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Last Updated: Oct 06, 2013




House prices in Switzerland continue to rise, though there are signs of slowdown in some market segments, according to the Swiss National Bank’s (SNB) September 2013 Quarterly Bulletin.
  • Owner-occupied apartment prices rose 4.9% during the year to In Q2 2013, or (5.3% in real terms), up from 4% in Q2 2012.
  • Single-family home prices rose by 5.5% (5.9% in real terms). 
  • Rental apartments gained by 3.2% (3.7% in real terms) for old buildings, and 1% (1.4% in real terms) for new buildings, during the year to Q2 2013.  However rental apartments’ price growth has slowed slightly, when compared to the previous year’s y-o-y growth of 3.8% for old and 1.3% for new buildings.

One factor has been an increase in the number of immigrants which has led to higher demand for houses. From 2007 to 2011, net migration into the country reached 365,500 people.

Another factor is that after the collapse of house prices in other countries, Swiss citizens and residents moved their investments back to the relatively stable domestic housing market.  There is also strong residential demand due to low mortgage interest rates, and low vacancy rates at around 0.96% of the housing stock in June 2013, according to the Federal Statistics Office (FSO)

From 2000 to 2012, the Swiss housing market had strong house price increases:
  • Owner-occupied dwelling prices rose 67.2% (54% in real terms)
  • Single-family home prices rose 44.9% (33.6% in real terms)
  • Rental apartments in old and new buildings had price growth of 44% (32.7% in real terms)

The Swiss economy emerged from recession in mid-2009, and expanded by 3.0% in 2010 and by 1.9% in 2011. However, economic growth slowed to 0.9% in 2012.

The economy is expected to grow by 1.3% in 2013.  Mortgage rates in Switzerland remain low, as a countermeasure to Swiss franc’s appreciation. The variable mortgage rate was 2.69% in July 2013, with three-month Libor moving in a range of from 0.0% to 0.25% in September 2013.

Have house prices risen too far?  According to the UBS Swiss real estate bubble index, the risk of the Swiss property market having a speculative bubble has fallen in Q2 2013, although the mortgage volume increased by 4.3% y-o-y and prices remain overvalued.

Developments pointing to overvaluation:
  • Prices continue to rise much more quickly than asking rents.
  • The house price to income ratio was 6.1 in Q2 2013, higher than the long-term average of 5.2.

Developments pointing to stability:
  • The contribution of the construction industry to GDP remained at 9%, lower than the long-term average of 11%.
  • Home prices are around 6% of consumer spending, lower than the price peak during the real estate bubble in Q3 1989.
  •  Mortgage lending slowed, although relative to income it remains significantly higher than the long-term trend.

Switzerland house prices

Three factors prevent the Swiss housing market severely overheating, according to Philippe Kaufmann of Credit Suisse:

  • Relatively limited speculative transactions,
  • Many institutions curbed lending against the backdrop of tighter monitoring and growing risks,
  • No oversupply yet of residential property.

There was a surge in new apartments authorized in Q4 2012 by 41.9% to 22,264 units from the previous quarter and by 70.7% from the previous year. However during the fourth quarter of 2012, the total of new apartments completed in Switzerland actually dropped by 11.7% from a year earlier.

Analysis of Switzerland Residential Property Market »


RENTAL YIELDS
Last Updated: Aug 16, 2013



Luxury apartments in Geneva command average square metre (sq. m.) prices between EUR 13,000 to EUR 14,000.

In our sample, a 120 sq. m. apartment in Geneva costs on average EUR 12,600 per sq. m., 11% more than last year (but due to the small sample size, this is not reliable as a basis for price-comparisons).

Rents on apartments in Geneva range from EUR 31 to 34 per sq. m. per month. A 120 sq. m. apartment can be rented for around EUR 3,700 per month.

The gross rental yield for apartments in Geneva is very poor, ranging from 2.83% to 3.08%. Smaller apartments tend to earn higher rental yields. For example, a 60 sq. m. apartment returns 3.08% rental yields, while a 120 sq. m. apartment returns 2.94% rental yield. A 225 sq. m. apartment returns only 2.83% rental yield.

In Zurich, the average price per sq. m. for a 120 sq. m. apartment is around EUR 10,200.

