Swiss real estate prices still display modest price growth, despite a reduction in transactions and steady high interest rates. The YoY growth of +1.3% for houses and +0.8% for apartments illustrates a balanced market amidst tough economic conditions.
Absolute property prices growth in Switzerland is gradually approaching a standstill, with a Year on Year (YoY) increase of +1.3% for houses and +0.8% for apartments. Despite challenging local market conditions and global economic uncertainty, real estate prices continue to hold firm.
The analysis from the top 5 largest agglomerations unveils a landscape where property price growth is lagging behind the current inflation rate of 1.7% YoY. The apartment market is experiencing slow growth in some Swiss cities, with Bern seeing a 0.2% increase and Zürich a 0.9% increase. However, in Geneva, Basel, and Lausanne, the market is slightly declining with rates of -0.1%, -0.5%, and -0.3% respectively, compared to the previous year. House prices are faring slightly better with Zürich at 0.9%, Bern at 1.2%, and Geneva at 0.7%, although Lausanne and Basel are trailing with figures of -1.1% and -0.2%, respectively.
At the cantonal level, the trend is similar, with a few exceptions. Graubünden leads with a robust 6% YoY growth for both houses and flats.
Additionally, a few other markets exhibit growth surpassing +3.0%. For houses: Valais (+4%), Appenzell Innerhoden (+3.6%), Zug (+3.4%), and Appenzell Ausserrhoden (+3.2%); and for apartments: Appenzell Innerhoden (+3.9%), Zug (+3.8%), Valais (+3.7%), Uri (+3.5%), and Glarus (+3.1%) are showcasing strong growth figures. However, the majority of the population (75%) resides in cantons where the YoY growth is below the 1.7% inflation rate.
Only a minority of cantons have experienced slight price reductions. Basel-Landschaft records the only minor contraction for houses, with -0.2%. Similarly, the apartment market witnesses only a couple of price reductions in Basel-Landschaft (-0.8%), Schaffhausen (-0.8%), and Neuchâtel (-1.0%).
The number of real estate transactions in Switzerland continues to decrease, registering a -10% dip over the last 12 months compared to the historical average of the past decade. This drop in pace is more pronounced when compared against previous years, with a -13% slump compared to 2022 and a stark -25% fall against 2021. Despite the interest rates not increasing as substantially as in Europe and the US, the slowdown in the number of transactions is similar. In France, we are observing a -25% decline compared to 2021. In the US, the situation is even more striking, as existing home sales have reduced by -31% compared to 2021.
The last quarter saw a 3% increase in stock compared to the previous three months, accumulating to a 17% rise over the past year. Nonetheless, despite the decline in transactions numbers, the supply remains low with regard to the demand in most areas.
This factor has been instrumental in upholding price stability despite languishing demand. The outlook does not indicate drastic changes in this trend in the near future. However, these slight shifts have granted more negotiation power to buyers. Properties that don’t exactly meet market demand are becoming harder to sell, often requiring sellers to revise their expectations downward.
Mortgage interest rates in Switzerland have remained steady at around 2.5%, courtesy of the BNS's decision to maintain the policy rate at 1.75%. Concurrently, the inflation rate is holding at 1.7% YoY, depicting a scenario of well-managed economic indicators.
The outlook for the upcoming year suggests persistent downward pressure, primarily driven by the overarching economic scenario. The probability of a sharp decline in interest rates is slim, as the Swiss economy, intertwined with global economies, endeavours to curb inflation. Despite these economic challenges, the low supply in high-demand areas is likely to drive prices upward. However, the majority of regions might experience a stagnation or a downward trend in property prices, ushering a period of cautious anticipation for the Swiss real estate market.
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