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One month of lockdown: the Swiss real estate market is polarizing

  • Data Insights
Published by Frank Butz a month and 3 weeks ago
MP_Studie

Although more than half of the tenants still want to buy residential property at present, this figure was more than two thirds higher before the start of the Corona crisis. Of Swiss people who want to buy, 30 percent are influenced by the corona crisis in their purchasing intentions. This is the result of two representative surveys conducted by Moneypark and PriceHubble. While the number of advertisements for property sales has only fallen slightly in the last two months according to an analysis by PriceHubble, the number of advertisements for rental properties has fallen by just under 17 percent.

The Corona crisis is having a significant impact on the desire of the Swiss people to acquire residential property. In April 2020, more than half (57%) of tenants still stated that they were interested in buying their own home. However, in December 2019, i.e. before the outbreak of the Corona crisis, their share was still around 70 percent. This shows that tenants with lower incomes in particular are refraining from buying their own home for the time being. The fear of longer short-time work, unemployment and financial losses are likely to be responsible for this. Families with a smaller budget in particular cannot currently imagine an investment with major financial implications. Paradoxically, however, these would be precisely those tenants who could most urgently use the relief in housing costs provided by buying their own home.

Owners, on the other hand, who already had a desire to buy before Corona, often stick to their purchase plans. The higher the household income, the more short-term they want to buy a new property. It is likely to play a role here that owners are aware of both the potential opportunities and the financial implications of a property purchase.

Corona influences the desire for home ownership divergently

Of those people who expressed an active desire to buy in April 2020, 30 percent of them let Corona influence their buying intentions. One half of them would like to buy faster than planned. There are many reasons for this decision: Some would like to live in a property that better suits their needs, as the old property no longer fits after the "experience lockdown". Others would like to invest their assets in real estate as a value investment. The (supposed) prospect of a lower purchase price is also likely to play a role. The other half currently prefer to postpone the purchase.

A look at the differences between German and French-speaking Switzerland is exciting: people with purchase intentions from French-speaking Switzerland are thus much more influenced by Corona than the German-speaking Swiss (43% vs. 26%). In particular, the desire to buy faster than originally planned in order to live in a more suitable property after the lockdown was mentioned conspicuously frequently - by one in seven people - in French-speaking Switzerland. In German-speaking Switzerland, this argument was mentioned only by half as many people in percentage terms.

The survey results clearly show that Corona polarises the residential property market. The past teaches us that people react in many different ways, especially in times of crisis. Buying a home is an emotional decision that is never made purely rationally. Understandably, facts such as the fact that the cost of living could be massively reduced by buying a home often take a back seat. This makes it all the more important to consult a specialist in these times.

Number of rental advertisements declines, sales advertisements react with a slight decline

In the last two months, the supply of residential real estate (number of advertisements) has declined only slightly (-2.3 %). This development underscores the stable value of (owner-occupied) residential property during the crisis. The owner-occupied housing market has proved to be much more stable and less volatile than the tenant market. In contrast, the number of advertisements for rental properties has fallen by almost 17%. In general, the marketing of real estate is difficult at present, e.g. house inspections are difficult to conduct. This is likely to be accompanied by a decline in willingness to take the reins.

"Advanced marketing processes can probably still be completed. But whoever had the plan to sell could now be hesitant due to the current uncertainty in the market and interest rate environment. The new supply is therefore likely to decline in the coming weeks. A data-based view of the market is likely to be even more important in the future to create security. Innovative approaches to digital marketing are therefore particularly relevant now. We at PriceHubble can clearly see this in the demand for our solutions," says Markus Stadler, Co-Founder and COO of PriceHubble.

Corona lockdown does not (yet) have any influence on the offer prices

Corona has not yet exerted any demonstrable influence on property prices. The time period under consideration for this market segment is still too short for this. Although the number of real estate transactions has decreased, because the processes of marketing, viewing and notary's office currently take longer. However, this has not yet had any effect on the offer prices, so a market weakening is not (yet) in sight. However, a continuing stable supply combined with falling demand increases the buyer's negotiating scope, which can have a positive effect after a longer phase of excess demand.

However, if the corona crisis lasts longer and the economy slides into a prolonged recession with sharply increased unemployment figures, this could trigger major price corrections. Even in this rather unlikely scenario, owner-occupied housing is likely to be the most resilient segment in the market.

The full study and survey results can be found here.

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