Low interest rates act as a booster for the real estate market

The real estate valuation company IAZI AG reports on the price development on the real estate markets at the end of each quarter. The basis for this is the prices actually paid and is based on a trasaction data pool. According to the evaluation for the 4th quarter of 2021, the “SWX IAZI Private Real Estate Price Index” for private residential property (single-family houses and condominiums) again reached a striking price increase of 1.9 % (previous quarter: 1.2 %). On an annual basis, price growth amounts to 6.2 % (previous quarter: 5.5 %). “As was already the case last year, there is no sign of a cooling in the real estate market. Prices are rising inexorably,” says Donato Scognamiglio, CEO of IAZI AG. The economic environment at the beginning of the year is still very positive, he says. “With value increases on real estate, low unemployment rates and a GDP forecast of 3 percent for 2022, the start of the new year has been good.”

Transaction prices for private residential property

Single-family houses even reached a price growth of 2.2 % in the 4th quarter (previous quarter: 1.1%). On an annual basis, the growth amounts to 7.3 % (previous quarter: 5.8 %). “Such proud growth figures are last found towards the end of 2012,” says Donato Scognamiglio. “The still great demand for the idyll in the countryside continues to give impetus to this segment,” Scognamiglio continues. For the next quarter, IAZI predicts that prices for single-family homes will rise less sharply, although large regional differences are to be expected.

Preiswachstum privates Wohneigentum; Quelle: IAZI

Price growth of private residential property; source: IAZI AG

Condominiums recorded price growth of 1.5 % in the 4th quarter (previous quarter: 1.3 %). On an annual basis, the growth amounts to 5.1 %. “Those who can no longer afford a single-family home under the current strict affordability guidelines will probably have to switch to condominiums or remain tenants,” says Donato Scognamiglio.

Transaction prices for apartment buildings

In the 4th quarter, price growth for multi-family houses reached 2.1 % (previous quarter: 2.2 %). On an annual basis, price growth has increased significantly to 5.9 % (previous quarter: 4.5 %). “Those who want to park their money and prefer stable cash flows to zero interest rates on savings accounts will continue to invest in income properties,” says Donato Scognamiglio. However, one should not ignore the risks. The still high inflation rates will put pressure on the central banks to raise their key interest rates. The USA is already planning two interest rate hikes this year. Whether the SNB will follow suit is more a question of “when” than “how”. “The current low interest rate environment is still acting as a booster for the real estate market,” says Donato Scognamiglio. In the medium term, however, one must slowly get used to the idea of an interest rate increase.

The graphs on the price developments and a video commentary with Prof. Dr. Donato Scognamiglio you can find here.