Switzerland

Switzerland’s stable housing market

Lalaine C. Delmendo

Switzerland’s housing market remains more or less steady, with the nationwide price index for privately owned apartments rising modestly by 2.62% during 2023, following y-o-y increases of 3.66% in 2022, 1.29% in 2021, and 0.39% in 2020, according to figures from the Swiss National Bank (SNB). However, when adjusted for inflation, prices were up by a meager 0.99% last year.

Quarter-on-quarter, apartment prices increased by 1.21% in Q4 2023 (1.25% inflation-adjusted), an improvement from a q-o-q fall of 0.37% in the previous quarter.

Switzerland’s house price annual change

By region:

  • In Lake Geneva, the average transaction price of privately owned apartments fell slightly by 0.32% in 2023 from a year earlier but increased by 0.43% from the previous quarter.
  • Zurich saw a modest y-o-y price increase in privately owned apartments of 2.58% in 2023. Quarter-on-quarter, prices increased by 1.45% in Q4 2023.
  • Central Switzerland recorded the biggest y-o-y price increase in privately owned apartments, at 6.51%. On a quarterly basis, apartment prices were up by 1.27%.
  • Southern Switzerland had a robust price increase of 5.38% in 2023 from a year earlier. Quarter-on-quarter, prices were up by 2.17% in Q4 2023.
  • Eastern Switzerland’s apartment prices were also rising, recording an increase of 5.62% y-o-y and a growth of 1.89% q-o-q.
  • In Northwestern Switzerland, prices for privately owned apartments increased by a modest 2.86% in 2023 from a year earlier and by 1.19% in Q4 2023 from the previous quarter.
  • Western Switzerland had a price growth of 3.6% when compared to a year ago, and 1.15% from the previous quarter.
  • Berne’s apartment prices rose by 2.49% y-o-y in 2023 and by 1.28% q-o-q in Q4 2023.

Switzerland’s housing market saw strong house price increases from 2000 to 2016:

  • Owner-occupied dwelling prices rose by 80.5% (70.2% in real terms)
  • Single-family home prices rose by 58% (49% in real terms)
  • Rental apartments in old and new buildings rose by 49.2% (40.7% in real terms)

Residential property growth slowed dramatically from 2017 to the first half of 2020. Surprisingly, the Swiss housing market remained healthy during the Covid-19 pandemic. Residential property prices have been rising modestly from the second half of 2020 to the last quarter of 2023.

Switzerland Real Estate Price Indices graph

The Swiss housing market is expected to remain stable during the remainder of the year, with modest price increases for both apartments and single-family homes. However, low rental yields and strict foreign homeownership rules in the country are discouraging some foreign investors.

In Q1 2024, the average gross rental yields in the whole country stood at 3.05%, barely changing from 3.08% in Q3 2023, according to research conducted by the Global Property Guide in February 2024. In Geneva and Zurich, rental yields are even lower than the national average, at 2.57% and 2.74%, respectively.

Foreign property purchases are severely restricted. The Swiss have for a long time restricted the sale of property to foreigners, with an annual quota of permits set by the Federal Government given to non-resident foreigners seeking to acquire property in Switzerland.

During 2023, Switzerland’s economy expanded by a minuscule 1.3%, amidst a challenging international environment and heightened inflationary pressure worldwide. In the years prior, the economy grew by 5.4% in 2021 and by another 2.7% in 2022, following a 2.3% contraction in 2020, thanks to the Swiss government’s introduction of an economic stimulus package worth CHF 65 billion (€66.63 billion) - the biggest in the country’s history.

The Swiss economy is expected to grow by another unimpressive 1.1% in 2024, significantly below average, based on forecasts released by the State Secretariat for Economic Affairs (SECO). The projected real GDP growth rate next year remains weak, at 1.7%.

Switzerland is a rich country, having one of the highest GDP per capita in the world, at an average of CHF 91,723 (€94,027) in 2023, according to figures from the International Monetary Fund (IMF).

Switzerland GDP Per Capita graph

Local house price variations

Geneva has Switzerland’s most expensive owner-occupied apartments while Zurich has the priciest single-family homes.

