Swiss apartment prices will decline for the first time in 15 years in 2016 as purchases by investors fail to offset a broader weakening of demand and rising supply, according to Wueest & Partner AG.
Prices will drop 0.6 percent next year, after gaining 1.6 percent in 2015, the real estate consulting firm wrote in report on Thursday. The biggest decline, 2.3 percent, is projected for the canton of Valais, which includes the Zermatt and Verbier ski resorts, while values will fall 1.8 percent in Geneva.
“Demand is coming from people investing, but it’s not compensating for a widening gap with supply,” Wueest partner Herve Froidevaux said in an interview. “Price corrections in the Lake Geneva region are linked to people having less money to spend.”
Switzerland’s real estate market is slowing after more than a decade of annual price increases of 3 percent to 5 percent. The Swiss central bank’s January decision to abandon its cap against the euro made it more expensive for investors from the 19-nation currency bloc to buy property, reducing demand, Froidevaux said.

Rents Decline
Apartment rents will also drop for the first time since 2001 as companies curb housing allowances for employees and fewer jobs reduces spending power in the financial hubs of Zurich and Geneva. The number of empty apartments in Switzerland climbed to the highest since 2001, the government said last month.
Immigration and interest rates will have the greatest effect on Swiss residential property prices going forward, according to Froidevaux.
“We don’t expect big changes in rates and that’s still a calming factor for the market,” he said. While there shouldn’t be much decline in immigration until at least 2017, purchasing power will weaken, Froidevaux said.
A 1 percentage point increase in rates would cut apartment prices by 9.5 percent, according to calculations by Wueest, assuming other macroeconomic factors remained unchanged.
The average price of individual houses in Switzerland is projected to rise by 0.4 percent in 2016 with lack of construction helping to underpin the market, according to Wueest. Prices in Geneva will decline for a fourth year, with a forecast drop of 3.5 percent, it said.
The average house price in the Lake Geneva region was 1.4 million francs ($1.41 million) in the second quarter, while in Zurich it was 1.18 million francs, Wueest data show.