Residential property prices in Switzerland continue to rise, though the pace has slowed. According to the latest Private Real Estate Price Index from real estate advisory firm IAZI, apartment prices increased by an average of 3.9 percent year-on-year in the third quarter, outpacing single-family homes, which recorded a 2.8 percent increase.
From July to September, prices for single-family homes grew by 0.7 percent, while condominium apartments saw a 0.8 percent increase. The ongoing price increases coincide with early signs of deceleration in the Swiss real estate market. The number of home purchases declined slightly, alongside a slowdown in mortgage volume growth. High purchase prices remain a factor, as many households struggle to afford residential property despite relatively favorable financing conditions. Banks have also adopted a more cautious approach to financing when household budgets are tight.
Meanwhile, buyers of investment properties faced higher costs, paying 1.4 percent more in the third quarter compared to the previous quarter, according to IAZI's Investment Real Estate Price Index. Prices for investment properties rose 4.5 percent over the course of a year.
IAZI attributes the increase largely to low interest rates. The Swiss National Bank maintained its policy rate at 0 percent at the end of September, preserving the relative attractiveness of real estate for investors compared to other asset classes. Financing costs remain moderate, with ten-year fixed-rate mortgages priced at approximately 2 percent and mortgages tied to the variable SARON rate standing slightly above 1 percent.
At present, indicators point away from a fundamental trend reversal. Although demand for housing is growing less rapidly than in previous years due to lower immigration, construction activity remains low.
This low supply is reflected in vacancy rates. As of early June, the nationwide vacancy rate declined for the sixth consecutive time to 0.9 percent. Out of roughly 45,000 vacant apartments and houses, slightly under 11,000 units were owner-occupied homes, while rental housing supply remains particularly scarce.
