Q2 2023: Price changes in the 15 largest urban areas
In Q2 2023, the Swiss real estate market continued to adjust, with house prices in major cities falling by as much as 1.9%. A year-over-year comparison reveals a substantial 20% decrease in the number of transactions. Meanwhile, long-term interest rates have hit their peak, with a downward trend expected in the coming months.
The second quarter of 2023 saw a general decrease in property prices across Switzerland. For apartments, the national average fell slightly by 0.1%. However, this seemingly small change masks more significant shifts in key cities. Geneva led the decline with a decrease of 1.2%, followed closely by Lausanne and Basel, both experiencing a drop of 1.0% and 0.8% respectively. Bern also saw a decrease of 0.8% in apartment prices. Interestingly, not all cities followed this downward trend. Zug and Zurich bucked the trend with slight increases of 0.6% and 0.3% respectively.
The market for houses showed a similar trend, with the national average decreasing by 0.8%. Geneva saw the largest decrease of 1.9%, followed by Basel and Bern at 1.0% and 0.9% respectively. Even Zurich, which had seen a slight increase in apartment prices, experienced a decrease in house prices, albeit a smaller one at 0.4%. Zug remained stable with no change in house prices.
These trends indicate a cooling in the Swiss real estate market, particularly in major cities. The decrease in prices may be influenced by a variety of factors, including economic conditions, interest rates, and market sentiment. As we move into the second half of the year, it will be interesting to see how these trends evolve and what impact they will have on both buyers and sellers in the market.
The number of real estate transactions in Q2 2023 saw a significant year-over-year decrease of 20%. This trend is consistent across most regions. Zurich and Bern both experienced a decrease of 15% in transactions compared to the same period last year, while Geneva saw a slightly higher decrease of 18%. Basel's transactions dipped by 12%, marking a noticeable slowdown in market activity in these major cities compared to the previous year.
The most significant year-over-year drops were seen in Ticino, Valais, and Grisons, all at 30%. The decrease in transactions in these regions is a clear indication of the cooling market, reflecting the overall slowdown in the Swiss real estate market.
This decrease in transactions has led to a significant increase in the stock of houses and apartments for sale online, rising from 35,000 to 40,000, marking a 14% increase. As these properties stay on the market for longer periods, buyers may find themselves with more options and negotiating power. This shift could potentially lead to a buyer's market in some regions, where supply exceeds demand, and buyers have the upper hand in negotiations. As we move further into 2023, it will be interesting to see how this increased stock and decreased transaction activity will impact the overall Swiss real estate market.
The Swiss National Bank (SNB) raised its policy rate from 1.5 to 1.75 percent in June, justifying the move due to medium-term inflation risks for the Swiss economy. Despite this increase, the SNB expects inflation to be slightly above its target of 0 to 2 percent in 2026. It is anticipated that the SNB will increase its policy rate one last time to 2 percent in September 2023.
However, this is unlikely to have a major impact on longer-term mortgage interest rates, as the bond markets are already anticipating the change in the policy rate forecast for September. On the contrary, the outlook for potential policy rate cuts next year should lead to slightly lower interest rates in the second half of the year. This will no doubt be more pronounced for mortgage interest rates than for government bond yields.
Inflation in Switzerland fell below 2% in June, reaching the target of the Swiss central bank for the first time in a year and a half. The decline in oil prices contributed to the decrease in inflation, with prices down 22.6% compared to June 2022. This is the first time since early 2022 that inflation in Switzerland is below the 2% threshold targeted by the Swiss National Bank. Inflation in Switzerland at 1.7% is much lower than inflation in the eurozone, which stood at 5.5% in June according to Eurostat's estimate. These developments in inflation and interest rates will undoubtedly play a significant role in shaping the Swiss real estate market in the coming months.
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