20 April 2023
The era of price increases for upscale residential real estate has come to an end for the time being. Prices are expected to stabilize across Switzerland as a whole. In the sale of investment properties, price declines are now to be expected due to the changed interest rate environment - albeit with a time lag. For the indirect real estate investment segment, the recent more positive trend is expected to continue.
Higher interest rates are making potential buyers less willing to pay, which is likely to lead to stagnation in price development. However, the corrections may vary greatly depending on the location. Properties in particularly sought-after locations will maintain a high level. Not least because demand continues to outweigh the already scarce supply and their limited development potential. Moreover, in certain locations, Switzerland continues to offer wealthy individuals from Switzerland and abroad attractive framework conditions that thoroughly justify the higher investments in upscale residential properties.
While the investment property segment is also coming under increasing price pressure, investors can nevertheless breathe a sigh of relief. This is because inflation-related additional costs can be passed on to tenants, promising higher returns. In addition, living space remains scarce and construction activity - especially in the residential sector - is limited. In other words, vacancy rates are at a very low level, which means that real estate investments will remain an attractive asset class in the future.
Further information on the current market situation can be found here.