| Ramzi Chamat
The year 2023 was a period of transformation for the Swiss real estate market. This study examines the notable trends of the past year while looking at projections for 2024. In 2023, despite moderate price growth and economic challenges, the Swiss real estate market has shown its resilience. Positive signals for 2024, such as reduced interest rates and an expected increase in transactions, point to a promising year. However, vigilance remains required in the face of global economic uncertainty.
The year 2023 was a crucial year for the Swiss real estate market, marked by significant developments and major challenges. Switzerland, known for its economic stability, faced internal and external factors that influenced real estate market trends. In this study, we will delve into the retrospective analysis of real estate trends in 2023 and provide projections for the year 2024.
In 2023, the Swiss real estate market recorded the lowest price increase since the subprime crisis. Apartment prices increased by only 0.9%, while houses saw a growth of 0.7%. This limited growth was primarily due to significant increases in interest rates that curbed demand. Potential buyers faced higher borrowing costs, reducing their purchasing power and slowing down transaction rates.
Unlike some of its European neighbors, such as Germany and France, where real estate prices declined in 2023, Switzerland maintained stable prices despite modest growth. This suggests a certain resilience in the Swiss market. Switzerland has always been considered an attractive real estate market due to its economic and political stability, which continued to attract both domestic and foreign investors in 2023.
At the regional level, disparities in real estate prices were pronounced. Some cities such as Zug, Sion, Lugano, and Biel experienced price increases of more than 2%, while others like Basel and Lausanne faced significant declines. These disparities were often linked to local factors such as supply and demand, as well as specific economic developments in each region.
A major trend in 2023 was the significant decrease in real estate transactions in Switzerland, with a 25% drop compared to the ten-year average. This reduction was mainly due to increased borrowing costs associated with rising mortgage rates. Swiss 10-year mortgage rates saw a considerable increase, rising from less than 1% to over 3% at their peak before stabilizing around 2% by year-end. Consequently, the costs for a couple buying a house nearly doubled compared to a few years ago, reducing interest in new real estate loans. Moreover, economic uncertainty and expectations of a possible decline in real estate prices likely deterred many potential buyers from taking action in 2023.
In 2024, the Swiss real estate market approaches the future with cautious optimism. Several factors contribute to this sentiment. Firstly, inflation, which showed signs of weakness at the end of 2023, ended on a positive note, alleviating concerns of a recession. Inflation can have a significant impact on the real estate market as it influences the monetary policies of central banks and interest rates.
Interest rates, having likely reached their peak, are expected to start declining. This reduction could prompt central banks, including the Swiss National Bank (SNB), to lower key interest rates in the near future. Interest rates are a key factor for real estate buyers, as lower rates mean lower borrowing costs, which can stimulate demand in the real estate market.
With limited supply and an expected increase in demand, real estate prices are likely to experience a slightly higher increase than in 2023. This trend could facilitate negotiations between buyers and sellers. However, a spectacular price rebound is unlikely as caution prevails.
The number of transactions is also expected to rise, especially for investment properties. Market values, seeming to have reached their lowest point, should stabilize in 2024, encouraging more potential buyers to take action. Real estate investors may see this period as an opportunity to make acquisitions at relatively low prices.
The upcoming American elections could also influence global economic policies. With Democrats possibly seeking to boost the economy to gain favor with voters, this could have an impact on global economic stability and, by extension, the Swiss real estate market. Political decisions made in the United States often have global repercussions, and it is important to monitor how they evolve.
In conclusion, 2023 was a year of challenges for the Swiss real estate market, but the outlook for 2024 is optimistic. Positive signals such as the reduction in interest rates and price stabilization could invigorate the market. However, it is essential to remain cautious in the face of global economic uncertainty and closely monitor international economic developments that could influence the Swiss real estate market in the months ahead. Market participants will need to adapt to new conditions and opportunities while maintaining a prudent vigilance.
