significant increase, with a rise of 6.2% during 2023. Geneva and Basel also experienced notable increases, with respective increases of 4.8% and 4.5%. These cities attract investors due to their status as economic and financial centers.
However, it is essential to note that the situation varies significantly from one region to another in Switzerland. In rural and less urbanized areas, price increases may be less pronounced. For example, the cantons of Appenzell and Uri recorded more modest price increases of around 1.5% and 2.1%, respectively. Regional differences in employment markets, accessibility to amenities, and quality of life also have a significant impact on property prices.
In summary, the numbers confirm that the rise in Swiss real estate prices is a reality, with notable variations across regions. This analysis of numerical data allows us to better understand how real estate market trends manifest across the country, reflecting the impact of regional and economic factors on prices.
In addition to real estate prices, it is important to consider construction costs that impact the market. Construction costs increased by 1.4% in 2023 but remain 15% higher compared to three years ago, indicating a significant trend.
This increase has been influenced by the fluctuation of construction material prices. Construction materials have experienced contrasting developments, directly affecting construction costs. For example:
1. Brick prices saw a significant increase of 36%, significantly impacting construction costs for projects using this material.
2. Fresh concrete, a commonly used construction material, experienced a 9% increase, contributing to the overall rise in construction costs.
3. Glass wool insulation boards also increased by 6%, affecting building insulation costs.
4. Conversely, some materials saw significant price decreases, partially mitigating the impact of rising construction costs. Steel reinforcement bars saw a decrease of 28%, reinforcement mesh decreased by 21%, and wooden panels saw a 14% price reduction. These price decreases were welcomed by construction industry stakeholders.
This analysis of construction costs and material prices highlights the importance of closely monitoring cost developments in the construction sector, as they directly influence the decisions of real estate developers and investors.
Looking ahead, the outlook for 2024 appears uncertain. Experts at Wüest Partner predict a 1.5% increase in construction costs for the coming year. This projection is influenced by several factors.
On one hand, inflationary pressure has slowed down, which could lead to stabilization or even a slight decrease in construction material prices in 2024. This could be positive for industry stakeholders.
On the other hand, labor shortages in the construction sector and rising energy costs persist. These challenges could exert upward pressure on labor and energy costs.
Ultimately, economic uncertainty and trends in the Swiss real estate market will play a crucial role in determining construction costs for 2024. Industry stakeholders will need to remain vigilant and responsive to economic developments and external factors to navigate successfully in an ever-changing environment.
In 2023, the Swiss real estate market experienced a notable upswing, driven by factors like low interest rates, evolving buyer preferences, and economic stability. However, regional disparities underscored the significance of localized influences.
The surge in construction costs, attributed to fluctuating material prices, added a layer of complexity to the landscape. While some materials became more expensive, others witnessed price reductions, shaping construction decisions.
Looking ahead to 2024, uncertainty prevails, with variables such as inflation, labor shortages, and energy costs influencing the trajectory. Adapting to these dynamic forces will be paramount for industry stakeholders.
In summary, the Swiss real estate market exemplifies resilience and adaptability. It not only thrived amid challenges but also sets the stage for continued evolution in the years to come.
