The ever-fading dream of becoming an owner


The ever-fading dream of becoming an owner
High property prices and high regulatory barriers do not allow a part of the population to realise their dream: owning their own home. A trend that is likely to continue.

Since the 1990s, we have seen an explosion in home ownership. According to a study by Raiffeisen Economic Research, this trend is slowly coming to an end. Until the middle of the last decade, house prices rose and so did the number of homeowners. In the meantime, the market for owner-occupied housing has changed dramatically, due to the continuing low interest rate environment.

Here are some explanations:

  • Property prices have been rising for 20 years and this is not about to change.

  • Prices are being driven up by fundamentals, not speculation. That is why this housing bubble will not burst.

  • Homeowners enjoy many advantages (low housing costs and high capital gains).

  • After decades of growth, the rate of home ownership is falling again. Switzerland is becoming a country of tenants again.

Continuous increase over the past 20 years

Several phenomena have contributed to this uninterrupted rise in prices: economic growth, high immigration and the expansion of the population's ability to own property. Even economic crises and the Covid-19 pandemic have not been able to curb this continuous rise in prices. This can be explained by an increasing demand and a decreasing supply.

Is the bubble bursting?

In its press release, Raiffeisen explains that the Swiss real estate market has been impacted by the ultra-expansionary monetary policy pursued by central banks for several years. With asset prices already inflated, this is causing property prices to rise. This does not necessarily mean that a real estate bubble is about to burst, as the absolute level of prices says very little about the situation and possible risks in the market.

So the rise is not just in the real estate sector. Switzerland has also experienced strong economic and demographic growth. There are more and more people living in Switzerland and they want to have their own home. The problem is that there is less and less building land available. The problem is that there is less and less building land available, so most of the buildings are rental properties. This bubble has only a small chance of bursting.

The richest profit and the others pay

After 20 years of continuous price increases, the dream of home ownership has come to a halt for a large part of the population. We are talking about the middle class. In addition to this price increase, access to financing has also become increasingly difficult.

In conclusion, the home ownership boom in Switzerland is coming to an end. There are several reasons for this: high prices, financing obstacles, lack of available properties and lack of building land. However, the trend could change in several years' time, when the baby boomers sell their current properties.

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