Switzerland’s property market remains strong.
•Prices of owner-occupied apartments rose 5.08% (4.45% in real terms) over the year to Q1 2011
•Prices of single-family homes rose 4.37% (3.75% in real terms) over the same period.
•Apartment rents increased 1.44% (0.84% in real terms) over the year to Q1 2011.
The Swiss housing market experienced healthy price increases during the last decade. From 2000 to 2010:
• Prices of single-family homes rose by 35.9% (25.1% in real terms)
• Prices of owner-occupied dwellings increased by 53.6% (41.5% in real terms)
• Prices of rental apartments rose by 35.8% (25% in real terms)
In 2010, the total number of new apartments completed was 40,167 units, up 3.9% from the previous year, but down from an annual average of 42,000 units from 2006 to 2008.
There were about 269,202 apartments under construction, up 11.14% from a year earlier. On the other hand, the total number of new apartments authorized dropped by 1.5% to 49,517 units over the same period. In the year to end-Q1 2011:
• New apartments completed were up by 4.5% to 8,798 units
• The number of apartments under construction rose by 5.74% to 68,307 units
• The number of apartments authorized increased 2.02% to 13,719 units
There are several possible reasons for the continued strength of the Swiss housing market:
• Low interest rates spurred strong real estate demand.
• Switzerland is widely viewed as a “safe haven” by wealthy foreigners.
• An increase in the number of immigrants has led to higher demand for houses. Over the past four years, net migration totaled 330,000 people.
• After the collapse of house prices in other countries, Swiss citizens and residents moved their investments back to the domestic housing market which is relatively more stable.
• The Swiss economy emerged from recession in mid-2009, and in 2010 the economy expanded 2.55% from a year earlier.
However, the country’s economic growth is projected to slow to around 2% in 2011, with the Swiss franc appreciating at an uncontrollable pace. The official exchange rate stands at €1=CHF1.085 in early-August 2011, a rise of about 30% from the same period last year. Over the previous year, the franc has also soared about 32% against the US dollar.
The strong Swiss franc has been weakening exports and stoking inflation. Swiss National Bank (SNB), the country’s central bank, has introduced numerous measures to halt the franc’s rise to record levels against the beleaguered euro and US dollar.
• The Franc’s money market liquidity was almost quadrupled. SNB boosted the monetary base from CHF30 billion to CHF80 billion. Then in August 10, 2011, SNB announced it would increase it further to CHF120 billion
• Currency swaps were introduced
• The key rate was slashed to close to zero in August 3, 2011, after the franc climbed to just below parity with the euro. The special rate for bottleneck financing facility was 0.59% in June 2011
In addition, there are speculations that SNB would further act to counter strength in the local currency by setting an exchange rate target against the euro. However, local analysts are doubtful whether implementing an exchange rate target would be effective given the nature of flows which have driven the appreciation of the franc. "Swiss strength is being driven by savings deposits and other real-money flows out of the euro zone and into Switzerland, rather than speculators," said Kiran Kowshik of BNP Paribas.
Despite this, residential property prices are expected to continue rising in 2011, albeit at a slower pace compared to the previous year, according to Credit Suisse.
The Swiss have for a long time restricted the sale of property to foreigners. Now the Federal government has set an annual quota of permits for non-resident foreigners seeking to acquire property in Switzerland. In addition, cantonal authorization is needed before gaining a title. Each canton has slightly different rules, varying from commune to commune within the canton.
However in 2010 each canton gains responsibility for its own foreign property acquisition laws. This may result in faster transfer of property titles, as opposed to the current delays.
Foreigners cannot acquire residential real estate for buy-to-let investments except for subsidized housing which has below market rents.
•Prices of owner-occupied apartments rose 5.08% (4.45% in real terms) over the year to Q1 2011
•Prices of single-family homes rose 4.37% (3.75% in real terms) over the same period.
•Apartment rents increased 1.44% (0.84% in real terms) over the year to Q1 2011.
The Swiss housing market experienced healthy price increases during the last decade. From 2000 to 2010:
• Prices of single-family homes rose by 35.9% (25.1% in real terms)
• Prices of owner-occupied dwellings increased by 53.6% (41.5% in real terms)
• Prices of rental apartments rose by 35.8% (25% in real terms)
In 2010, the total number of new apartments completed was 40,167 units, up 3.9% from the previous year, but down from an annual average of 42,000 units from 2006 to 2008.
