Prices for single-family homes rose by 0.7 percent from July to September, while condominium prices increased by 0.8 percent. Compared with the previous year, apartments became 3.9 percent more expensive, slightly more than single-family homes at 2.8 percent. The price increase on the Swiss real estate market therefore continues, albeit somewhat more slowly than before. This is shown by the latest Private Real Estate Price Index from real estate consultancy IAZI.

At the same time, the first signs of a slowdown are emerging. The number of home purchases edged lower, as did growth in mortgage volumes. One reason is the high purchase prices: despite comparatively cheap financing, many households can still only just afford home ownership. Banks are also more cautious when financing pushes a household budget close to the limit.

Investment Properties Are Rising More Strongly

Buyers had to pay 1.4 percent more for investment properties in the third quarter than in the previous quarter, according to IAZI’s Investment Real Estate Price Index. Over one year, prices rose by 4.5 percent.

According to IAZI, an important reason for this is low interest rates. At the end of September, the Swiss National Bank left its key interest rate at 0 percent. As a result, real estate remains attractive to investors compared with many other asset classes. Financing costs also remain moderate: ten-year fixed-rate mortgages cost around 2 percent, according to IAZI, while mortgages with a variable SARON rate cost a little more than 1 percent.

Little Being Built

For the time being, there is little to suggest a fundamental reversal of the trend. Demand for housing is growing less strongly than in previous years because immigration is lower. At the same time, however, little is still being built.

This is also reflected in vacancy rates. The national vacancy rate for apartments fell to 0.9 percent as of the beginning of June, the sixth consecutive decline. Of around 45,000 vacant apartments and houses, just under 11,000 were owner-occupied homes. The supply of rental apartments remains particularly tight.