Real estate prices continue to rise

Real estate prices continue to rise

The Swiss National Bank (SNB) announced a return in interest rates in mid-June – as a result, mortgage rates continue to rise. On the other hand, there was no sign of a reversal in house and flat prices in June, as shown by the Swiss Real Estate Offer Index.

Rising interest rates are making mortgages more expensive and real estate investments less attractive. This could have a negative impact on demand for residential real estate, SMG Swiss Marketplace Group and IAZI’s real estate advisor write on Monday in a statement on the Swiss Real Estate Offer Index. Still, the opposite is true – prices keep rising!

According to the Swiss Real Estate Offer Index, sellers of condominiums significantly increased their price expectations in June by 1.1%. within a month. Suppliers also demanded higher prices for single-family houses. However, the surcharge is slightly lower there, at 0.3 percent.

Will prices drop soon?

It remains to be seen whether the propensity of buyers to pay homes will continue to follow the rising price expectations of sellers. This cannot be ruled out as the cost of mortgage loans is by no means the only criterion when purchasing a residential property.

Moreover, unlike fixed rate mortgages, money market mortgages are still available on good terms. And since prospective property buyers already have to show that they can cope with mortgage rates of around 5 percent due to the existing affordability rules, no collapse in demand is expected, according to experts.

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As previously announced, the movement in rents for flats is slight. The rental prices offered in the advertisements hardly changed in June with an increase of 0.1%. This is not surprising as asking rents are mainly influenced by immediate demand for housing space.

Rental rates in Zurich are slightly falling

In contrast, rents for existing rentals are based on the federal government’s benchmark mortgage rate, which is currently 1.25 percent. There may be revisions due to higher interest rates and overall inflation.

“High energy prices are likely to have a much greater impact on asking or existing rents than rising interest rates,” believes Martin Waeber, head of real estate at the Swiss Marketplace Group. As this would lead to a significant increase in additional costs, not least for old buildings.

Looking at the regions, asking rents were different in June. For example, in the Lake Geneva region (including Valais) they increased by 0.8%, while rents in central Switzerland fell by 0.5%. On the other hand, in Espace Mittelland (+ 0.2%) and Zurich (-0.2%), they moved only slightly. (nim / SDA)

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