| Ramzi Chamat
Swiss real estate has always been a point of interest for both domestic and foreign investors. Its market, renowned for its stability and resilience, has weathered turbulent economic times with remarkable tenacity. In recent years, global economic conditions, rising mortgage rates, and inflation have posed challenges to the Swiss real estate sector. In this context, we take a closer look at the current state of the Swiss real estate market and the emerging trends.
The Swiss real estate market has long been synonymous with stability and security for investors. However, in recent times, global economic uncertainties, rising mortgage rates, and inflation have raised doubts about the Swiss market's ability to maintain its legendary resilience. In this article, we will closely examine the current state of the Swiss real estate market and the emerging trends.
Against all expectations, the Swiss real estate market has shown remarkable resilience over the past 12 months. Indeed, house prices have recorded a modest increase of 1.3%, while apartment prices have progressed in a slight but encouraging manner, showing an increase of 0.8%. This relative stability contrasts with the expected decline, primarily due to rising mortgage rates and global economic uncertainty. However, this performance suggests that the Swiss real estate market continues to withstand current challenges, offering an intriguing perspective for investors and property owners.
The resilience of the Swiss real estate market should be considered in the context of a global economy marked by uncertainties. This relative stability reflects a balance that continues to characterize the Swiss economy. However, a concern arises in the form of inflation, currently at around 2%. For the first time in two decades, inflation is beginning to erode the real value of real estate in Switzerland. This trend underscores the importance of closely monitoring inflation and its potential impact on the real estate market in the future, as investors and property owners navigate this complex economic climate.
In Swiss major cities, especially in the French-speaking region, apartment prices have experienced a slight downward trend in the recent period. In Geneva, Lausanne, Basel, Lugano, and Neuchâtel, the decline has been contained, with figures below 1%. The city of Schaffhausen recorded the most significant decrease, reaching 1.2% over a year. However, it is essential to consider the longer-term context: over a decade, most of these cities have experienced substantial price increases ranging from 30% to 45%. This temporal perspective highlights the underlying robustness of the Swiss real estate market despite short-term fluctuations.
Against all expectations, the Swiss real estate market has shown remarkable resilience over the past 12 months. Indeed, house prices have recorded a modest increase of 1.3%, while apartment prices have progressed in a slight but encouraging manner, showing an increase of 0.8%. This relative stability contrasts with the expected decline, primarily due to rising mortgage rates and global economic uncertainty. However, this performance suggests that the Swiss real estate market continues to withstand current challenges, offering an intriguing perspective for investors and property owners.
Despite recent slowing trends observed in some Swiss major cities, several regions in the country continue to shine in the real estate sector. Several cities stand out with significant increases in property prices, demonstrating their resilience and attractiveness to investors and buyers.
The city of Sion, located in the heart of the Valais canton, has recorded an impressive increase in apartment prices, with an increase of approximately 3% over the past 12 months. This growth reflects Sion's growing appeal as a dynamic regional economic center, combined with its beautiful natural surroundings and rich cultural heritage.
The city of Lucerne, situated on the shores of Lake Lucerne, is another favored destination for real estate investors. Apartment prices in Lucerne have increased by about 3% over the same period. The picturesque beauty of the city, its strategic location in the heart of Switzerland, and its diversified economic sector make it an attractive choice for those looking to invest in real estate.
Biel/Bienne, in the canton of Bern, also stands out with rising property prices. Apartment prices there have increased by about 3% over the past 12 months. The city is known for its role as a hub for watchmaking and technology, contributing to its growing appeal for investors.
The city of Zug leads the way with a notable 4.3% increase in property prices over the last year. This outstanding performance is largely attributable to the strength of the regional economy. Zug has long been a significant financial and technological center in Switzerland, attracting businesses and talent from around the world. This economic vitality reinforces the demand for housing in the region, resulting in significant price increases.
These leading cities illustrate the diversity and dynamics of the Swiss real estate market, where some regions continue to experience strong growth despite global economic challenges. Investors and buyers seeking appreciation opportunities in Swiss real estate can find attractive options in these thriving destinations.
Analyzing the future prospects of the Swiss real estate market reveals several key factors influencing price stagnation. This situation is primarily attributable to a combination of declining demand and limited supply, as well as the impact of rising mortgage rates.
The increase in mortgage rates has prompted many potential buyers to reconsider their real estate purchase plans. The higher costs associated with mortgage borrowing have limited the purchasing power of many Swiss households, leading them to delay their buying decisions.
Concurrently, the supply of real estate properties in the Swiss market has become even more limited. Property owners, aware of continued demand despite higher mortgage rates, are increasingly reluctant to list their properties for sale at prices below their expectations. This attitude has created an imbalance between supply and demand, thus maintaining pressure on prices.
A direct consequence of this dynamic is the decrease in the number of real estate transactions in Switzerland. Data shows a significant decline, with a 13% drop compared to 2022 and an even more pronounced reduction of 25% compared to 2021.
According to Jonas Wiesel, co-founder of RealAdvisor, short-term prospects do not indicate drastic changes in the Swiss real estate market. Price stability and pressure on sellers may persist. This situation has also led to longer sales periods and given more negotiation power to buyers. Properties that do not perfectly align with market demand have faced challenges in being sold, often leading sellers to lower their expectations to finalize transactions.
Ultimately, while the Swiss real estate market faces challenges, it continues to present opportunities for buyers and investors willing to navigate this complex economic climate. Long-term prospects, supported by the persistent demand for housing in Switzerland, remain positive, hinting at the possibility of a future recovery in the real estate market.
In summary, the Swiss real estate market exhibits relative stability despite economic challenges and the impact of inflation, with slight price stagnation, primarily in the apartment sector. This situation stems from declining demand and limited supply, creating a favorable environment for negotiation for buyers. Although short-term prospects do not foresee major changes, this period has led to longer sales periods and a downward revision of sellers' expectations to finalize transactions. However, long-term prospects remain positive, supported by a robust economy and ongoing housing demand in Switzerland, suggesting the potential for a future rebound in the real estate market.
Source: Real Advisor
