High inflation and an impending recession increase the risk in the Swiss real estate market. The risk is likely to increase further in the coming quarters, according to Moneypark, the online mortgage comparison platform.
The Real Estate Risk Index (RERI) calculated by Moneypark increased to 3.5 index points in the first quarter of 2022. The barometer therefore shows a situation that ranges from “moderate risk” to “slightly increased risk,” reports Moneypark.
The risk of a global recession has increased significantly in recent weeks. Rapid inflation in the US and the EU, the effects of the war in Ukraine and the escalation of supply chain problems in China were all symbolized by dark storm clouds in the economic sky, continues Moneypark.
The rise in interest rates on the Swiss capital market is enormous. The 10-year swap rates, which were still in the 0 percent range in December, would have breached the 1 percent limit on March 30. In April, the spread between the 2-year and 10-year swap rates continued to widen. This points to a serious downturn in the Swiss economy.
Expected slower price growth
In the last quarter, prices of owner-occupied housing increased only slightly, by slightly less than half a percentage point. On the other hand, single-family houses also recorded an almost two percent increase in this quarter. But now there are signs of a slowdown. This was indicated by the rising costs of financing and maintenance as well as the economic slowdown. Nevertheless, the trend should remain intact: home ownership will become (slightly) more expensive.
More about real estate
The debt ratio for newly granted funding increased again in the first quarter of 2022, not only due to price increases, but remained first-class at 64 percent and therefore posed no additional risk.
Commercial real estate prices have returned to pre-crisis levels, indicating the health of the Swiss economy. On the other hand, office prices have declined and confirm that the home office has established itself in a large proportion of the working population outside the acute phase of the pandemic. (SDA)