Swiss residential real estate will be more expensive in 2023 - but what happens next? Financial experts analyze price developments and possible reasons

Swiss residential real estate will be more expensive in 2023 - but what happens next? Financial experts analyze price developments and possible reasons

According to a report from www.nzz.ch, prices for Swiss residential properties have risen again in 2023, although the dynamics of the price increase have weakened, especially for single-family homes. There are several reasons for this trend and could continue to have an impact on the market in the future.

There are many reasons for the weaker price dynamics in Swiss real estate. One of the main reasons is the rise in interest rates, which is leading to reduced demand and increased reluctance to finance single-family homes. Likewise, home ownership is becoming less affordable for many households as mortgage affordability criteria have become stricter. This results in fewer potential buyers being able to afford a home.

The lack of clarity about how interest rates and inflation will evolve, as well as the higher cost of living, are also contributing to reduced demand. In addition, second-hand properties that require significant investments in the next few years deter potential buyers of single-family homes.

Nevertheless, a moderate price correction could be possible in the future, although a significant price drop is considered unlikely. The tightness of the market, the relative stability of Switzerland and the continued demand for condominiums could keep price declines within narrow limits. The low level of new construction activity in both segments also contributes to the fact that prices are only expected to rise slightly despite certain negative conditions.

Overall, prices for single-family homes are expected to rise by 0.3 percent before deducting inflation in 2024, while prices for condominiums are expected to rise by 1.2 percent (www.nzz.ch).

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Slowing price increases for Swiss residential real estate

According to a report by www.nzz.ch, the prices for Swiss residential real estate will have risen again in 2023, although the dynamic of the price increase has weakened, especially for single-family homes. There are several reasons for this trend and could continue to have an impact on the market in the future.

Causes for the weakened price dynamics

There are many reasons for the weaker price dynamics in Swiss real estate. One of the main reasons is the rise in interest rates, which is leading to reduced demand and increased reluctance to finance single-family homes. Likewise, home ownership is becoming less affordable for many households as mortgage affordability criteria have become stricter. This results in fewer potential buyers being able to afford a home.

The lack of clarity about how interest rates and inflation will evolve, as well as the higher cost of living, are also contributing to reduced demand. In addition, second-hand properties that require significant investments in the next few years deter potential buyers of single-family homes.

Outlook for the real estate market in 2024

Nevertheless, a moderate price correction could be possible in the future, although a significant price drop is considered unlikely. The tightness of the market, the relative stability of Switzerland and the continued demand for condominiums could keep price declines within narrow limits. The low level of new construction activity in both segments also contributes to the fact that prices are only expected to rise slightly despite certain negative conditions.

Overall, prices for single-family homes are expected to rise by 0.3 percent before inflation in 2024, while prices for condominiums are expected to rise by 1.2 percent ( www.nzz.ch ).