Outlook and developments in the Swiss real estate market at the dawn of 2024: Analysis of the individual property sector.

Introduction

The year 2023 marked significant adjustments in the Swiss real estate market. With fluctuating mortgage rates, changing supply and demand, and the impact of inflation on the economy, the real estate landscape has undergone notable transformations. This study delves into key issues such as the evolution of the number of properties for sale, mortgage rate trends, the impact on property prices, and the purchasing power of buyers. By analyzing current data and trends observed throughout 2023, we aim to provide insightful perspectives on what 2024 may hold for the Swiss real estate market.

I. Evolution of the Number of Properties for Sale

The change in the number of properties for sale in Switzerland in 2023 is a key indicator of the dynamics of the real estate market, particularly in the individual property sector. This year, the market recorded a notable increase in the inventory of available properties, with a significant jump from 35,000 to 40,000 units, a rise of 14%. This development has several important implications for the Swiss real estate market.

1. Increase in Supply and Its Implications

• Expanded Choice for Buyers: With a larger number of properties available, buyers benefit from a wider choice. This allows them to compare more options before making a purchasing decision, thus increasing their chances of finding a property that precisely meets their needs and preferences.

• Increased Negotiating Power: A greater supply gives buyers better negotiating power. In a market where supply is abundant, sellers may be more inclined to negotiate on prices or sale conditions to attract buyers.

• Potential for a Buyers' Market: The rise in the stock of real estate suggests a trend towards a buyers' market, particularly in certain regions where supply exceeds demand. In such a market, buyers often have the advantage in terms of price and sale conditions.

2. Factors Contributing to the Increase in Supply

• Sales Slowdown: A slowdown in the pace of real estate transactions can lead to an accumulation of properties on the market. This can be due to various factors, including economic uncertainties or adjustments in mortgage rates.

• Real Estate Developments: New developments and constructions can also contribute to an increase in supply on the market. This includes the construction of new houses, apartments, and other types of residential properties.

• Demographic and Social Changes: Demographic trends, such as the aging of the population or changes in living preferences, can also influence the number of properties put up for sale.

4. Considerations for Market Players

• Sellers' Strategy: Sellers need to be aware of the increased competition and adjust their strategies accordingly. This may include price adjustments, property improvements, or more targeted marketing strategies.

• Opportunities for Buyers: Buyers should take advantage of the expanded options and increased negotiating power to negotiate more favorable conditions.

• Market Monitoring: Both buyers and sellers must remain attentive to market trends, as conditions can evolve rapidly, influencing the dynamics of supply and demand.

In summary, the significant increase in the supply of properties in Switzerland in 2023 has created a potentially favorable environment for buyers and introduced new challenges and opportunities for sellers. This evolution highlights the importance for market players to adapt and respond strategically to changes in the real estate landscape.

II. Evolution of Mortgage Rates

The evolution of mortgage rates in Switzerland in 2023 has been a major concern for players in the real estate market. The decision of the Swiss National Bank (SNB) to raise its policy rate raised questions about the impact of this measure on long-term mortgage interest rates.

1. Increase in the Policy Rate by the SNB

• In 2023, the SNB raised its policy rate, a measure often taken in response to macroeconomic concerns such as inflation.

• Such a decision typically can lead to an increase in interest rates, including those applied to mortgage loans.

2. Bond Market Anticipation

• Bond markets often have the ability to anticipate changes in monetary policy and their implications.

• In this case, it appears that the markets have already factored in the adjustments to the policy rate into their calculations and forecasts.

3. Limited Impact on Long-Term Mortgage Rates

• Despite the increase in the policy rate, a major impact on long-term mortgage interest rates is not expected.

• This situation is partly explained by market expectations and other economic factors influencing mortgage rates.

4. Forecast of a Slight Decrease in Interest Rates

• For the second half of 2023, a slight decrease in interest rates is anticipated.

• This decrease can be influenced by various factors, including market expectations, overall economic conditions, and SNB policies.

5. Consequences for Buyers

A decrease in mortgage interest rates could reduce financing costs for real estate buyers.

This could make property purchases more affordable and appealing, especially for new buyers or those looking to refinance existing loans.

6. Implications for the Real Estate Market

• Mortgage rates directly influence consumers' buying power and overall demand in the real estate market.

• Lower rates can stimulate demand for properties by making home purchases more accessible.

• Conversely, an increase in rates can cool demand and influence property prices.

In summary, the evolution of mortgage rates in Switzerland in 2023 was marked by an increase in the SNB policy rate, followed by bond market anticipation and a forecast of a slight decrease in interest rates. This dynamic potentially offers a more favorable environment for buyers in terms of financing costs and could have positive repercussions on the overall real estate market.

III. Impact on Prices

In 2023, the Swiss real estate market experienced an interesting dynamic regarding the impact of interest rates on property prices. While an increase in interest rates generally has a cooling effect on demand, property prices followed a slightly different trend.

