Interest rate hikes & energy crisis: What do current developments mean for property owners?

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Energy crisis – The Swiss National Bank (SNB) will come under massive pressure following Thursday’s decision by the European Central Bank (ECB). Real estate financing will become even more expensive and prices, particularly for non-sustainable properties, could fall. What does this mean for property owners?

On Thursday, the ECB decided on another major interest rate hike in the eurozone. It raised the key interest rate by 0.75 percentage points to 2 percent. At the same time, the monetary authorities signaled their willingness to raise interest rates further.

The key interest rate hike is likely to make real estate financing more expensive. Due to the ongoing energy crisis, this applies in particular to the financing costs of less sustainable buildings. According to the forecasts, significant value losses of 10 to 15 percent or even more are to be expected for residential properties with renovation backlogs, according to the ZIA.

Energy crisis – impact on real estate value

On the Swiss real estate market, the question now is how much mortgage interest rates will continue to rise and what impact the energy crisis will have on real estate values. It is already becoming apparent that many people will no longer be able to afford a property due to higher interest rates. In addition, a restrictive monetary policy will slow down economic growth. Consumption is already declining today, as the rise in energy and consumer prices is weakening purchasing power.

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It can already be observed that unsustainable buildings can only be sold at a discount because they do not meet possible future requirements or simply no longer meet people’s expectations.

Figure: Characteristic values of a ceteris paribus comparison between two properties that differ only in that one emits CO2 and the other does not.

If the SNB follows the ECB’s lead, the effects will be felt by property owners in Switzerland. The property must be green – otherwise there is a risk of the home losing value. Early action before the storm hits Switzerland will pay off.

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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