Future development of residential construction activity in Switzerland
A recent study shows that despite the recent interest rate hikes, residential construction activity in Switzerland will pick up again in the medium term, supported by falling land prices and increased rental yields.
A study by property consultants Wüest Partner, headquartered in Zurich, concludes that residential construction activity in Switzerland will pick up in the medium term. The rise in interest rates in the years 2021 to 2023 has slowed down construction activity and thus the growth of the property stock. This has led to falling building land prices, according to a press release from the Federal Office for Housing(BWO) on the study. Building will therefore become more economical again in the medium term. In addition, the higher reference rate for rents has increased income. This is also stimulating construction activity.
The housing market is currently in a transitional phase, after which equilibrium will be restored. However, the expected increase in construction activity is likely to be lower than before the interest rate hike. In March, the Swiss National Bank lowered the key interest rate again from 1.75 per cent to 1.5 per cent.
Wüest Partner conducted the study “Rise in interest rates: effects on residential construction and prices” on behalf of the BWO. It analysed the development of interest rates and construction activity between 2021 and 2023.