Will the construction sector benefit from the drop in rates?

Will the construction sector benefit from the drop in rates?
Will the construction sector benefit from the drop in rates?

Published on December 18, 2024 at 05:10. / Modified on December 18, 2024 at 2:05 p.m.

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The further reduction in the key rate of the Swiss National Bank (SNB) last Thursday, by 0.5 points to 0.5%, constitutes good news for the Swiss real estate market. This decision could in particular boost housing construction, which has been insufficient in recent years. “Lower rates increase the attractiveness of real estate investments compared to other forms of investment such as government bonds and reduce financing costs, which is particularly favorable for the residential segment,” explains Corinne Dubois, economist with the real estate consultancy Wüest Partner. “Generally speaking, the lower the rates, the easier it is to make a construction project profitable,” she notes.

Signs of a rebound in activity are increasing. Since 2017, investment in construction has decreased every year in real terms, adjusted for changes in construction prices. The past year, however, marks a turning point. Wüest Partner anticipates a slight increase of 1.2%. The trend is expected to strengthen next year, with an expected growth of 4% in construction investments. The increase was even expected to reach 7% for multi-family buildings. “However, we are starting from a very low level,” notes Corinne Dubois. Even if investment in construction increases further in the coming years, it will take a few years to return to its 2017 level.”

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