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Increasing discrepancy between asking prices and market prices for real estate

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Every successful real estate sale begins with a professional property valuation. But just because a property is valued at a certain price no longer means that it can be sold on the market at that price. In recent months, more and more sales prices far above the estimated market value have been achieved. With the changed market conditions, we are increasingly seeing a correction.

Theory versus practice

The limited supply, higher construction costs and continuing population growth are “still” causing prices to rise despite the turnaround in interest rates. At least in theory. In practice, the market already looks different. We are increasingly seeing corrections and a discrepancy between estimated market value, desired sales price and effectively realizable sales proceeds . Rising mortgage interest rates are having an impact on lending for buyers. Even today, planned purchases can no longer be realized as the affordability of the buyers is no longer guaranteed according to the lenders’ golden rule.

Graphic: Growing discrepancy between real estate prices and nominal wages.

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Trend factors Pricing

There are various factors that indicate that the trend of falling prices on the real estate market will continue to intensify.

Economic outlook: A pessimistic economic outlook, inflation and rising interest rates are causing many people to postpone buying or building their own home.
Overvaluation: The market value of houses and apartments is higher than their asset value.
Interest rate hikes: The Swiss National Bank (SNB) has raised the key interest rate by a decent amount. This has an impact on all key economic variables – from mortgages to the stock markets. Experts assume that the SNB will raise the key interest rate by a further percentage point.
Financing conditions: The growing discrepancy between property prices and nominal wages means that the loan-to-income ratio for new mortgages has steadily increased, making it increasingly difficult to meet affordability requirements. Price corrections in the event of falling real estate prices also represent a considerable risk for both owners and banks.
Market economy: Electricity prices continue to rise, leading to a sharp increase in ancillary costs. This is due to the persistently high market prices for procurement. The price level for building materials is at an all-time high and further cost increases are forecast.
Search activities: The higher interest rates have consequences: The number of search subscriptions fell by 10% and the number of transactions was 8% lower in the first half of 2022 than in the previous year.

Important for property owners

When selling real estate, a fair market price is essential. According to the market, this means that there are potential buyers who are willing to pay the proposed price or can finance it. Excessively high receivables make sales more difficult in today’s market environment. There is a risk of a deflationary trend here; sales are delayed or no longer take place at all as customers speculate on further price reductions. It is therefore important to know the correct market price of your property if a sale is planned. If a property was bought at a high price during a boom, it can often only be sold at a loss after a possible value adjustment.

That’s why you should get even more comprehensive information and seek professional real estate expertise. Especially in the current market situation, we are receiving more and more inquiries about unsuccessful sales processes on our own. That doesn’t have to be the case.

Do you have any questions and would like a free, no-obligation consultation? Arrange a consultation directly or give us a call: +41 44 244 32 00

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All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be assumed for the accuracy of the information provided.

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properti

Properti – we offer simple and understandable real estate expertise. Thanks to our many years of experience and focus on industry trends, we always have our finger on the pulse and can provide our clients with the most important information on real estate.

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