During the year to end-Q3 2016, the nationwide average price of rental apartments dropped 1.28% (-1.15% inflation-adjusted), its third consecutive quarter of y-o-y falls, according to the Swiss National Bank (SNB). During the latest quarter, rental apartment prices dropped 0.22% q-o-q (increased 0.13% when adjusted for inflation).
- Old residential rental apartments: down by 1.2% on average (-1.07% inflation-adjusted) during the year to Q3 2016, after annual declines of 1.5% in Q2 2016 and 0.7% in Q1 2016, and y-o-y rises of 1.4% in Q4 2015 and 2.4% in Q3 2015.
- New residential rental apartments: down by 3.45% on average (-3.33% inflation-adjusted) y-o-y in Q3 2016, after annual declines of 3.65% in Q2 2016, 1.97% in Q1 2016, 2.69% in Q4 2015, 1.3% in Q3 2015, and 3% in Q2 2015.
Owner-occupied apartment prices were up by only 1.38% (1.51% inflation-adjusted) during the year to Q3 2016, far below the average annual price rises of 5.4% between 2009 and 2012. On the other hand, single-family home prices increased by 1.36% (1.49% inflation-adjusted) y-o-y in Q3 2016, after annual rises of 1.17% in Q2 2016, 1.26% in Q1 2016, 2.29% in Q4 2015, and 2.01% in Q3 2015.
The property market's slowdown can be attributed to efforts by the federal government and the Swiss National Bank to cool the market, using stricter lending criteria to lower housing debt (currently 90% of all household debt). The recent decision of the central bank to abandon its cap against the euro also made Swiss real estate more expensive for foreign investors, thereby reducing demand, according to Wueest& Partner AG, a real estate consulting firm.
- Lake Geneva recorded the biggest price decline in residential rental apartments, at 5.4% (-5% inflation-adjusted) during the year to Q3 2016
- Zurich had a house price decline of 2.2% (-1.8% inflation-adjusted) over the same period
- Southern Switzerland had a house price decline of 2% (-1.6% inflation-adjusted)
- Central Switzerland saw a house price fall of 1.6% (-1.2% inflation-adjusted)
- Eastern Switzerland had a house price fall of 1.5% (-1.2% inflation-adjusted)
- Northwestern Switzerland had a house price drop of 0.6% (-0.2% inflation-adjusted)
- Western Switzerland recorded an annual house price increase of just 0.8% (1.2% inflation-adjusted)
- Berne’s house prices were unchanged during the year to Q3 2016 (0.4% increase when adjusted for inflation)
The Swiss property market is expected to continue to see modest house price falls in the coming months, amidst a weak economy and regional uncertainties brought about by the Brexit vote, according to local property experts.
Switzerland’s economy unexpectedly stagnated in Q3 2016, amidst weaker government spending and a decline in exports. Quarter-on-quarter, real GDP growth fell to zero, down from 0.6% growth in the previous quarter, according to the State Secretariat for Economic Affairs. The economy is expected to grow by 1% this year, after the central bank gave up its cap on the Swiss franc last year. The economy expanded by just 0.8% in 2015, after growing by 1.9% in 2014, 1.8% in 2013, 1.1% in 2012, 1.9% in 2011 and 2.9% in 2010, according to the International Monetary Fund (IMF).
Analysis of Switzerland Residential Property Market »
Luxury apartments in Geneva command average square metre (sq. m.) prices between EUR 11,400 to EUR 13,500.
In our sample, a 120 sq. m. apartment in Geneva costs on average EUR 11,460 per sq. m.. A 120 sq. m. apartment can be rented for around EUR 3,827 per month. That means a yield of around 3.33%
In Zurich, the average price per sq. m. for a 120 sq. m. apartment is around EUR 12,050. A 120 sq. m. apartment can be rented for around EUR 3,950 per month. That means a rental yield of around 3.27%.
Round trip transaction costs are moderate on residential property in Switzerland. See our Swiss residential property transaction costs analysis and Transaction costs in Switzerland compared to other countries
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.
The buyer pays the Real Estate Transfer Tax which ranges from 0.2% to 3.3%, depending upon the canton. Since January 2005, Transfer Tax has been abolished in Zurich.
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.
The economy expanded by just 0.8% in 2015, after growing by 1.9% in 2014, 1.8% in 2013, 1.1% in 2012, 1.9% in 2011 and 2.9% in 2010, according to the IMF. The Swiss economy has suffered last year mainly due to the franc, which is considered as “significantly overvalued”, despite record low interest rates. The economy is expected to grow by 1% this year and by 1.3% in 2017.
Economic growth was relatively strong from 2004 to 2007, with average annual GDP growth of 3.5%. However with the global financial crisis, economic growth slowed to 2.2% in 2008. By the 4th quarter of 2008 Switzerland was in recession. GDP contracted by as much as 2.1% in 2009, before returning to positive growth in 2010.
In November 2016, the overall unemployment rate remained unchanged from the previous month, at 3.3%, according to the State Secretariat for Economic Affairs. Unemployment averaged 3% from 2000 to 2015. There were about 149,228 unemployed persons in the country in November 2016, up by 4,697 from the prior month.
The country’s jobless rate is expected to rise slightly to 3.5% this year before returning to 3.4% in 2017, according to the IMF.
Consumer prices are still falling in Switzerland. In October 2016, core deflation stood at 0.26%, a slight improvement from a decline in prices of 0.75% in the same period last year, according to the Swiss Federal Statistical Office. Consumer prices fell by an average of 0.5% from 2012 to 2015.
Swiss franc appreciates strongly, after SNB scraps the exchange rate cap
On January 15, 2015 the Swiss franc soared against major currencies when the SNB removed its CHF1.20 = EUR 1 exchange rate cap. Immediately the Swiss franc gained 39% against the euro and almost 30% against the US dollar.
The cap was introduced in 2011, when investors fled the crisis-torn Euro for Swiss assets. Switzerland's exporters cried foul when the Swiss franc rose past the US$1.10 mark in March 2011. It went to US$1.20 in June 2011 during the Greek sovereign-debt crisis. It surged to US$1.30 in August 2011.
The exchange rate cap stopped the appreciation of the domestic currency against major currencies.
However recently the SNB decided to abandon the cap in face of monetary easing by the European Central Bank (ECB), believing that increased demand for safe haven currencies such as the Swiss franc would make it impossible to defend the cap.
As of November 2016, the franc appreciated by 11.5% against the euro, at an average monthly exchange rate stood at CHF1.0759 = EUR 1, according to the Swiss National Bank.