During 2023:

  • In Geneva, the average transaction price of owner-occupied apartments was CHF 20,130 (€20,636) per sq. m, up by 3.4% from a year earlier, based on figures from Wüest and Partner.
  • In Zurich, the average price was CHF 19,920 (€20,420) per sq. m, up by a modest 3.7% from the previous year.
  • In Lausanne, the average price was CHF 15,330 (€15,715) per sq. m, up by 3.4% from a year earlier.
  • In Basel, the average price was CHF 12,810 (€13,132) per sq. m, up by 3.3% from a year ago.
  • In Berne, the average price stood at CHF 10,810 (€11,082) per sq. m., up slightly by 1.2% from a year earlier.

For single-family homes:

  • In Zurich, the average transaction price for single-family homes rose by a modest 2.5% y-o-y to CHF 4.18 million (€4.28 million) during 2023.
  • In Geneva, the average price was CHF 3.38 million (€3.47 million) in 2023, up by 2.2% from a year ago.
  • In Lausanne, the average transaction price stood at CHF 2.59 million (€2.65 million), down by 2.5% from a year earlier.
  • In Basel, the average price was CHF 2.7 million (€2.77 million), up slightly by 1.2% from a year earlier.
  • In Berne, the transaction price was CHF 2.21 million (€2.26 million), almost unchanged from the previous year.

Switzerland Price Indices of Single Family Houses graph

Policy rate cut; mortgage rates gradually falling again

In its March 2024 meeting, the SNB lowered its policy rate by 25 basis points to 1.5%, marking the first cut in nine years, as inflation continues to fall, indicative of price stability. 

Before the surprise rate cut, the central bank raised the key interest rate five times by a cumulative 250 basis points from just -0.75% in June 2022 to 1.75% in June 2023, where it stayed since before the policy shift.

“The easing of monetary policy has been made possible because the fight against inflation over the past two and a half years has been effective. For some months now, inflation has been back below 2% and thus in the range the SNB equates with price stability. According to the new forecast, inflation is also likely to remain in this range over the next few years,” said the SNB in its March 2024 Monetary Policy Assessment.

“With its decision, the SNB is taking into account the reduced inflationary pressure as well as the appreciation of the Swiss franc in real terms over the past year. The policy rate cut also supports economic activity,” added the central bank report.

Switzerland SNB Policy Rate graph

In line with the central bank move, mortgage rates have been gradually falling again in recent months.

  • Variable: 3% in February 2024, up from 2.7% a year ago and 2.63% two years earlier
  • Fixed with up to 1-year maturity: 2.44% in February 2024, down from 2.73% a year earlier but still higher than the 1.05% seen two years ago
  • Fixed with up to 3 years maturity: 2.27%, down from 2.89% in the previous year but up from 1.17% two years ago
  • Fixed with up to 5 years maturity: 2.31%, down from 2.94% in February 2023 but still higher than the 1.37% recorded in February 2022
  • Fixed with up to 7 years maturity: 2.38%, down from 3.04% a year ago but still up from 1.55% two years earlier
  • Fixed to 10 years: 2.47%, down from 3.14% in the previous year but up from 1.72% two years ago

Switzerland Mortgage Rates graph

The mortgage market remains highly leveraged

The size of Switzerland’s mortgage market was around 148.5% of GDP in 2023, the lowest in the past five years but still far higher than the 120% of GDP in 2010, 95% of GDP in 2000, and just 60% of GDP in 1990.

During 2023, the mortgage market grew by 2.4% from a year earlier, a slowdown from the annual average growth of 4.5% from 2002 to 2022.

“Momentum on the mortgage and real estate markets has weakened noticeably in recent quarters. However, the vulnerabilities in these markets remain,” said the central bank in its Q1 2024 Quarterly Bulletin.

In January 2024, the total amount of mortgage loans outstanding rose by 2.3% to about CHF 1.2 trillion (€1.23 trillion) from the same period last year, according to the SNB. Over the same period:

  • Domestic: mortgage loans were up by 2.3% y-o-y to CHF 1.19 trillion (€ 1.22 billion)
  • Foreign: mortgage loans increased 3.4% y-o-y to CHF 14.55 billion (€14.92 billion)

Switzerland Mortgage Loans graph

Housing loan volumes have increased only modestly in recent years, because the Federal Council imposed a countercyclical capital buffer (CCyB) for residential real estate in February 2013, as part of SNB’s attempt to contain the appreciation of the Swiss franc. However, in March 2020, the requirement was removed to mitigate the economic impact of the Covid-19 pandemic. Then on January 26, 2022, the capital buffer targeted at mortgage loan financing residential real estate was reactivated, where it remained since.

