Swiss property market faces bleak future despite record values
-
Loading... - Seth Simon
- 20 Apr 2022
- 318 Views
- 0 Like
- 0 Comment
The Swiss real estate market recorded a bumper year in 2021. The total return, comprising rental income and value changes on properties, was higher for real estate investors than it had been in seven years. Prices have been heading in just one direction – up – for years, and interest rates are low. This created ideal conditions for those who could afford the high prices and invest in apartments or an apartment building.
But the Russian invasion of Ukraine in late February has turned all forecasts upside down.
“The situation in Ukraine has given us a new baseline,” Donato Scognamiglio, of real estate consultancy IAZIExternal link, said at a media conference in Zurich last month. “Inflation – the risk we didn’t want to look in the eye before – is now here."
Unscathed by the pandemic
The Swiss real estate market has weathered recent crises well.
“Since 1998 we’ve seen one value appreciation after another,” Scognamiglio said. This is true even for the 2008 financial crisis.
Fritz Zurbrügg, a member of the board at the Swiss National Bank (SNB), said at a lecture in GenevaExternal link in late March: “Unlike in many other countries there was no real estate boom in Switzerland before the global financial crisis, so there was no slump afterwards.”
“Instead, residential property prices have continued to rise steadily since then,” he added.
The Covid crisis did little to change this. The market value of apartment buildings increased by 4.1% in 2021 compared with the previous year, reaching an all-time high.
The situation for the commercial real estate market was more difficult, however. Many retailers in Switzerland struggled with losses after being forced to close temporarily because of pandemic restrictions or people staying home to avoid catching the virus. Yet even commercial properties experienced a 2.7% increase in value in 2021.
How Swiss real estate prices compare
Rising property prices are not unique to Switzerland. Compared with other countries, they are not even increasing particularly fast, as OECD figures show.
According to Zurbrügg, this international trend is the result of scarce real estate supply, increased demand for residential property due to the pandemic, and historically low interest rates in recent years.
Although the Swiss price increase looks moderate by international comparison, property in Switzerland is among the most expensive in the world, even when taking into account the country’s high average disposable income. Read More...
