Mortgage rates fell drastically in the third quarter of 2024, according to an analysis by Moneypark. This fall was influenced in particular by disappointing economic indicators and renewed fears in the United States.
The Swiss National Bank (SNB) recently cut its key interest rate for the 3rd time in a row, from 1.25% to 1.00% (its lowest level since the beginning of 2023). What impact could this have on the Swiss property market?
Lower mortgage rates boost property investment
For those who want to invest in property, now is the time! Borrowing money will cost less than before.
Thanks to controlled inflation and a prosperous economy (sustained growth, low unemployment, resilience in the face of crises, sound public finances, etc.), Switzerland remains an attractive market for property investors, and this announcement only reinforces that.
Unsurprisingly, residential property continues to attract institutional investors (insurance companies, pension funds, family offices and foundations in particular), who prefer well-located assets that comply with ESG criteria (environmental, social and governance criteria). This considerably reduces the opportunities available and therefore significantly reduces the rates of return for investors in these sought-after areas (due to the increase in property prices).
Worsening housing shortage
In the second quarter of 2024, the proposed rent index rose by 6.4% over a one-year period (Source: Wüest Partners). This trend, which continues unabated, is due in particular to the stagnation in construction activity over the past two decades and population growth.
There are now more than 9 million permanent residents in Switzerland. The ageing of the Swiss population and immigration explain this increase.
As a direct result of a declining supply of housing and steadily rising demand, the proportion of vacant homes is extremely low, ensuring attractive returns for investors.
In conclusion, the 50 basis point reduction in fixed-rate mortgages since mid-June has reduced the cost of buying a property, a real boon for investors.
Falling borrowing costs and rising rental income are boosting the Swiss property market, which continues to be a safe haven and offers undeniable prospects for long-term profitability.
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