| Ramzi Chamat
In a global economic climate marked by uncertainty and volatility, the Swiss National Bank (SNB) has recently made a decision that has sparked particular interest in the Swiss real estate sector. Opting for stability and prudence, the SNB has maintained its prime rate at 1.75%, a decision contrasting with the previous five consecutive increases. This decision, coming in a context of inflationary pressures and moderate economic growth, is perceived as a positive sign for the real estate market, offering a certain assurance to investors, owners, and buyers. However, it also raises questions about medium and long-term economic prospects and how real estate market players can navigate this complex environment. In the following article, we will delve deeply into the implications of this SNB decision and its potential impact on the Swiss real estate market.
The Swiss National Bank (SNB) has recently made a significant decision by maintaining its prime rate at 1.75%, news that resonates favorably in the corridors of the Swiss real estate market. This decision, coming after five consecutive increases in the prime rate since July 2022, denotes a balanced and cautious approach by the SNB in the face of an economic environment strewn with uncertainties and challenges.
The Swiss economy, like the global economy, is navigating tumultuous waters, marked by inflationary pressures and sluggish economic growth. The inflation rate, although slowed to 1.6% in August, remains a major concern, with expectations of price increases at 2.2% for 2023 and 2024. Concurrently, the growth of the Swiss GDP is forecasted at about 1% for the current year, and a modest increase in unemployment is anticipated.
In this context, the SNB's decision to keep the prime rate stable is perceived as support for the real estate market. A stable prime rate generally means stable mortgage interest rates, which can encourage investment in real estate and support property values. Additionally, the stability of interest rates can promote the predictability and confidence of investors, buyers, and property owners.
The increase in rents and electricity prices, mentioned by Thomas Jordan, Chairman of the Governing Board of the SNB, could also impact the real estate market. While these increases may exert additional inflationary pressure on the economy, they could also translate into increased rental yields for property owners.
The comparison with the European Central Bank (ECB) highlights the prudence of the SNB. While the ECB was forced to raise its rates due to an inflation rate significantly above its target, the SNB has opted for a more cautious and thoughtful position. This prudence is applauded by experts such as Charles-Henry Monchau, Director of Investment at Banque Syz, who considers the SNB's decision as "clear and limpid."
The SNB's decision offers a positive outlook for the Swiss real estate market, but it is crucial for market players to remain vigilant. Fluctuations in inflation, interventions in the foreign exchange market, and developments in economic growth can all influence the real estate market in the medium and long term.
The SNB, by maintaining a balanced approach and being ready to intervene in the foreign exchange market, demonstrates a willingness to support the Swiss economy and mitigate imported inflationary pressures. This could help maintain a favorable environment for the real estate market, mitigating risks related to inflation and supporting the value of the Swiss franc.
The SNB's decision to maintain the prime rate at 1.75% is a sign of stability and support for the Swiss real estate market. In an uncertain economic environment, this decision brings a certain assurance to investors, property owners, and homebuyers. However, caution remains advisable, and careful observation of economic indicators and future SNB decisions will be essential for successfully navigating the Swiss real estate market in the coming months and years.