There were about 269,202 apartments under construction, up 11.14% from a year earlier. On the other hand, the total number of new apartments authorized dropped by 1.5% to 49,517 units over the same period. In the year to end-Q1 2011:
• New apartments completed were up by 4.5% to 8,798 units
• The number of apartments under construction rose by 5.74% to 68,307 units
• The number of apartments authorized increased 2.02% to 13,719 units
There are several possible reasons for the continued strength of the Swiss housing market:
• Low interest rates spurred strong real estate demand.
• Switzerland is widely viewed as a “safe haven” by wealthy foreigners.
• An increase in the number of immigrants has led to higher demand for houses. Over the past four years, net migration totaled 330,000 people.
• After the collapse of house prices in other countries, Swiss citizens and residents moved their investments back to the domestic housing market which is relatively more stable.
• The Swiss economy emerged from recession in mid-2009, and in 2010 the economy expanded 2.55% from a year earlier.
However, the country’s economic growth is projected to slow to around 2% in 2011, with the Swiss franc appreciating at an uncontrollable pace. The official exchange rate stands at €1=CHF1.085 in early-August 2011, a rise of about 30% from the same period last year. Over the previous year, the franc has also soared about 32% against the US dollar.
The strong Swiss franc has been weakening exports and stoking inflation. Swiss National Bank (SNB), the country’s central bank, has introduced numerous measures to halt the franc’s rise to record levels against the beleaguered euro and US dollar.
• The Franc’s money market liquidity was almost quadrupled. SNB boosted the monetary base from CHF30 billion to CHF80 billion. Then in August 10, 2011, SNB announced it would increase it further to CHF120 billion
• Currency swaps were introduced
• The key rate was slashed to close to zero in August 3, 2011, after the franc climbed to just below parity with the euro. The special rate for bottleneck financing facility was 0.59% in June 2011
In addition, there are speculations that SNB would further act to counter strength in the local currency by setting an exchange rate target against the euro. However, local analysts are doubtful whether implementing an exchange rate target would be effective given the nature of flows which have driven the appreciation of the franc. "Swiss strength is being driven by savings deposits and other real-money flows out of the euro zone and into Switzerland, rather than speculators," said Kiran Kowshik of BNP Paribas.
Despite this, residential property prices are expected to continue rising in 2011, albeit at a slower pace compared to the previous year, according to Credit Suisse. The Swiss have for a long time restricted the sale of property to foreigners. Now the Federal government has set an annual quota of permits for non-resident foreigners seeking to acquire property in Switzerland. In addition, cantonal authorization is needed before gaining a title. Each canton has slightly different rules, varying from commune to commune within the canton.
However in 2010 each canton gains responsibility for its own foreign property acquisition laws. This may result in faster transfer of property titles, as opposed to the current delays.
Foreigners cannot acquire residential real estate for buy-to-let investments except for subsidized housing which has below market rents.
Analysis of Switzerland Residential Property Market »
RENTAL YIELDS
Last Updated: Aug 01, 2011
Swiss gross rental yields range from 3.17% to 5.28%, similar to 2007 Global Property Guide estimates.
Still home to various international organizations, average yields for Geneva city apartments are poor at 4.05%. In Zurich, Switzerland’s biggest city and the financial capital, apartments perform slightly better with an average yield of 4.65%.
Properties for both city centers range from a minimum of 50 sq.m. to a maximum of 250 sq.m. Prices start at €347,050 up to €1,050,180 respectively.
Still home to various international organizations, average yields for Geneva city apartments are poor at 4.05%. In Zurich, Switzerland’s biggest city and the financial capital, apartments perform slightly better with an average yield of 4.65%.
Properties for both city centers range from a minimum of 50 sq.m. to a maximum of 250 sq.m. Prices start at €347,050 up to €1,050,180 respectively.
TAXES AND COSTS
Last Updated: Aug 12, 2011
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.
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.
BUYING GUIDE
Last Updated: Mar 23, 2007
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% - 5% (plus 7.6% VAT), usually paid by the seller.
