Homes have only limited protection against inflation
The risk of inflation can only be cushioned by home ownership in very long-term perspectives. In contrast, the rental housing market has shown itself to be crisis-resistant. The Raiffeisen economists present these findings, among other things, in their current publication “Real Estate Switzerland”.
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Raiffeisen Switzerland has examined the connection between inflation and the development of the real estate market. In their current report “ Real Estate Switzerland ”, the bank's economists come to the conclusion that the real value of real estate is a myth. The price development over the past 50 years shows that home prices do not automatically rise with inflation rates. "Only in the very long term does the home actually protect against inflation," Raiffeisen chief economist Martin Neff is quoted in a media release.
In contrast, even the biggest economic and social crisis in recent history, the COVID-19 pandemic, could not throw the Swiss rental housing market off course. “Even if inflation were to rise sharply in this country, we can still expect falling asking rents,” said Neff. In the opinion of the authors, any rising interest rates should not harm professional real estate investors.
Raiffeisen sees an accelerated structural change in the stationary retail trade. Because "it is rather unlikely that non-food retailers or restaurateurs will scramble for space that is becoming empty after the experience of the last few months".
The Raiffeisen economists paid particular attention to the “little-screened market” for building land. Buildable land is very scarce in Switzerland. At the same time, free parcels for homes and rental apartments are in great demand in the current low interest rate environment. That has caused prices to rise by almost 70 percent since 2016. Only in tourist communities have the large building land reserves and the law on second homes led to price declines. In contrast, construction prices rose only slightly.
