The turnaround in interest rates should actually lead to declines in home prices. By no means.
The prices for residential property know practically only one direction. Despite persistently higher interest rates, the transaction prices for owner-occupied housing were very robust, the Raiffeisen Banking Group announced on Friday regarding the development of a corresponding index.
Accordingly, buyers of single-family homes had to pay around 3.5 percent more in the fourth quarter of 2022 than in the previous quarter.
In contrast, prices for condominiums fell slightly compared to the previous quarter, with a decline of 0.4 percent.
Boom virtually unstoppable
Single-family homes cost compared to the fourth quarter of 2021 are now already up 7.6 percent and condominiums are up 5.2 percent from more than a year ago, it was said further.
The strongest price increases within a year recorded single-family homes in central Switzerland.
In the past four quarters, prices for condominiums increased the most in the region of western Switzerland and around Lake Geneva.
Despite the increase in interest rates and the resulting rise in the cost of mortgages, prices for residential property are virtually only heading upwards.
Switzerland’s third-largest banking group explained this as follows: “Demand, which remains brisk, continues to be met by extremely tight supply, which will continue to keep prices on the downside,” said Martin Neff, chief economist at Raiffeisen Switzerland.
The Raiffeisen Banking Group’s quarterly barometer for real estate prices of owner-occupied housing has known only one direction for years. (Source: Raiffeisen Switzerland)
Even individual cantons are currently going out of their way to creatively support young buyers with money so that they can become homeowners, as muula.ch also reported. This means that demand is not dwindling.
However, the purchase of houses or apartments is likely to decline at some point as interest rates continue to rise, so that the increase in financing costs will still have an effect.
Eastern Switzerland behind
However, price levels in Switzerland have recently risen at very different rates from region to region. In a year-on-year comparison, single-family homes in the fourth quarter of 2022 recorded the biggest price increases in Central Switzerland (+15.8%) and Eastern Switzerland (+13.2%).
By contrast, prices rose less strongly in Zurich (+6.1 percent) and the Bern region (+6.3 percent). In condominium ownership, prices rose the most in western Switzerland (+7.5 percent).
Eastern Switzerland recorded the lowest year-on-year price increases (+2.2 percent).
Tourism regions ahead
On top of this, the breakdown of price trends by community type showed that house prices in tourist communities rose more strongly than in other community types within one year (+11.4 percent).
In the condominium segment, tourist communities also recorded the strongest price increases (+8.7 percent).
With an increase of 3.4 percent, condominium prices in central communities rose the least.
The Raiffeisen Transaction Price Index is published quarterly, at the beginning of each new quarter.
It measures the price development of owner-occupied residential property in Switzerland, based on transaction data from Raiffeisen and the Swiss Real Estate Datapool (Sred).