Owner-occupied housing market shows cooling

St.Gallen, May 2023

The gap between supply and demand on the market for residential property is slowly closing. As a result, the price dynamics for residential property are also weakening. In contrast, prices for rental flats, which are becoming increasingly scarce, are rising significantly. This is shown in a study by Raiffeisen Switzerland.

The market for residential property is not impressed by inflation and the turnaround in interest rates, writes Raiffeisen Switzerland in a press release on the current edition of its “Immobilien Schweiz” study. According to the banking group’s surveys, prices for single-family homes in the second quarter were 6.1 per cent higher than in the previous year. Prices for condominiums rose by 7.5 per cent in the same period.

Now, however, there are signs of a cooling of the market, writes Raiffeisen. Specifically, the experts of the banking group observe a slow closing of the gap between supply and demand. “However, it will probably not be enough for more than a weakening of the price dynamics on the owner-occupied housing market,” Martin Neff predicts in the press release. according to the chief economist of Raiffeisen Switzerland, “major price declines or even a crash” are unlikely: “The signs on the owner-occupied housing market point to a soft landing.”

In the rental housing market, on the other hand, Raiffeisen sees rising demand and an increasingly scarce supply. In view of dynamic immigration and stagnating construction activity, there is no relief in sight. “In the environment of rising construction prices, increased financing costs, ever higher administrative hurdles and significantly increased opportunity costs, the signs of heating up are not enough to sufficiently increase the attractiveness of new construction projects,” says Neff. He expects an “acute housing shortage” already observed in various regions to spread to other regions.

More articles