Real Estate

The Impact of Inflation on Homeownership

How Does Inflation Influence Homeownership?

The Impact on Access to Homeownership

Inflation is a phenomenon that has intensified significantly in recent months. The Covid-19 pandemic and recent events in Eastern Europe suggest that this trend may continue to strengthen in the coming years.

Inflation refers to a loss of purchasing power of a currency and results in a broad and sustained increase in prices. It therefore has a considerable impact on household budgets and could eventually affect real estate prices, including in Switzerland.

An analysis of the situation.

The Impact of Inflation on the Global Real Estate Market

Economists generally consider an inflation rate between 1% and 2% to be healthy. At present, inflation stands at around 8% in the United States, 6% in Europe, and 3% in Switzerland.

This exceptional situation is encouraging central banks to raise key interest rates. Such a decision acts as a brake on access to homeownership, as it reduces the number of individuals who can qualify for the purchase of a property.

This trend is already visible in Europe and the United States and is expected to continue strengthening.

Consequences Expected in Switzerland Despite a Strong Real Estate Market

So far, the Swiss real estate market has remained relatively protected.

In Switzerland, buyers’ affordability is calculated by banks using a theoretical mortgage interest rate of between 4.5% and 5%, while actual mortgage rates are generally between 1% and 2%.

Although this approach provides a degree of resilience to the Swiss real estate market, it does not completely offset the effects of inflation. A reduction in the number of borrowers over the medium to long term remains a realistic possibility.

Such a situation could lead to lower demand and, consequently, to a slowdown in property prices, even in Switzerland.

2022: A Favourable Time to Sell Your Property

The current uncertainty and rising inflation suggest that property prices may have reached a peak in recent years.

The current economic environment and forecasts point towards a gradual and moderate decline in the value of apartments and houses in the years ahead.

Experts have already observed that asking prices in French-speaking Switzerland have begun to stabilise following a long period of significant and sustained growth.

As a result, 2022 appeared to be a particularly favourable time for property owners to sell at record-high market values.

NewHome Services, Your Preferred Real Estate Partner

Founded in 2007, NewHome Services specialises in the residential real estate and property development markets in the cantons of Vaud and Geneva.

The company can assist you in assessing the value of your land to achieve a fair selling price or in enhancing the value of your property through a tailored development strategy.