The property professionals’ solution

On December 12, 2024, the Swiss National Bank (SNB) decided to lower its key interest rate by 50 basis points, bringing it down to 0.5%. This reduction is a direct response to the favorable inflation trend, which decreased to 0.7% in November 2024, well below levels observed in other major economies. Such a monetary policy adjustment has significant implications for the entire Swiss real estate sector. Let’s explore how.

The Effects of the Interest Rate Cut on Real Estate Loans

The interest rate set by the SNB directly influences borrowing costs for commercial banks. When the SNB lowers this rate, banks can borrow at lower rates, which translates into reduced loan costs for individuals and businesses. Mortgage interest rates are expected to decrease, making access to financing more affordable.
Real estate investors, who often rely on credit for acquisitions, stand to benefit from these more favorable conditions, enhancing their investment capacity. This phenomenon could stimulate property purchases, whether residential or commercial.

Rents: A Moderated Dynamic Expected

In addition to loans, the SNB’s rate cut also affects rents in Switzerland. Rent levels are partially calculated based on reference interest rates, which in turn depend on the key interest rate. Therefore, a decrease in the SNB rate could lead to more moderate rents for tenants.
However, it is important to note that this reduction will not immediately translate into lower rents. Adjustments will occur gradually over a few months, but they should still provide relief to tenants, especially in an economic context where price stability remains a major concern.

A Revitalized Real Estate Market Driven by Lower Borrowing Costs

One of the most direct consequences of this interest rate cut is the increased incentive to invest in real estate. With reduced borrowing costs, many households and businesses will be more inclined to invest in properties. This could rejuvenate the market, stimulate construction projects, and consequently boost the development of new commercial or residential ventures.
Investors, whether professional or individual, will seek to take advantage of these favorable conditions to build their real estate portfolios. Lower interest rates facilitate credit access, which can boost demand for real estate and increase market transactions.

Moderate but Stable Growth Prospects

It is also worth noting that the SNB has adjusted its economic growth forecast for 2025, projecting GDP growth of about 1 to 1.5%. While these economic prospects remain cautious, the interest rate cut aims to support consumption and investments, thereby creating a more favorable environment for the real estate sector.

Real Estate Well-Positioned to Benefit from the Rate Cut

The SNB’s reduction of the key interest rate to 0.5% is a measure that will have direct effects on the Swiss real estate sector by lowering borrowing costs and encouraging investors to turn to real estate. While this decision primarily benefits real estate investors, it could also bring advantages to tenants through rent moderation.
For real estate professionals, this development represents an opportunity to reassess investment strategies and adapt financing offers to maximize the benefits of this historic rate cut. It is crucial to closely monitor upcoming SNB announcements to adjust forecasts and fully leverage this dynamic.



Sources
rts.ch - Article
imvesters.ch - Article
neho.ch - Article