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Français SWITZERLAND - PROPERTY - NEGATIVE INTEREST RATES ARE SET TO SEND PRICES SOARING
Despite a deterioration in the economic outlook, property prices are expected to rise over the next twelve months, according to a consultancy firm.
Nothing particularly new or surprising… as investment property has always been out of reach for the average person, nothing is changing in that regard.
As heritage property remains virtually out of reach for the majority of the Swiss population, that shouldn’t change much either, would it?
Not necessarily, because as residents of cities like Geneva, for example, are almost all tenants... sorry, ‘tenant-slaves’... With prices set to rise, it is highly likely that rents (which, curiously, never fall) could start climbing again...
In short, the world’s most expensive country is pulling far ahead of the rest and is not about to be caught up with… unless the looming massive crisis ends up completely ruining Switzerland’s working-class majority, the ‘working poor’
Alain Farrugia
Property experts are expecting prices in the sector to soar. Against a backdrop of negative interest rates, investment alternatives offering a good return are becoming increasingly scarce, the consultancy firm KPMG explained on Tuesday.
Property prices are expected to rise over the next twelve months, with expectations clearly higher than those of the previous year, according to a press release. This rise is expected despite a deterioration in the economic outlook.
All-time high
Calculated by KPMG, the Swiss Real Estate Sentiment Index has thus reached an all-time high of 31.0 points, compared with 0.8 points in 2018. This index, based on a survey of investors and property valuers, has reflected these specialists’ views on price trends in the sector since its first edition in 2012.
“Players in the property investment market are anticipating higher price levels as there are currently few alternative investment opportunities,” says Beat Seger, partner and property expert at KPMG, quoted in the press release.
The upward trend is mainly driven by institutional investors, particularly pension funds, which are struggling to find returns on the financial markets and are therefore turning to income-generating property, causing prices to skyrocket.
Decline expected in outlying areas
The Swiss National Bank (SNB) has been warning for some time now of the risks of a bubble in investment property. In the SNB’s view, these concerns currently justify maintaining prudential measures, foremost among which is the countercyclical capital buffer.
It is worth noting that it was the SNB that introduced negative interest rates in 2015 to curb the rise of the franc. Price rises are widespread, with the exception of outlying areas, where forecasts remain in the red. A downward trend is also expected in two of Switzerland’s eight major economic centres, namely Lugano and St Gallen. The sharpest increases are forecast, unsurprisingly, in Zurich and Geneva, but also in Basel and Lausanne.
Further price rises
The experts surveyed by KPMG anticipate a further rise in residential property prices. For office space, stability is expected for the first time since the survey began, according to the press release. Commercial and retail space is on a downward trend.
According to the survey, the perception of risk has declined somewhat over the past year. In total, 46% of participants expect an increase in risks, compared with 48% who foresee the status quo. The remaining 6% are the most optimistic.