“The Swiss sectoral CCyB targeted at mortgage loans financing residential property located in Switzerland remains at 2.5% as decided and communicated by the Federal Council in January 2022,” said the SNB. “The Swiss authorities will continue to monitor the developments in the mortgage and real estate markets closely and examine whether further measures are necessary to contain the risks for financial stability.”

Swiss lenders are generally conservative. Borrowers must produce down payments of 5% to 20% of the loan value. About 90% of all bank mortgages have loan-to-value (LTV) ratios of less than two-thirds of the property value.

Immigrants boost the housing market

Switzerland has one of the world’s largest numbers of permanent immigrants per capita, at almost 26% of the population, according to the State Secretariat for Migration (SEM). This significantly affects house price movements.

In 2023, the total number of permanent foreign residents rose by 3.2% from a year earlier, to 2,313,217 people – the highest ever recorded. It was also the biggest growth recorded since 2014.

As of February 2024, permanent foreign residents in Switzerland stood at 2,324,970 people.

Zurich has the highest number of permanent foreign residents at 19.1% of the total, followed by the canton of Vaud (12.2%), Geneva (8.3%), the canton of Argovia (8.2%), and Berne (7.7%). Europeans accounted for more than 84% of the permanent foreign resident population in Switzerland as of February 2024, at 1,961,228 people.

Switzerland Permanent Foreign Resident Population graph

However, the growth in net migration is gradually slowing. In 2023, the net migration rate stood at about 4.5%, at par with the previous year but down from 4.9% in 2021, 5.2% in 2020, 5.5% in 2019, and 5.8% in 2018. The previous two years had been the lowest level recorded in the past two decades.

Foreign residents tend to remain ‘foreign’ because Switzerland has one of the world’s strictest citizenship requirements. It requires 12 years of “permanent, legal, notated” residency, full integration into Swiss culture and community, and mastery of one of the official languages.

Switzerland Net Migration Rate graph

Foreign property purchases are severely restricted

The Swiss have long restricted the sale of property to non-resident foreigners. Cantonal authorization is needed before gaining the title. Each canton has slightly different rules and the rules even vary from commune to commune within the canton. In addition, the Federal government has set an annual quota of permits for non-resident foreigners seeking to acquire property in Switzerland.

Generally speaking, foreigners have the largest choice of properties in French-speaking cantons. The most liberal canton is Vaud, which includes mountain resorts such as Villars, where foreigners can buy virtually any property and resell it immediately.

Residential rents are rising

Residential rent increases are gaining momentum, buoyed by a supply shortage and increasing population. In Q4 2023, the rent index for rental housing units in Switzerland rose by 4.8% from a year earlier, an acceleration from the prior year’s 1.6% growth. It was the sixth consecutive quarter of registering y-o-y increases from Q1 2016 to Q1 2022, based on figures from the SNB. It was the highest growth seen since Q4 2008.

This was supported by Wüest and Partner’s report, which showed that the median asking rent for apartments increased 4.7% y-o-y to CHF 230 (€236) per sq. m. during 2023, following annual declines of 1.6% in 2022, 2.6% in 2021, 2.1% in 2020, 0.9% in 2019 and 2.1% in 2018.

During 2023:

  • In Zurich, the median asking rent was CHF 410 (€420) per sq. m, a huge increase of 17.1% from the previous year. Zurich’s average rent in prime areas was CHF 890 (€912) per sq. m.
  • In Geneva, the median asking rent was CHF 400 (€410) per sq. m, up by 8.1% from a year earlier. Geneva’s average rent in prime areas was CHF 660 (€677) per sq. m.
  • In Lausanne, the median asking rent increased by a modest 3.6% to CHF 290 (€297) per sq. m. Lausanne’s average rent in prime areas was CHF 480 (€492) per sq. m.
  • In Basel, the median asking rent rose by 4.2% to CHF 250 (€256) per sq. m and the average rent in prime areas increased to CHF 440 (€451) per sq. m.
  • In Berne, the median asking rent increased by 4% to CHF 260 (€267) per sq. m as compared to a year earlier. Berne’s average rent in prime areas was CHF 480 (€492) per sq. m.

The highest rents are in the cantons of Zug, Zurich, Schwyz, and Geneva, according to the Federal Statistical Office. The cheapest cantons include Jura, Neuchâtel, and Valais.

“Residential property continues to be scarce on the Swiss rental apartment market as newbuild activity is sluggish: The number of approved rental apartment newbuilds throughout Switzerland was 11% below the average of the last ten years in the third quarter of 2023,” said Wüest and Partner in its Q4 2023 Switzerland Property Market report.

