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Why are Switzerland’s property prices stable while they are dropping elsewhere?

Helena Bachmann
Helena Bachmann - [email protected]
Why are Switzerland’s property prices stable while they are dropping elsewhere?
Its price is likely stable. Photo: Pixabay

While real estate prices in many countries are decreasing due to lower demand, stability prevails on the Swiss housing market.

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Figures released earlier this week indicate that the cost of real estate in Switzerland has not dropped in June — unlike the case in many other countries.

The prices for family homes in Switzerland rose by only 0.3 percent on average over one month, while the cost of apartments fell by 0.4 percent, real estate specialists Immoscout and Iazi reported.

This points to price stability on the Swiss property market, even though interest rates have gone up recently, the two companies said.

Rising interest rates have pushed up financing costs for real estate, which is dampening price increases.

In June, in order to control inflation, the Swiss National Bank increased the interest rate (including on mortgages) from 1.50 to 1.75 percent.

That is much lower than hikes in other countries: 4 percent in the eurozone, 5 percent in the UK, and over 5 percent in the United States.

READ ALSO: Swiss central bank announces interest rate hike to combat inflation

What effect does this have on property prices?

In Switzerland, new buyers should expect a a mortgage rate of around 3 percent — more than previously, but still lower than elsewhere.

In other European countries, on the other hand, this rate is between 4 and 5 percent, and as much as 7 percent in the US, according to research carried out by Blick newspaper.

This means that while in other countries many people can no longer afford these increased costs, so both the demand and property prices are falling as a result, in Switzerland the market is more stable.

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In fact, demand for new housing continues to outstrip the supply, mostly because the number of new units under construction is lower than in recent years.

“We are not seeing a drop in prices on a broad front. And this is not expected in the near future,” Patrick Schnorf, from the the real estate consulting company Wüest Partner, told Blick.

The reason for this stability is the fact that inflation is relatively moderate in Switzerland in comparison, so there has been less of a ‘rate shock’ here that elsewhere.

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