The Swiss real estate market is not expected to collapse because of the coronavirus, but it will not come out unscathed either. Fears of an impending housing crisis are not justified, says Credit Suisse in its latest report “Monitor Switzerland”. Above all, the residential segment represents a stable anchor.
Thanks to the emergency aid decided by the Federal Council, the earnings losses of Swiss households should be significantly reduced, the economists of the big bank write. Therefore, an important loss of mortgage installments and therefore a multiplication of forced sales should not be expected.
No drop in prices – For those who dream of real estate, experts warn that there should be no drop in prices due to the coronavirus crisis. This is because low interest rates support house prices and at the same time construction activity decreases, reducing supply.
However, the crisis will have effects on the real estate market: promoters of new-owned homes should suffer the most, say experts from Credit Suisse. In fact, if the situation persists beyond the expected, the sale of new housing units will slow down considerably and lead to liquidity problems for the promoters.
The recovery? It could be rapid – Once the epidemic decreases, the home ownership market should, however, recover rather quickly, with the exception of the luxury segment, considering that the strong correction on the capital markets should not be compensated so quickly.
In exchange, the prices of rented apartments are expected to drop 1.5-2% this year, as economic uncertainty weighs on demand and immigration decreases with borders closed. This also increases the number of vacant homes.
Inevitable recession – In the “Monitor Switzerland”, the economists of Credit Suisse reiterate the new economic estimates published last Wednesday: for 2020 we expect an annual change in gross domestic product (GDP) of -0.5%, against +1.0 % assumed at the beginning of the month. This is based on the assumption that the extraordinary situation lasts only until mid-May and then progressively improves. In this case, growth would accelerate strongly towards the end of the year. For 2021 a + 2.0% is expected. But if the epidemic persists, the consequences would be more serious, experts reiterate.