RBA Board keeps interest rates on hold again as high inflation digs in
While good news for borrowers, it is unlikely to impact on demand for housing, industry expert says
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In a widely predicted move, the Reserve Bank of Australia board decided to keep rates on hold at its meeting this afternoon.
In a statement, the board said the cash rate will remain at 4.35 percent, while the interest paid on exchnage settlement balances will also be unchanged at 4.25 percent.
The RBA noted that while inflation has fallen since its peak in 2022, the rate of inflation is still outside the board’s target range of between 2 and 3 percent.
“In underlying terms, as represented by the trimmed mean, the CPI rose by 3.9 percent over the year to the June quarter, broadly as forecast in the May Statement ob Monetary Policy,” the board said. “But the latest numbers also demonstrate that inflation is proving persistent.”
Noting that the economic outlook is uncertain and the road to a more manageable rate of inflation is slow and bumpy, the RBA board now predicts that the 2 to 3 percent rate is more likely to take at least another 12 months. The board has repeatedly stated its resolve to bring inflation to heel since it hit a high of 7.8 percent in December 2022.
“This represents a slightly slower return to market than forecast in May, based on estimates that the gap between aggregate demand and supply in the economy is larger than previously thought,” the board said. “In part, this reflects an increase in the forecast for domestic demand. But it also reflects a judgement that the economy’s capacity to meet that demand is somewhat weaker than previously thought, evidenced by the persistence of inflation and ongoing strength in the labour market.”
Research director at CoreLogic Asia Pacific, Tim Lawless, said the decision was unlikely to impact housing demand.
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The government in Switzerland has waived residency requirements in a handful of locations, including one that’s growing fast.
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While golden visa schemes proliferate, Switzerland remains famously protective about buying property in the country.
Rules known as Lex Koller, introduced in 1983, prohibit foreigners from buying homes in cities like Geneva and Zurich. And in the few locations where foreigners can buy, purchase permits come with rules around size and occupancy.
But non-Swiss buyers who have coveted an Alpine home now have a pathway to ownership, and it’s likely to come with financial upside. The Swiss government has waived residency requirements in a handful of locations where developers have negotiated exemptions in exchange for billions of dollars of investment in construction and improvements.
Andermatt, a village 4,715 feet above sea level in the centre of the Swiss Alps, is the largest municipality to open up to foreign buyers.
Its main investor, Egyptian magnate Samih Sawiris, “believed Andermatt could become a full-town redevelopment when he first visited in 2005, but the key was to offer real estate to people outside of Switzerland,” said Russell Collins, chief commercial officer of Andermatt-Swiss Alps, Sawiris’s development company.
“We became the only large-scale real estate development in Switzerland with an exemption from the Lex Koller regulations.”
In the ensuing decades, Andermatt has become a major draw for high-net-worth buyers from around the world, said Alex Koch de Gooreynd, a partner at Knight Frank in London and head of its Swiss residential sales team.
“What the Andermatt-Swiss Alps guys have done is incredible,” he said. “It’s an impressive resort, and there is still a good 10 years’ worth of construction to come. The future of the resort is very good.”
Andermatt’s profile got another boost from the 2022 acquisition of its ski and resort operations by Vail Resorts, which runs 41 ski destinations worldwide.
“Vail has committed to 150 million Swiss francs (US$175 million) in investments, which is another game-changer,” de Gooreynd said.
“If you’d asked me about Andermatt 10 years ago, I would have said the ski areas weren’t good enough of a draw.”
Along with the five-star Chedi Andermatt hotel and residences, which opened in 2013, residential offerings include the Gotthard Residences at the Radisson Blu hotel; at least six branded residences are planned to open by 2030, according to Jeremy Rollason, director for France, Switzerland, and Austria at Savills Ski.
“Most of these are niche, boutique buildings with anywhere from eight to 14 units, and they’re releasing them selectively to create interest and demand, which has been a very successful approach,” he said.
“Andermatt is an emerging destination, and an intelligent buy. Many buyers haven’t heard of it, but it’s about building a brand to the level of Verbier, Courchevel or Gstaad.”
The Alpinist, Andermatt’s third hotel residence, is slated to open in 2027; with 164 apartments, the five-star project will be run by Andermatt-Swiss Alps, according to Collins.
Other developments include Tova, an 18-unit project designed by Norwegian architects Snohetta, and La Foret, an 18-apartment building conceived by Swiss architects Brandenberger Kloter.
Prices in Andermatt’s new buildings range from around 1.35 million francs for a one-bedroom apartment to as much as 3.5 million francs for a two-bedroom unit, according to Astrid Josuran, an agent with Zurich Sotheby’s International Realty.
Penthouses with four or more bedrooms average 5 million-6 million francs. “Property values have been increasing steadily, with an average annual growth rate of 7.7% in the last 10 years,” she said.
“New developments will continue for the next 10 years, after which supply will be limited.”
Foreign buyers can obtain mortgages from Swiss banks, where current rates hover around 1.5% “and are declining,” Josuran said.
Compared to other countries with Alpine resorts, Switzerland also offers tax advantages, said Rollason of Savills. “France has a wealth tax on property wealth, which can become quite penal if you own $4 million or $5 million worth of property,” he said.
Andermatt’s high-end lifestyle has enhanced its appeal, said Collins of Andermatt-Swiss Alps.
“We have three Michelin-starred restaurants, and we want to create a culinary hub here,” he said. “We’ve redeveloped the main shopping promenade, Furkagasse, with 20 new retail and culinary outlets.
And there is a unique international community developing. While half our owners are Swiss, we have British, Italian and German buyers, and we are seeing inquiries from the U.S.”
But Andermatt is not the only Swiss location to cut red tape for foreign buyers.
The much smaller Samnaun resort, between Davos and Innsbruck, Austria, “is zoned so we can sell to foreigners,” said Thomas Joyce of Alpine property specialist Pure International.
“It’s high-altitude, with good restaurants and offers low property taxes of the Graubunden canton where it’s located.”
At the Edge, a new 22-apartment project by a Dutch developer, prices range from 12,000-13,500 francs per square metre, he said.
As Andermatt’s stature grows, this is a strategic time for foreigners to invest, said Josuran of Sotheby’s.
“It might be under the radar now, but it’s rapidly growing, and already among Switzerland’s most attractive ski locations,” she said. “Now’s the time to buy, before it reaches the status of a St. Moritz or Zermatt.”
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