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PROPERTY

Is now a good time to buy property in Switzerland?

Real estate — single-family houses as well as apartments — are not exactly cheap in Switzerland at any time. But their cost can go up or down, depending on the mortgage rates.

Is now a good time to buy property in Switzerland?
Whether or not to buy property now depends on mortgage rates. Photo: Pixabay

Geneva and Zurich have traditionally been — and still remain — the most expensive markets for home buyers not only in Switzerland, but among the priciest in Europe as well.

Prices are also high in Basel, Zug and Lausanne, that is, urban centres with a high concentration of multinational companies and residents.

One major reason for such high real estate prices is scarcity of land.

Switzerland is a small country with little land left to be developed, and the development of whatever land is available is strictly regulated; for instance, agricultural land can’t easily be used for construction.

And as Switzerland’s land is not expandable, “residential real estate will continue to appreciate in value”, Stefan Fahrländer, chairman of the board of Fahrländer Partner, a real estate consultancy firm in Zurich, said in an interview.

That is a reason why most people in Switzerland are tenants rather than owners.

However, while the prices of land in high-demand areas hardly ever drop (if anything, they go up), they may be more affordable if mortgage rates are really low.

For instance, at the beginning of 2021, a 10-year mortgage cost 1.1 percent on average across the country. Currently, 10-year rates stand at 2.90 percent.

“Mortgage rates have risen extraordinarily strongly since the beginning of the year”, Felix Oeschger, analyst at Moneyland, an online price comparison service, told The Local.

READ MORE: This is where you can buy cheaper properties in Switzerland

Why is this happening?

Blame it on inflation.

Although Switzerland is doing better on this front than other countries, with the inflation rate much lower than across the eurozone, prices of consumer goods —including mortgages — have risen here nevertheless

As to how long it will take for mortgage interest rates in Switzerland to fall again. “this depends on many factors, such as the further development of inflation”, Oeschger said.

“Forecasts are difficult in this regard, as is also shown by the fact that the central banks have constantly revised their inflation forecasts upwards in the past year”.

Therefore, “a further rise in interest rates “would not be out of the ordinary”, Oeschger said.

So should you take out mortgage now or wait for better times?

The natural response, based on the information above, would be to sit tight and wait until inflation — and therefore, mortgage rates — go down.

However, while the increase in rates between last year and now may seem steep, Oeschger points out that “if you look at Swiss mortgage rates over a slightly longer period of time, for example over the last 15 years, they are only slightly above average”.

While this may dissuade potential home buyers from purchasing now, it may, in fact, be a good time to do so if you want to avoid future increases.

“If it is urgent to take out a fixed-rate mortgage, I would rather do it now than wait”, he said.

READ MORE: EXPLAINED: How to save on your mortgage in Switzerland

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PROPERTY

How property and rental prices in Switzerland are rising

Buying a property in Switzerland is still getting more expensive every month, and rents are set to increase too.

How property and rental prices in Switzerland are rising

Property prices continue to rise in September in Switzerland, despite the end of the negative interest rate policy, the Swiss Real Estate Offer Index, jointly compiled by ImmoScout24, SMG Swiss Marketplace Group and Cifi, said.

“Strong demand for living space and limited supply are driving the Swiss real estate market, despite the end of the negative interest rate policy,” the study stated.

During the month under review, house prices rose by 0.8%, while the price of a flat increased by 0.2%.

READ ALSO: Is now a good time to buy property in Switzerland?

On the other hand, tenants looking for a flat are seeing basically the same prices as in August, since rents grew an average of 0.3 percent month on month, according to the index.

Rents should rise too

Immoscout24 said they expect rents to increase as demand soars with increasing migration levels to Switzerland.

“Due to the strong immigration in the current year, rents are likely to increase in the coming months. The increasingly scarce supply of flats also contributes to this assessment”, it said.

“According to the current vacancy census, around 60,000 flats were vacant in Switzerland on 1 June 2022, which is 10,000 fewer than the previous year.

READ ALSO: Where in Switzerland are you most likely to find flats for rent?

“The vacancy rate is 1.3 per cent”, explained Martin Waeber, Managing Director Real Estate, SMG Swiss Marketplace Group. “According to the official definition, there is, therefore, an overall housing shortage, although the situation varies regionally here as well,” he added.

Rental prices also vary regionally. Though the national average prices increased by 0.3 percent from the end of September compared to the month before, some regions saw rents soaring while others had prices going down.

READ ALSO: Where to find property in Switzerland for under CHF 500k

While the advertised values in Ticino (3.1 percent) and the Central Plateau (2.1 percent) have risen significantly, there are hardly any changes in Northwestern Switzerland (0.3 percent), the Lake Geneva region (0.3 percent) and Eastern Switzerland (0.2 percent).

In contrast, rents fell in central Switzerland (-0.7 percent) and in the greater Zurich region (-0.8 percent).

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