1. Decrease in Demand Due to Rising Interest Rates

• The increase in interest rates made property purchases more expensive in terms of mortgage financing, which deterred some potential buyers.

• This increase in financing costs can reduce the number of people qualified for mortgage loans or discourage buyers due to increased financial burden.

2. Continued Price Increases in 2023

• Despite the decrease in demand, property prices continued to rise, albeit slightly, in 2023.

• This trend can be attributed to several factors, such as a shortage of housing supply and continued investments in real estate as a safe haven.

• The modest price growth also reflects the resilience of the Swiss real estate market in the face of economic fluctuations.

3. Forecast of Further Modest Growth

• For the end of 2023, further modest growth in property prices is anticipated.

• This forecast is based on the current market dynamics and expectations of real estate stakeholders.

4. Price Declines Expected from 2024 Onward

• Looking ahead to 2024, the downward trend in demand, partly due to the continued rise in interest rates, suggests a decline in property prices in the real estate market.

• This anticipated price correction could result from market adaptation to the new economic and financial reality.

• It's important to note that these forecasts are subject to global economic influences and future monetary policies.

In summary, while 2023 saw a slight but steady increase in property prices in Switzerland, the ongoing decrease in demand and interest rate adjustments suggest a potential price correction starting in 2024. This evolution highlights the complexity of the Swiss real estate market, where multiple factors interact to influence price dynamics.

IV. Impact of Inflation on Buyers

Inflation in Switzerland in 2023 had a notable impact on potential buyers of real estate, especially in light of its recent decline. With inflation falling below 2%, economic conditions evolved in a way that could potentially favor real estate buyers.

1. Controlled Inflation and Its Impact

• Controlled inflation in Switzerland indicates increased economic stability. A lower inflation rate can mean a slower increase in the prices of goods and services, including costs related to real estate.

• Lower inflation can also have a positive influence on monetary policy, especially in terms of interest rates.

2. Decrease in Interest Rates

• A decrease in inflation can lead to lower interest rates. In the real estate context, this potentially means lower mortgage interest rates.
• Lower interest rates make borrowing less expensive for buyers, which can increase their ability to finance property purchases.

3. Improved Purchasing Power

• In an environment with lower interest rates and controlled inflation, consumers' purchasing power can improve.

• For real estate buyers, this can translate into an increased ability to invest in real estate and take on larger or more favorable mortgage loans.

4. Considerations for Potential Buyers

• Potential buyers should consider the impact of inflation and interest rates on their purchasing ability and the total cost of buying property.

• It's also important to take into account future economic forecasts, as they can influence real estate market conditions in the medium and long term.

In summary, the decrease in inflation in Switzerland in 2023 and the potentially lower interest rates it may lead to create an environment that could be more favorable for real estate buyers. This could manifest as improved purchasing power and reduced financing costs, making property ownership more accessible to a larger number of people.

V. Ease of Selling Properties

The Swiss real estate market situation in 2023, characterized by an increase in available property stocks and a decrease in transactions, presents specific challenges for property sellers. This market dynamic can influence the ease of selling properties in several ways.

1. Increased Property Stocks

The increase in the number of properties available on the market means more options for buyers. This situation can make some properties less attractive or unique, especially if they do not clearly stand out in terms of price, location, or features.

2. Decreased Transactions

A decrease in the number of real estate transactions indicates a less active market. In such an environment, properties may remain on the market longer before finding a buyer.

3. Buyers' Negotiating Power

• With more properties to choose from and less competition among buyers, buyers find themselves in a stronger negotiating position. They may be more inclined to negotiate prices or request additional concessions.

4. Increased Competition for Sellers

• To stand out in a more competitive market, sellers may need to adjust their selling strategies. This may include setting more competitive prices, improving property presentation, or offering additional incentives to attract buyers.

• Sellers must also be prepared to negotiate more and be flexible on the terms of the sale.

5. Sales Strategies

• Sellers should consider working with experienced real estate agents who can help them navigate this more complex market.

• Implementing effective marketing strategies, such as home staging and digital promotion, can also help attract potential buyers.

6. Influence of External Factors

• Factors such as changes in mortgage interest rates, overall economic conditions, and demographic trends can also play a role in the ease of selling properties.

In summary, property sellers in Switzerland in 2023 may face increased challenges due to a market that favors buyers. The need to adjust pricing, marketing, and negotiation strategies is essential for success in an increasingly competitive real estate environment.

Conclusion

In conclusion, as 2023 comes to a close, the Swiss real estate market appears to be heading towards a period of stabilization with gradual adjustments. Buyers can expect a potentially more favorable market, while sellers may need to adjust their strategies in response to a more competitive market. Factors such as mortgage rates, housing supply and demand, as well as macroeconomic influences like inflation, will continue to play a crucial role in shaping the Swiss real estate market in 2024. Market participants will need to remain vigilant and adapt quickly to changes to navigate successfully in this evolving landscape.