Swiss residential real estate will take time to rebound

Swiss residential property prices rose an average of 3.5% last year, according to estimates by Standard & Poor’s (S&P).

Real estate prices in Switzerland should continue to rise this year, but at a slower pace than in 2020. After the slowdown phase, stagnation is expected until 2023, contrasting with the expected recovery in Europe, indicates Monday Standard & Poor’s (S&P) in a study.

Swiss residential real estate has seen prices rise by an average of 3.5% last year, according to estimates by the rating agency. In 2019, growth had reached 2.4%. S&P expects an annual price increase of 2.0% until 2023.

In Switzerland, the real estate market is characterized by a strong presence of institutional investors. In a context of low rates, they should turn away from bonds to seek yield in stone, exerting upward pressure on prices, argues S&P.

The evolution of the Swiss market is expected to be lower than that of the ten other European countries included in the study. If some should experience a decline in prices in 2021 – this is the case of Italy (-0.5%) and Great Britain (-2.3%) – all are promised a sharp increase in the next year, which will extend in some markets into 2023.

The price increase expected in 2020 can be explained by state measures taken in Europe aimed at supporting the economy in times of crisis, such as recourse to short-time working which has made it possible to preserve the income of households which, for some, have saved.

The monetary policies of central banks have also contributed to this increase, by keeping interest rates at historically low levels, the rating agency said. In 2020, growth in the Netherlands is expected at 8.0%, or even 10.1% in Sweden. A few rare countries, namely Belgium, Portugal and Spain, should show a slowdown this year, while remaining in the positive zone.

From 2022, the lifting of restrictions, in particular social distancing, should increase the price levels of residential real estate in Europe, driven by better prospects in the labor market and the return of foreign tourists.

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