The prices for flats in Switzerland have shifted upwards in the past year and the potential overpricing now tops pre-pandemic levels, Swiss National Bank said.
(Bloomberg) — The prices for flats in Switzerland have shifted upwards in the past year and the potential overpricing now tops pre-pandemic levels, Swiss National Bank said.
“Current apartment prices are roughly 15% – 40% above the levels that can be explained by fundamental factors,” the central bank said in its annual Financial Stability Report published Thursday.
“When interpreting these figures, it is important to bear in mind that they do not capture all demand and supply factors that can affect the residential real estate market. For example, the high and rising share of already built-up residential areas coupled with slow advances in high-density construction have contributed to the tightness of supply. At the same time, household growth has been higher than population growth in recent years, as the average household size has decreased.”
The start of the SNB’s tightening cycle last year had much less of an effect on real estate and mortgage markets than similar central-bank action elsewhere and “has been moderate overall,” according to the report.
Still, the SNB cautioned the potential of a correction.
“With the rise in interest rates on mortgages, the likelihood of declines in residential real estate prices has grown,” it said. “This applies to both the owner-occupied and the residential investment property segment — in the latter, prices have actually already declined somewhat.”
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