A reversal in interest rates increases the risk of a correction

A study of the real estate market warns

The reversal of interest rates increases the risk of a correction in real estate prices

According to a study published on Wednesday, the Swiss real estate market is about to turn around. Experts expect a decline in the prices of apartments and houses. Reasons.

1/4

According to a new study by real estate consultants Iazi, there may be a price correction in the housing market.

The real estate boom is coming to an end. Rising interest rates, falling financial markets and a weakening economy are likely to make real estate investment less attractive. The private residential real estate market is currently doing somewhat better.

Given the turnaround in interest rates, real estate investors would have to rethink their investment strategy, real estate consultancy Iazi announced on Wednesday. Due to rising interest rates, federal bonds are again an alternative. Ten-year federal bonds are once again yielding more than one percent net. “The days of the investment emergency are definitely over,” writes Iazi.

High immigration as a boost

According to Iazi, price developments show that investment properties are becoming less attractive. However, the price correction currently still counteracts the fact that rising interest rates also cause the reference interest rate, which is decisive for rent, to rise. Along with higher inflation, this allows rents to be adjusted. In addition, the investment property market was supported by high immigration, a decline in construction activity and low vacancy rates.

Nevertheless, there may be a price correction. Pension systems may not invest more than 30 percent of their total investments in real estate. However, if stocks and bonds – like in the current year – lose a lot in value, the share of real estate will rise above this quota. According to a bank study, this is currently the case for roughly a quarter of institutions. Therefore, there could be a sale that would meet the quota again, Iazi continues.

Stable situation for private residential real estate

Leave a Comment