The Swiss real estate market has remarkably weathered the return to positive interest rates, despite a noticeable cooling off period. Prices for residential properties (single-family homes and condominiums) remain high and are even continuing to rise. The latest Zurich Residential Property Index (ZWEX) from the Zurich Cantonal Bank (ZKB) confirms this assessment.

As the dominant player in mortgage lending within its cantonal borders, the state institution possesses intimate knowledge of the real estate market in Switzerland's most important economic region, aided by extensive property evaluations.

Returning to Its Previous Trajectory

After a setback earlier in the year, the ZWEX returned to its previous trajectory in the second quarter, according to ZKB. Prices increased by 3.3 percent compared to the previous year.

The downward trend in interest rates since March appears to be stimulating activity. Although financing costs are still higher than during the negative interest rate phase, they have significantly decreased thanks to two rate cuts by the Swiss National Bank (SNB). This seems to be stimulating buyer activity, especially in condominiums, as reported by ZKB in the first quarter. This is good news for both market participants and those involved in the mortgage business.

Rising Rental Trends Stimulate Home-Ownership

In addition to interest rates, rental costs play a crucial role in decisions regarding homeownership. When rental prices for currently available housing rise, the attractiveness of homeownership increases as an alternative. While the growth in offered rents slowed significantly in the first half of the year due to special factors, the upward trend remains strong, according to ZKB's assessment.

The ZKB no longer anticipates another increase in the mortgage reference interest rate by 2025. This revision is based on the SNB's surprising interest rate moves. The bank also predicts a moderate increase in home prices through 2025, driven by sustained housing demand due to high net migration and limited growth in new construction.