Swiss real estate market Demand for residential property picks up again
The Swiss real estate market continues to boom. Following the National Bank's interest rate cuts this year, demand for residential property is now picking up again.
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- Thanks to the interest rate cuts by the Swiss National Bank, demand for residential property has recovered significantly after a slump following the rise in interest rates.
- Excess demand from the rental housing market is reinforcing the trend, while the greater supply is currently putting a temporary brake on price momentum.
- Despite falling interest rates and a halt in construction inflation, there are no signs of an increase in the supply of new construction, which is further exacerbating the housing shortage.
In a study published on Thursday, Raiffeisen economists write that fears of major upheavals on the home ownership market have subsided. Demand for residential property has largely recovered after the slump following the previous sharp rise in interest rates due to the cuts that have now been made.
"In addition to the return of the housing cost advantage over renting as interest rates fall again, excess demand from the rental housing market is now also spilling over into the owner-occupied market," said Raiffeisen chief economist Fredy Hasenmaile. The increased demand for residential property is currently still being offset by a renewed increase in supply, which is slowing down price momentum.
No easing on the price front
However, those who are now looking forward to an easing on the price front may have rejoiced too soon once again: According to Raiffeisen, the current greater supply is not coming from new construction, but only from existing properties, which is why the shortage is only likely to be alleviated in the short term.
The more liquid supply and more confident buyers are already being reflected in a higher number of changes of ownership. The majority of sellers will be able to push through their asking prices. "We are therefore expecting higher price growth again in the medium term," predicts Fredy Hasenmaile according to the press release.
(Too) few new builds
And despite the renewed fall in interest rates and the halt in construction inflation, there are still hardly any signs of an increase in housing supply in Switzerland, as the Raiffeisen economists once again confirm. Last year, fewer new apartments were approved than at any time since records began 20 years ago.
Just how severe the housing shortage already is is shown by the few rental apartments advertised on internet portals and a vacancy rate across Switzerland that is likely to soon fall below the psychologically important mark of one percent.
"However, the strongest signal of scarcity is sent by asking rents, whose annual growth rose to 6.4 percent in the second quarter of 2024," says Hasenmaile.