Switzerland’s Housing Market Crashes: Huge Decline in House Prices After Interest Rate Hike

Switzerland's housing market crashes as house prices plummet by 10% since 2023, following an interest rate hike. Experts predict further decline in prices. Get the latest updates on Swiss real estate.

Switzerland's house prices have finally started to decline after reaching their peak in 2022, according to a recent study conducted by consulting group Fahrländer Partner (FPRE). The Swiss National Bank has even predicted that prices may continue to fall. The study reveals that since the beginning of 2023, the average value of houses in Switzerland has dropped by 10 percent. In comparison to mid-2022, property prices are now 13.4 percent cheaper.

Switzerland’s Housing Market Crashes: Huge Decline in House Prices After Interest Rate Hike | ogusyis

The decline in prices varied significantly across different regions within Switzerland. The most significant drops were observed in Appenzells (-17.6 percent), Obwalden (-17.3 percent), and Solothurn (-16.5 percent). Even the average costs in Zurich experienced a decline of over 10 percent, while Canton Uri recorded the smallest price correction of -8.4 percent.

FPRE attributes the decrease in prices primarily to higher interest rates on Swiss mortgages. With housing becoming less affordable, it has become a less profitable asset for pension providers, funds, and other companies investing in property. Moreover, a rebalancing based on "fundamental factors" has also contributed to the price corrections. It remains notable that buying a home in Switzerland remains 45 percent more expensive than renting in the long term.

The decline in property prices has garnered attention from the government and national institutions. The Swiss National Bank's latest economic report suggests that the downward trend in prices may persist in the future.

Despite the recent fall in prices, housing in Switzerland is still significantly expensive. FPRE highlights that even with a 10 percent drop, housing is still 154 percent costlier than at the beginning of the century. Swiss cities continue to be rated as having some of the most overpriced homes globally. Additionally, the higher interest rates on Swiss mortgages have made it even more unaffordable for regular individuals to purchase properties. Hence, the decrease in prices does not necessarily equate to increased affordability.