For twenty years, the prices for single-family houses and condominiums in Switzerland have risen almost continuously. Favorable financing with interest rates sometimes below 1% for a 10-year mortgage made buying attractive compared to renting. In addition, the demand for real estate was driven by strong immigration. As a result, home ownership prices rose sharply. They literally exploded in the centers.
Mortgages will increase by 3.5% in 2022
But the rapid turnaround in interest rates last year has made financing more expensive: buyers now have to pay more than double the mortgage interest for their dream property. As a result, the demand for objects should have textbook-wise declined. The consequence of this is that the volume of mortgage loans is also declining or at least stagnating. But the SNB figures for 2022 show a different picture: Overall, 3.5% more domestic mortgages were granted last year than in the previous year. While the volume at the big banks was already stagnating, the cantonal banks financed 5.1% more real estate, followed by the regional banks and savings banks with a plus of 4.9% and the institutions of the Raiffeisen group (plus 3.7%). Real estate financing rose particularly strongly among the members of the Clientis Group: At the end of 2022, they recorded a portfolio of mortgage-backed loans of CHF 10,745 million – an increase of 5.8%!
Objects in urban areas unaffordable
There are certainly numerous explanations for these large differences in mortgage growth. But if you look at real estate prices and the availability of residential property, it quickly becomes clear that the regionally active institutes have been able to benefit greatly from their home markets and their local expertise. Because while home ownership in urban areas has become almost unaffordable, there are still affordable and financeable properties in rural areas. According to a report in Blick an average family home in Aarburg (AG) costs CHF 610,000, while the buyer in Miles (ZH) has to pay CHF 3.4 million for a comparable property.
Reports from individual regional banks show that the trend away from the urban agglomeration into the surrounding countryside has led to increased demand and construction activity, from which the banking business has also benefited. Thanks to this trend, the long-ridiculed regional banks became the growth winners.
Stagnation of mortgages since the beginning of the year
Even if the need for living space is still great, there are currently signs of stagnation in demand and thus also in the prices for residential property. The first figures from the SNB’s banking statistics for the first quarter of 2023 show that there is also less demand for real estate loans. Domestic mortgage growth was just 0.7%. The cantonal (+1.2%), Raiffeisen (+0.7%) and regional banks (+0.3%) were also able to lend less money for mortgages. If this trend continues, there should be zero growth in mortgage loans this year.
Conclusion
However, this should not be a disadvantage for the regionally active banks: They have gained new customers over the long term. Provided the refinancing is solid and no major concessions have been made in terms of affordability, this segment, which has long been ridiculed, has shown that there can be a successful future even for traditional small banks, despite pressure on margins, digitization and increasing regulation. This is in complete contrast to a former major Swiss bank that is also steeped in tradition.
“Back to basics” – this is the topic of the industry talk banks, which will take place on June 20, 2023 in Zurich. Registrations at:
2023-06-14 12:46:26
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