Swiss real estate prices record high in 2012, likely to head down

construction_housing_valais_sm

More than 75,000 home units under construction at the end of 2012 in Switzerland

ZURICH, SWITZERLAND – Swiss home prices are likely to start drifting down, says Wüest & Partner in its latest report on the Swiss real estate market. The company is an international real estate consultancy firm that regularly produces reports on its home market.

“In the coming months, demand for commercial properties is expected to flatten in response to sluggish economic growth. The residential markets are overall robust, but likely to enter calmer waters in 2013 compared to the previous years,” the company’s “Property Market Switzerland 2013/2, published 23 April, forecasts.

The firm says that it expects asking rents for apartments to increase by 1.6 percent on average by the end of 2013, a slower rate of growth compared to 2012, which saw asking rents go up by 2.3 percent.

The forecast contrasts with widely publicized remarks last week by the vice-president of Switzerland’s central bank. Jean-Pierre Danthine expressed concern that with continuing high property prices, the country could be experiencing a market bubble and might be headed towards a crash. He noted that prices today are 40-60 percent higher than 12 years ago.

But Wüest argues that there are two distinct markets. “On the one hand, rents under existing lease agreements – which are linked to the reference interest
rate – have been on a downward trend for quite some time. Asking rents and rents under new lease agreements, on the other hand, have risen by 25 and 13 percent respectively since the year 2005. Inward migration from abroad, which managed to remain at a persistently high level in 2012, continues to represent the main driver for residential demand.”

The construction business in Switzerland is still booming and more than 75,000 units were being built at the end of 2012, a 2.5 percent increase from 2011. “Rising supply levels are likely to slow the pace of rental growth,” concludes Wüest.