| Ramzi Chamat
A wind of stability is blowing over the Swiss real estate market, and the recent announcement by the Federal Housing Office (OFL) plays a significant role in this. With the decision to maintain the mortgage reference rate for September, what implications can we expect for tenants, landlords, and the dynamism of the Swiss real estate market? From the analysis of average interest rates to regulatory flexibility, we dissect every aspect to provide you with a comprehensive and enlightened perspective.
In the face of uncertainties in the global financial markets and fluctuating economic conditions, the Federal Housing Office (OFL) surprised many by maintaining the mortgage reference rate at 1.50% for September. After a significant increase in June, what message does this maintenance send to the Swiss real estate market?
The mortgage reference rate had risen by 25 basis points to reach 1.50% in June. This increase had raised concerns among tenants and investors about a potential ongoing upward trend, which could significantly impact the housing market.
With the September decision, tenants can breathe a sigh of relief. Those whose rents are indexed to this rate will not see an increase for at least four months. This demonstrates a desire to stabilize the Swiss real estate sector in these uncertain times.
The weighted average interest rate for mortgage claims as of June 30th was 1.59%, marking an increase from the 1.44% in the previous quarter. The federal administration specified that for a fluctuation in the rate determining rents, the average rate would have had to drop below 1.38% or exceed 1.62%.
Switzerland, true to its tradition of balanced regulation, provides flexibility mechanisms for both tenants and landlords. While the former can request a rent reduction if based on a previous rate of 1.75% or higher, the latter have the latitude to increase rents by up to 3% if they are indexed to the rate of 1.25% in force between March 2020 and June 2023.
VI. Conclusion: Switzerland and Its Balanced Real Estate Sector
The OFL's decision demonstrates Switzerland's ability to regulate its real estate market with precision and foresight. Even in the face of global uncertainties, the country continues to protect both the interests of tenants and those of landlords. This regulatory and economic stability reinforces Switzerland's position as one of the most solid and reliable real estate markets in the world.
