Rapid depreciation hurts homeowners: Property prices are falling the most in these cantons

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Landlords are coming under pressure this year. The value of investment properties in Switzerland has fallen by more than ten percent on average this year. This is also evident in the preliminary figures from consulting firm Fahrländer Partner (FPRE) submitted to CH Media. This happened after the prices of multifamily homes reached their absolute peak in 2022.

There was also plenty of room for improvement: Compared with inflation, which has risen by just 11 percent over the past 22 years, the national average price of investment properties has more than doubled. There was a massive increase of 154 percent!

Significantly higher declines depending on canton

With the reversal in interest rates, things are now rapidly deteriorating. In the second quarter of 2023, prices fell a full 13.4 percent compared to the peak in 2022. Depending on the canton, the decrease is even higher: the highest decreases are in the two Appenzell (-17.6 percent) and Obwalden (-17.3 percent), Solothurn (-16.5 percent) and Basel-Landscape’ (-16.1 percent). The region with the lowest price correction is the canton of Uri (-8.4 percent).

This decline in residential investment property prices “may well continue,” as the Swiss National Bank (SNB) warned in its latest stability report. Real estate markets always reacted with a delay to changes in interest rates.

Purchase prices increase, rental income remains the same

Moreover, the risk in this segment is particularly great because prices are far removed from the so-called fundamental factors. Today, you pay a 45 percent higher purchase price than normal for multifamily homes for the same rental income.

Commercial investors such as listed real estate groups and pension funds purchasing apartments are also a significant risk factor. According to the SNB, due to the limited liability of capital, loan defaults will occur much faster than with private owners who are liable for all their assets.

But the price drops hurt only a few people. As FPRE boss Stefan Fahrländer analyzed, prices have only reached the level of four years ago. This means that anyone who bought real estate before will still get a good return today. (Snap)

Source :Blick