The growth in property prices slowed in 2023. Measured by the residential property price index, prices for residential property rose by 1.3% in the third quarter compared to the same quarter of the previous year, following growth of 3.9% in the first quarter and 2.4% in the second quarter of 2023. Since the start of the year, the sub-index for condominiums has risen from 112.8% to 115.1% (up 2.0%) and for single-family homes from 116.1% to 117.3% (up 1.0%). Since the turn of the millennium, prices for houses have risen by 3.4 percent annually and for apartments by 3.8 percent. Following the fifth interest rate hike since the end of the low-interest phase, supply has increased and demand has fallen. Nevertheless, demand for residential property continues to outstrip supply.
Until mid-2022, one in five mortgages was taken out without a fixed term and fixed interest rate; today it is one in two. Since the interest rate turnaround, more and more homeowners have been financing their home with a SARON mortgage. In our article "What You Need to Know about Mortgages Before Buying a House" find out more about the various mortgage models.
In 2023, the listing period for single-family homes increased by 8 days to 61 days and for condominiums by 4 days to 67 days. At the same time, fewer prospective buyers have set up search subscriptions and more homeowners have advertised their house or apartment for sale. This and the decline in changes of ownership in many regions indicate that more and more buyers are no longer prepared to pay any price, but that sellers (still) have the upper hand and can push through their asking prices. As mortgage rates have fallen again since the last prime rate hike on June 22, 2023, only a few homeowners have come under pressure and had to sell their house or apartment in a hurry.
Most property experts now assume that the property market will stabilize at a high price level. They expect prices to remain stable or fall slightly in the coming year. There is little to suggest a stronger correction (minus 10 percent or more), although the real estate market is highly valued. According to the UBS Real Estate Bubble Index, the risk of the real estate bubble bursting is low. The index has fallen from 1.49 to 1.41 and is thus well below the level of the early 1990s (2.60), when the real estate bubble burst and property prices in Switzerland collapsed by up to 40 percent.
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The longer the forecast period, the more difficult the prediction becomes. However, the factors that will support the real estate market and thus property prices next year will also apply in 2025 and beyond. Demand is likely to remain high for five reasons:
In addition, inflation is back under control and interest rates are low by international standards. Nevertheless, there are risks that could weigh on the real estate market. For example, geopolitical uncertainties caused by wars or the strong dependence of our export-oriented economy on falling global demand. An escalation in Ukraine or the Middle East could throw all forecasts out the window. This one too: The Swiss property market reacts sluggishly to higher housing costs due to interest rates. As a result, property prices could fall slightly from 2025. The high level of immigration is supporting demand and preventing a major price correction.
The real estate market could ease in the medium to long term. Supply could increase because the proportion of the working population is falling and the most populous cohort, born in 1964, will retire in 2029. Experts expect baby boomers to bequeath or sell more than 400,000 properties between 2030 and 2045. On balance, this suggests that property prices will fall. More so in municipalities with an above-average number of older residents, less so in cities with more families and young people. However, when making medium and, above all, long-term forecasts, we should remember the quote attributed to Karl Valentin, Mark Twain or Winston Churchill, depending on the source: "Forecasts are difficult, especially when they concern the future".
Densified building (or redensification) is a proven measure to make better use of the scarce living space in Switzerland. If you own an (older) detached house on a larger plot of land and want to sell it, a new replacement building is worth considering. You can find out more in our article "New construction: the sensible alternative to selling a house".
Although demand clearly exceeds supply, fewer properties are changing hands and many properties are being advertised for longer than a year ago. Even though more and more property experts expect property prices to stagnate or fall slightly, many sellers are sticking to their asking prices. As long as they do not have to sell for financial reasons, for example, and immigration remains high, they have the upper hand. Anyone looking for their dream house or apartment therefore needs sufficient equity and income as well as a lot of patience. If your property search returns no or too few hits, you should question your search criteria and divide them into important and less important criteria, for example.
With our intelligent property search, which covers 90 percent of all houses and apartments advertised online in Switzerland, you can set up a search subscription and will be notified automatically as soon as a property matches your requirements. In the article "Online Property Search: How to Find Your Dream Home" we explain how to optimize your search.
Credit Suisse, Raiffeisen, UBS and Zürcher Kantonalbank have financed 17 percent fewer house purchases and 18 percent fewer apartment purchases in the last four quarters. This reflects the decline in changes of ownership (see "How will property prices develop in 2024?").
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More and more buyers are no longer prepared to pay any price. Some because they expect property prices to stagnate or fall slightly, others because they can't or don't want to pay more. This is why homeowners who are willing to sell need to be more patient. Although demand remains high, especially in good locations, it takes longer than before to sell a detached house (average listing time of 61 days) or a condominium (average listing time of 67 days). In this situation, you have three options:
Housing costs have fallen. The interest rate index for residential properties from hypotheke.ch (available only in German) fell from 2.71% on January 3, 2023 (annual high) to 2.23% on November 14, 2023 (annual low). Year-on-year, the interest rate index fell by 37 basis points. This corresponds to a saving of CHF 3,700 on a mortgage of CHF 1 million.
If you want to wait to sell or keep your house or apartment and need to renew your mortgage soon, you can use our mortgage comparison to compare different models and combine the most attractive offers. With the right model and the right term, you can save a lot of money.
Of course, you can also sell your house or apartment yourself. In our guide "House Sale in 10 Steps with Houzy's Smart Tools", we guide you safely through the entire process. But selling a house is a lot of work. Especially if you're not a real estate professional. Plus, in times like these, it's easier for a realtor to negotiate on price when prospective buyers are trying to push the price down. This is likely to happen more often in the coming months as more and more prospective buyers expect property prices to stagnate or fall and are no longer able or willing to pay any price. If the realtor is able to sell your house or apartment for 1.25 million instead of 1.2 million, for example, the realtor's commission of 25,000 to 37,500 Swiss francs will have more than paid for itself.
You can find out more about realtor commissions in our article "Realtor Commission Switzerland: This is How Much the Sale of Properties Cost".
