Home ownership back in favour in Switzerland

The Swiss are once again tempted to buy a home, motivated by falling interest rates. But the Swiss real estate market remains constricted by supply that is far too low to meet demand, according to a study by the Raiffeisen banking group.

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“Demand for residential property has recovered from the slump caused by rising interest rates” in 2022 and 2023, said Fredy Hasenmaile, Chief Economist at Raiffeisen, one of Switzerland’s leading mortgage lenders.

+ Why home ownership is a mirage for most Swiss

The Swiss National Bank’s (SNB) reduction in key interest rates in March has made mortgages less expensive. According to a survey by the financial comparison portal Comparis.ch, a three-year fixed-rate mortgage was being negotiated at an indicative rate of 2.09% at the end of June, compared with 2.13% at the last survey in mid-April. The rate for a five-year term was also 2.09%, down from 2.15%.

This downward trend is set to continue, with Raiffeisen expecting the SNB to cut the key interest rate again in September.

Buying has thus become more advantageous than renting, and “excess demand in the rental market is spilling over into the property market”, noted the expert.

But in a market with a shortage of new construction – last year, newly-issued building permits reached an all-time low – the advantage is with the sellers, who can dictate prices. Housing prices should therefore accelerate again in the medium term, predicted Hasenmaile.

Moreover, the apartments being built are smaller, which further reinforces the shortage. With the vacancy rate set to fall below 1% nationwide – this indicator stood at 1.2% in 2023 – rents are also on the rise, with a 6.4% year-on-year increase in the second quarter.

Translated from French by DeepL/mga

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