SWITZERLAND IN THE SUCCESS BAROMETER
SITUATION IN SWITZERLAND AND HOW TO PROCEED
Switzerland in the success barometer: The strong economic recovery in Switzerland following the coronavirus pandemic has already stalled somewhat due to the Ukraine crisis and the return of inflation. However, Switzerland is doing very well compared to other countries and, according to expert estimates, can expect economic growth of at least 2.7 per cent in 2022. This growth will create new jobs, which in turn will lead to additional immigration. If more people live in Switzerland, more living space will be needed, which will lead to higher property prices - if, as is currently the case, supply cannot keep up with rising demand.
RISE IN INTEREST RATES DUE TO RISING INFLATION
However, interest rate trends will also be important for the further development of the property market. Low interest rates have been a key driver of property prices in Switzerland for many years. In the USA, however, inflation shot up to 8.5 per cent in March 2022, the highest level in 40 years. In response to the rising price level, the US Federal Reserve raised interest rates. Further interest rate hikes will follow. Higher interest rates make financing property more expensive, as mortgage rates are also rising. As a result, fewer people can afford a property, which leads to falling demand and consequently to lower property prices.
Mortgages in Switzerland have already become slightly more expensive, as market participants are anticipating the first interest rate hikes. However, Switzerland is also a special case when it comes to inflation: experts expect inflation in Switzerland to be around 2 per cent in 2022 as a whole, which is very moderate compared to other countries. The Swiss National Bank will therefore be cautious and raise interest rates cautiously at most, as the risk of the economy overheating due to rampant inflation is low. The risk of sharply falling prices due to massively higher financing costs on the Swiss property market is therefore considered to be low.
PROPERTY IS LIKELY TO BECOME MORE EXPENSIVE
According to a survey of over 700 property market experts conducted by Fahrländer Partner Raumentwicklung in spring 2022, a clear majority expect prices for condominiums and single-family homes in Switzerland to continue to rise over the next 12 months.
Expectations regarding the performance of apartment buildings are also still positive, but somewhat more subdued compared to autumn 2021. Stable prices are expected for office and commercial properties For buyers and sellers of residential property in Switzerland, this means that prices are likely to continue to do what they have been doing almost without interruption for the past 20 years: They will continue to rise. However, given the already high price levels, growth rates are likely to slow somewhat in many places. In addition, the observable pandemic-related shift in demand towards larger and more rural living space is likely to be only a short-term countertrend. Demand is likely to remain particularly strong for residential property in large urban centres. However, these are often areas where only little supply is being created and the further price increase could therefore be particularly strong.
DEVELOPMENT OF PROPERTY PRICES
Condominiums have become 4.9 per cent more expensive in Switzerland over the last 12 months and detached houses 4.7 per cent more expensive, according to analyses by FPRE. Rising prices were observed across all regions of Switzerland. Over this period, condominiums in the middle segment recorded the strongest increase in the regions of Zurich (+6.9%), Lake Geneva and Basel (both +6.4%). The lowest increase was in the regions of Southern Switzerland (+0.7%) and Central Switzerland (+3.7%). The market values of apartment buildings and office properties in Switzerland have risen by 8.2 per cent and 9.7 per cent respectively over the last four quarters.
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