Third SNB key rate cut in 2024: impact on Swiss Real Estate Investment
Third SNB consecutive key rate cut: A positive signal for real estate investment in Switzerland
On Thursday, September 26, 2024, the Swiss National Bank (SNB) announced a further cut in its key interest rate by 25 basis points, bringing it down to 1%. This represents the third consecutive cut this year, highlighting an accommodating monetary policy amidst controlled inflation and a strong economy. This decision is expected to enhance the attractiveness of real estate investments in Switzerland, with lower mortgage rates and increased capital flows into the real estate sector.
A revival of real estate investments in Switzerland
Lower key interest rates will further enhance the attractiveness of the Swiss real estate market, especially for investors seeking returns in an environment where traditional investments are struggling to perform.
However, this surge in capital may also lead to rising property prices, particularly in high-demand areas, potentially squeezing returns for investors.
Rental Market: Shortage and rent hikes
Switzerland’s dynamic service sector, a less severe industrial slowdown compared to the eurozone, and controlled inflation strengthen the country’s appeal and encourage immigration, driving up housing demand.
Despite the lower interest rates and moderate price pressures, the Swiss rental market faces a structural housing shortage. Raiffeisen Bank notes that new building permits are at a 20-year low, meaning supply is not at pace with growing demand. This imbalance contributes to continuous rent hikes, with proposed rents surpassing a 6.4% annual increase in 2024.
This combination of rising rents and an extremely low vacancy rate — expected to drop below the symbolic 1% threshold — ensures solid and sustainable returns.
Conclusion
The SNB’s key interest rate cut presents an opportunity for real estate investors in Switzerland. With decreasing financing costs and increasing rental income, real estate remains a safe haven, offering long-term profitability prospects. In a context of limited supply and sustained rental demand, investors can expect stable returns.
For those looking to diversify their portfolio or secure their investments amidst the volatility of other asset classes, Swiss real estate, particularly in the residential segment, remains one of the best options currently available.
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