Rents on apartments in Zurich range from EUR 29 to EUR 31 per sq. m. per month. A 120 sq. m. apartment can be rented for around EUR 3,600 per month.

Rental yields for apartments in Zurich are somewhat better than apartments in Geneva, at 3.35% to 3.50%.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Apr 08, 2013



Rental Income: Income is taxed at the federal, cantonal and municipal levels. The total tax liability could easily exceed 50%. Federal tax rates range from 0% to 11.5%.

Capital Gains: Capital gains are tax-free at the federal level (unless the gains are from the sale of business property). All cantons, however, levy their own taxes on gains from the disposal of immovable property located in the canton.

Inheritance: Inheritance tax is levied at the cantonal level, on the net assets transferred to the beneficiaries.

Residents: Residents are liable to pay federal, cantonal and municipal income taxes on their worldwide income.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Apr 08, 2013



Closing costs are relatively low in Switzerland. Roundtrip transaction costs, i.e., the total cost of buying and selling a property, range from 3.5% to 9%. The estate agent’s fee comprises a large chunk of the cost at roughly 3% to 5% (plus 7.6% VAT), usually paid by the seller.

The buyer pays the Real Estate Transfer Tax which ranges from 0.0% to 3.3%, depending upon the canton. Since January 2005, Transfer Tax has been abolished in Zurich.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: May 25, 2006



Around 61% of all households are renters; so it is not surprising that the law in Switzerland is pro-tenant.

Rents: he initial rent can be freely agreed between the landlord and tenant. However, within 30 days the tenant can appeal against the rent as abusive.

Tenant Security: Tenancies tend to revert to indefinite duration tenancies. This is not necessarily a disaster for the landlord, because three months termination notice can be given by either side.

But the court may give the tenant an extension of up to four years, in cases where and eviction would cause hardship.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Oct 06, 2013


Better economic outlook by end of 2013

Switzerland exchange rateSwitzerland’s economic growth was slow in 2012, with an annual growth of roughly 1%, due to slower growth in investment and foreign trade’s negative contribution. As of Q2 2013, GDP expanded by about 2.5% as compared to the previous year, suggesting an increase in growth for the full year of 2013.

Despite the slowdown, the country managed to keep its title for the 5th consecutive year as the world’s most competitive economy, followed by Singapore and Finland, based on the World Economic Forum’s Global Competitive Index 2012-2013.

Economic growth was relatively strong from 2004 to 2007, with an average annual GDP growth of 3.2%. However with the global financial crisis, economic growth slowed to 2.2% in 2008. By 4th quarter of 2008, Switzerland entered recession as GDP fell by 0.3% y-o-y, and continued to contract up to Q3 2009 by almost 2%. This has lead GDP to contract by as much as 1.9% in 2009.

Switzerland GDPIn 2011, Switzerland experienced a sharp currency appreciation as the franc rose past the US$1.10 mark in March 2011. The franc appreciated to US$1.20  in June 2011 as the Greek sovereign-debt crisis continued, and surged further to US$1.30 in August 2011 amidst the Euro crisis and US debt crisis.

Because of this, the SNB introduced measures to halt the franc’s rise:
  • SNB boosted its monetary base from CHF30 billion to CHF80 billion. Then in August 10, 2011, SNB announced a further increase to CHF120 billion.
  • Currency swaps were introduced
  • The key rate was slashed to close to zero in August 3, 2011. The bottleneck financing facility rate was 0.59% in June 2011.
  • The SNB announced an official 1.20 per euro cap on the strengthening franc.

The Swiss franc continues to trade below the SNB target, although the ceiling against the euro was briefly breached on April 5, 2012.

SNB expects inflation to fall to 0.2% in 2013, but to increase again to 0.3% in 2014.

In August 2013, the rate of unemployment reached 3.2%, according to SNB.






  • Strong & stable economy
  • Low transaction costs
  • Very high rental income tax
  • Pro-tenant rental market
  • Serious ownership limits
  • Low yields in Geneva
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €11,306 For a 120 sq. m. property, usually an apartment.
Rental Yield: 3.10% For a 120 sq. m. property, usually an apartment.
Rent/month: €3,508 For a 120 sq. m. property.
Income Tax: 48.56% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 5.74% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

Swiss real estate market Q3 2012 – UBSBaltic property back! Q1 2014 - Newsec

Overseas real estate mortgage

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