The property market in Switzerland may seem to be holding out against the crisis, but a closer look shows that current trends in the property market are the result of special factors. The aftereffects of the recession are likely to be felt for some time to come - in the property sector also.
by Gergina Hristova
The Swiss property market has held up surprisingly well. According the latest analysis from consultants Wüest & Partner, the reasons for this are the immigration of workers from abroad, which is slowing down but still strong, and the continuing low interest rates.
The after-effects of the recession
Experts at Wüest & Partners expect the Swiss economy to grow over the next few months. They point out, however, that growth will be slow and that the after-effects of the recession will be felt for some time to come. This will affect mainly the jobs market, where unemployment reached a new high in the first quarter of 2010.
Although the mood among consumers is gloomy, consumer spending remains a major mainstay of the economy. In contrast, the main demand indicator in the housing market - immigration from abroad - is in decline. Despite falling by around one-third in 2009, Wüest & Partner estimate that net immigration was around 40,000, which is still a substantial number. However, difficulties in the jobs market mean that immigration is set to fall even more in the coming months.
A modest drop in construction
The construction industry has withstood the recession remarkably well up to now. Following a peak in construction investment in 2005, real investment volume has fallen by only 4 percent. According to Wüest & Partner, this is primarily due to the continued high level of investment in new-build apartment buildings, and in the conversion and renovation sectors.
Little is expected to change in 2010. Lower investment in commercial building, single-family homes and infrastructure projects is offset by continuing investment in the construction of apartment buildings and in the conversion and renovation sectors, with the result that the downturn in construction is a modest one.
Growing risk potential
The building industry welcomes the high volume of investment, but for the property market it represents an increasing strain. According to Wüest & Partner, a strongly-growing supply is now encountering weakening demand. This makes it more difficult to market new-build properties, as there is a growing risk of vacancies. Questions about the sustainability of current levels of construction are therefore looking increasingly well-founded.
The high-rent paradox
In the light of the economic situation, the current discrepancy between inflation in general and the trend in residential rentals is surprising. The marked price differential is unfavourable to rent-payers, and once again makes owning one's own home a highly attractive proposition.
On the pages that follow you can read forecasts for the next 12 months issued by Wüest & Partner and covering price trends in residential rentals, privately owned property and single-family houses.