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The price hammer has hit many people hard in Switzerland over the last year and a half: rising rents, food prices, sky-high additional costs and falling real wages are burning a deep hole in household budgets in many places. Latest inflation figures now give hope!
Inflation fell to 1.4 percent in November, well below the Swiss National Bank’s (SNB) 2 percent target. Therefore, UBS expects the SNB to cut interest rates early next June. According to the big bank’s forecast, with two more reductions, the current base interest rate of 1.75 percent will reach 1 percent by the end of 2024. What does this mean in terms of rents, property prices, purchases or wages? Blick provides an overview.
Rent
Many tenants are currently threatened with further rent increases. With the recent increase in the reference interest rate, many property owners will increase their rents again by 3 percent next April. The good news: According to current interest rate forecasts, there will be no further increases. Bad news: The reference rate responds very slowly to interest rate cuts. Therefore, rent reductions are not expected until 2025. Some property owners automatically pass on discounts to tenants. But many will need to actively demand it.
Fees
Depending on forecasts, wages in Switzerland are expected to increase by an average of 1.9 to 2 percent next year. So far it looked like inflation was eating away at increases and the population was facing a round of zero real wages, or even a new decline. UBS reduced its 2024 inflation forecast from 2 percent to 1.6 percent. This means that many workers can look forward to a small increase in real wages.
real estate prices
Interest rate increases have made buying houses and flats more expensive and slowed demand in 2023: As a result, property price increases have slowed significantly. However, with interest rates falling, buying is becoming cheaper again, so prices are likely to rise more strongly again next year.
mortgage interest
With interest rate cuts, a mortgage for the purchase of a property, as well as refinancing a mortgage, will likely become cheaper. As of Dec. 4, the average interest rate on a ten-year fixed-rate mortgage was 2.49 percent, according to Moneypark. It is 2.32 percent in the five-year term and 2.4 percent in the two-year term. Saron mortgage interest rates are expected to fall from 2.61 percent to well below 2 percent by the end of next year; so much so that the reference interest rate will fall to 1 percent by then. Early providers have already reduced mortgage interest rates.
Shopping
Food, energy and fuel were 1.4 percent more expensive in November than a year ago. It is difficult to make predictions here: the prices of these products react strongly to geopolitical developments or, in the case of food, increasing droughts. But what works in consumers’ favor is that inflation rates have also fallen sharply in the US and the Eurozone. Added to this was the appreciation trend in the franc. This could mean that Swiss companies will no longer have to absorb further price increases for products from abroad. This could significantly slow down price increases in retail trade.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
