During the year to end-June 2014:
- Owner-occupied apartment prices rose by 1.5% (1.4% inflation-adjusted)
- Single-family home prices rose by just 0.5% (0.4% inflation-adjusted)
- Rental apartments gained 3.4% (3.3% inflation-adjusted) for old buildings and 1.5% (1.4% inflation-adjusted) for new buildings
The reasons?† An increase in the number of immigrants has led to higher demand for houses. In addition, some Swiss citizens and residents moved their investments back to Switzerlandís relatively stable domestic housing market, after the collapse of house prices in other countries.
However, local price variations were diverse. Northwestern Switzerland recorded the biggest price gain in owner-occupied apartments, at 3.9% (3.8% inflation-adjusted) in June 2014 from a year earlier. It was followed by Southern Switzerland, with an annual house price increase of 2.9% (2.8% inflation-adjusted), Eastern Switzerland, with a price rise of 1.6% (1.5% inflation-adjusted) and Central Switzerland with a price increase of 1.1% (1.0% inflation-adjusted).
Some regions are experiencing falling house prices. During the year to June 2014, Zurich area saw the biggest house price drop of 1.9% (-2% inflation-adjusted). Other areas which recorded minimal house price falls include Lake Geneva area (-0.8%), Berne area (-0.6%), and Western Switzerland (-0.2%).
Switzerlandís housing market saw strong house price increases from 2000 to 2012:
- 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 continued rise in house prices can be attributed to very low mortgage interest rates, a countermeasure to the Swiss francís appreciation. The average interest rate for mortgages with a maturity of over 6 months to 1 year was slightly down to 1.57% in March 2014, from 1.59% a year earlier.† The average interest rate for mortgages with a maturity of 2-3 years fell from 1.6% to 1.47%. †The average interest rate for mortgages with a maturity of 5-7 years was slightly up from 1.74%, to 1.88%.
The Swiss real estate bubble index (maintained by UBS) is up by 7% from a year earlier, though it fell slightly in Q1 2014 on a quarter-to-quarter basis.
Swiss property is expected to remain stable in 2014, according to Credit Suisse Economic Research.
The economy expanded by 2% in 2013, after growing by 1% in 2012, 1.8% in 2011 and 3% in 2010, according to the International Monetary Fund (IMF). †Economic growth of 2% is forecast for 2014† despite the European Unionís slowdown, according to the State Secretariat for Economics (SECO).
Analysis of Switzerland Residential Property Market »
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%.
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 0.0% 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 economic growth forecast for 2014 was cut from the initial 2.2% to 2%, mainly due to a sluggish outlook for exports amidst the European Unionís slowdown, according to SECO.
"(We) continue to expect the economic upturn to strengthen up to 2015," the SECO said. "However, the economic recovery may be somewhat slower than was forecast in March due to lagging exports."
Economic growth was relatively strong from 2004 to 2007, with average annual GDP growth of 3.2%. 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 1.9% in 2009.
Switzerland has experienced a sharp currency appreciation.† 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.
Because of this, the SNB introduced measures to halt the francís rise:
- The 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, after investors fleeing the euro zone crisis bid the safe-haven currency up to record levels
In May 2014, the overall unemployment rate stood at 3.2%, unchanged from a year earlier. From 2000 to 2013, the countryís unemployment rate averaged 3%, according to the IMF.
Inflation is expected to be 2% in 2014, after deflation of 2% in 2013 and 0.7% in 2012. In Q1 2014, inflation was just 0.1%.