Demand for residential property picks up
Demand for residential property is currently rising again following a slump caused by the rise in interest rates. Most of the supply is being met by existing buildings. These are the findings of a study by Raiffeisen Switzerland. Prices are expected to rise in the medium term.
Raiffeisen Switzerland sees a turnaround in the residential property market. The banking group examined developments on the property market in its study “Real Estate Switzerland – 3Q 2024″. “Demand for residential property has largely recovered following its slump in the wake of the sharp rise in interest rates,” Fredy Hasenmaile, Chief Economist at Raiffeisen Switzerland, is quoted as saying in a Raiffeisen press release on the study. “In addition to the return of the housing cost advantage over renting as interest rates fall again, excess demand is now also spilling over from the rental property market into the owner-occupied property market.”
However, according to the experts at Raiffeisen Switzerland, the resulting increase in supply will not be met by construction activity, but only from existing properties. They therefore expect that the shortage on the residential property market will only be alleviated in the short term. “The more liquid supply and more confident buyers are beginning to be reflected in a higher number of property changes,” explains Hasenmaile. The majority of properties are being sold at the prices desired by the sellers. In the medium term, the chief economist at Raiffeisen Switzerland therefore expects prices to rise more strongly again.
According to the experts, an increasing supply of new buildings is being countered by the densification process, in which new residential buildings are primarily being built in place of old properties. Hasenmaile believes that the vacancy rate on the rental flat market will soon fall below 1 per cent. The increase in annual growth in asking rents to 6.4 per cent in the second quarter of 2024 is also evidence of excess demand.