Q4 2022: Price changes in the 15 largest urban areas
In 2022, property prices rose by 5%, marking the 20th consecutive year of price increases (2003-2022). Despite this, we saw a slowdown in growth in the last quarter of the year, with an increase of 0.3% for flats and 0.6% for houses. The number of transactions is down by more than 20% and properties are taking longer to sell.
Property prices in Switzerland slowed down sharply in the last quarter of 2022. Flat prices rose by less than 0.3% on average, while house prices increased by 0.6%.
This trend can be clearly observed in the three largest Swiss conurbations, where prices rose by less than 0.5% on average. House prices rose by only +0.1% in Geneva, +0.3% in Basel and +0.7% in Zurich. The same is true for flats, where the increase has come to a halt in these three cities (+0.1% in Geneva, +0.2% in Basel and 0.2% in Zurich). However, despite the economic situation, only Lugano recorded a significant drop in prices with -0.7% for houses and -1.8% for flats. On the other hand, Zug continues its rise with a 2% increase.
Most cantons recorded moderate price increases, generally below 1%. Of the 10 most populous cantons in Switzerland, only two (Valais and Lucerne) are recording price increases of more than 1%.
The housing market has changed significantly in recent months, making it difficult for potential buyers. Mortgage interest rates and construction costs have risen, making property investments more expensive. While buyers are finding it increasingly difficult to pay high prices for their dream property, sellers are not yet willing to lower their prices.
This slowdown in the market is reflected in the decline of transaction volume, with a significant drop compared to the previous year. Specifically, in the fourth quarter of 2022, there was a 24% decrease in the number of transactions recorded nationwide as compared to the same period in 2021. In Geneva, the decline was even more pronounced, with a 30% drop in transactions in the third quarter of 2022.
We are also seeing a 30% drop in the number of enquiries submitted to online real estate listings. The number of potential buyers is decreasing, which makes negotiations more difficult for sellers. This has a real impact on the time it takes to sell a property. With the selling time increasing and the number of transactions decreasing, the stock of properties available for sale has increased by almost 40% compared to 2021.
Demand in the residential property market is expected to continue to be negatively impacted by several factors in 2023. Interest rates are expected to remain high, which makes property investments more expensive for potential buyers. In addition, uncertainty in the global economy and financial markets is expected to have a negative impact on buyer demand.
The number of properties available for sale is expected to continue to rise in the coming months, reflecting the reduced appetite of buyers. Furthermore, in Switzerland, the vast majority (89%) of borrowers have an outstanding fixed-rate mortgage. In this context, only a minority of homeowners will be forced to sell at a discount. By comparison, in Spain and Italy, over 50% of homeowners have an outstanding variable rate mortgage.
We expect private residential home prices to remain stable in most markets in Switzerland. However, in some less dynamic regions, prices could start to fall slightly.
Inflation seems to be slowing down, but if it does not get closer to the 2% target by 2024, this could pose a challenge for the SNB, which will find itself in a difficult situation. It could be forced to raise its policy rate beyond 2024. This could lead to a real estate crisis with a considerable decrease in the value of real estate assets.
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