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.
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.
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.
ECONOMIC GROWTH
Last Updated: Aug 17, 2011
SNB acts to weaken franc
Land-locked at the heart of central Europe with a population of 7.6 million, Switzerland is one of the richest economies in the world (GDP/capita of US$67,246 in 2010). Swiss voters have repeatedly rejected EU membership.
In 2010, the economy had a real GDP growth rate of 2.55%. Economic growth was relatively strong from 2004 to 2007, with an average annual GDP growth of 3.1%. However with the global financial crisis, economic growth slowed to 1.9% in 2008.
Switzerland officially entered recession in Q1 2009 with the economy contracting by as much as 1.9% in 2009.
The country’s economic growth is projected to slow to around 2% in 2011, with the Swiss franc appreciating to record levels. The official exchange rate stood at €1=CHF1.085 in early-August 2011, up 30% on the same period last year. Over the previous year, the franc has soared about 32% against the US dollar.
The strong Swiss franc has hurt exports. The Swiss National Bank (SNB), the country’s central bank, has introduced numerous measures to halt the franc’s rise to record levels against the beleaguered euro and US dollar.
• The Franc’s money market liquidity was almost quadrupled. SNB boosted its monetary base from CHF30 billion to CHF80 billion. Then in August 10, 2011, SNB announced to increase it further to CHF120 billion
• Currency swaps were introduced
• The key rate was slashed to close to zero in August 3, 2011, after the franc climbed to just below parity with the euro. The special rate for bottleneck financing facility was 0.59% in June 2011
SNB has indicated it may set an exchange rate target against the euro. However, analysts doubt a target would be effective. "Swiss strength is being driven by savings deposits and other real-money flows out of the euro zone and into Switzerland, rather than speculators," said Kiran Kowshik of BNP Paribas.
Despite the Swiss franc’s rise, in June 2011 the Swiss inflation rate was only 0.56%. Swiss inflation averaged 0.89% from 1994 to 2007, though it rose to 2.4% in 2008 due to high global food and fuel prices, followed by deflation of 0.48% in 2009, and minimal inflation of 0.69% in 2010.
Unemployment was 3.59% in 2010. In July 2011, the unemployment rate dropped to 2.8%.
In 2010, the economy had a real GDP growth rate of 2.55%. Economic growth was relatively strong from 2004 to 2007, with an average annual GDP growth of 3.1%. However with the global financial crisis, economic growth slowed to 1.9% in 2008.
Switzerland officially entered recession in Q1 2009 with the economy contracting by as much as 1.9% in 2009.
The country’s economic growth is projected to slow to around 2% in 2011, with the Swiss franc appreciating to record levels. The official exchange rate stood at €1=CHF1.085 in early-August 2011, up 30% on the same period last year. Over the previous year, the franc has soared about 32% against the US dollar.
The strong Swiss franc has hurt exports. The Swiss National Bank (SNB), the country’s central bank, has introduced numerous measures to halt the franc’s rise to record levels against the beleaguered euro and US dollar.
• The Franc’s money market liquidity was almost quadrupled. SNB boosted its monetary base from CHF30 billion to CHF80 billion. Then in August 10, 2011, SNB announced to increase it further to CHF120 billion
• Currency swaps were introduced
• The key rate was slashed to close to zero in August 3, 2011, after the franc climbed to just below parity with the euro. The special rate for bottleneck financing facility was 0.59% in June 2011
SNB has indicated it may set an exchange rate target against the euro. However, analysts doubt a target would be effective. "Swiss strength is being driven by savings deposits and other real-money flows out of the euro zone and into Switzerland, rather than speculators," said Kiran Kowshik of BNP Paribas.
Despite the Swiss franc’s rise, in June 2011 the Swiss inflation rate was only 0.56%. Swiss inflation averaged 0.89% from 1994 to 2007, though it rose to 2.4% in 2008 due to high global food and fuel prices, followed by deflation of 0.48% in 2009, and minimal inflation of 0.69% in 2010.
Unemployment was 3.59% in 2010. In July 2011, the unemployment rate dropped to 2.8%.
RSS
Global Property Guide on Twitter
Global Property Guide on Facebook
Global Property Guide on Linked In