“The increasingly severe shortage of accommodation for rent pushed up advertised rents by 4.7%. As there are currently no signs of any relaxation in the markets, the upward trend in advertised rents looks set to continue (forecast for 2024: +3.8%).,” noted Wüest and Partner.

Before the increase, rents had been falling in Switzerland, mainly due to a decline in demand. From 2018 to 2021, population growth fell to between 0.7% and 0.8% for the first time in more than a decade, amidst low net inward migration, compounded by the coronavirus-induced lockdowns and travel restrictions. The rental market only showed some signs of improvement in Q2 2022, as travel restrictions were eased and economic activity gradually returned to its pre-pandemic levels.

The vacancy rate for rental apartments fell to 1.6% in 2023, from 2.1% in 2022, 2.4% in 2021, and 2.7% in 2020, based on figures from Wüest and Partner.

Switzerland has a huge rental market, with about 2.4 million households (61%) living in rented or cooperative dwellings.

Switzerland Rent Index for Rental Housing Units graph

Rental yields are low

Rental yields in Switzerland’s major cities are quite low. In Q1 2024, the average gross rental yields in the country stood at 3.05%, barely changing from 3.08% in Q3 2023, according to research conducted by the Global Property Guide in February 2024.

In Geneva, home to several international organizations, i.e. Red Cross, WTO, WHO, and ILO, rental apartments yield from 2.25% to 2.76%, with a city average of 2.57%. Smaller apartments have generally higher rental yields than their larger counterparts.

Zurich, Switzerland’s biggest city and the financial capital, Global Property Guide research suggests that the gross rental yields for apartments stood at an average of 2.74% in Q1 2024, down from about 3.3% four years ago. Wüest and Partner’s recent report in Q1 2024 even showed worse rental yields, with prime rental yields averaging just 1.7%.

In other locations:

  • Canton of Vaud apartments yield between 2.46% and 3.21%, with an average of 2.82%.
  • Canton of Ticino apartments offer returns of about 2.06% to 3.52%, with an average of 2.88%.
  • Canton of Valais offers slightly higher rental yields for apartments, ranging from 3.71% to 5.03%, with an average of 4.11%.
  • Canton of Bern apartments earns a yield between 2.54% and 3.47% with an average of 2.87%.
  • Canton of Aargau apartments offer rental yields of around 2.61% to 3.35% with an average of 2.92%.
  • Canton of Fribourg apartments yield between 3.16% and 4.15% with an average of 3.49%.

The buy-to-let market remains off-limits to foreigners, except for subsidized housing. A foreigner may only be granted authorization to acquire a rental unit if he constructs subsidized housing, i.e. builds accommodation with a rent that is low compared with similar premises in the same locality, or acquires newly built housing of the same type when there is a local housing shortage, an exception which applies only in the cantons of Fribourg, Geneva, Grisons, Jura, Neuchâtel, Ticino, Vaud, and Valais.

Pro-tenant laws

Switzerland has one of the lowest owner-occupancy rates in Europe. One reason is extremely pro-tenant laws. Rent increases must be justified by the landlord’s cost increases. Tenants are also protected against eviction.

Owner-occupancy is also discouraged by taxation; property is treated as an asset subject both to wealth tax and to income tax for imputed rental income. Income tax rates in Switzerland can easily exceed 50%, among the highest in the world. Capital gains are also taxed at the cantonal level, with rates differing by the duration of ownership.

However, there has been a trend toward more home ownership, which increased from 28.5% of the total in 1970 to 30.1% in 1980, to 31.3% in 1990 to 34.6% in 2000, and finally to about 35.9% recently, according to figures from the Federal Statistical Office. Changes in pension laws helped - funds can now be withdrawn for house purchases from all pension accounts, both mandatory and voluntary. However, Switzerland is still sometimes dubbed "a nation of tenants".

The Swiss franc continues to strengthen, amidst safe-haven inflows

From January 2023 to March 2024, the Swiss franc gained another 3.2% against the euro to reach a monthly average exchange rate of CHF 0.9656 = EUR 1, as safe-haven inflows driven by the global economic slowdown and concerns over the Russia-Ukraine war pushed the domestic currency to one of its highest level ever recorded against the euro. Against the US dollar, the Swiss franc also appreciated by about 4.1% over the same period.

“The Swiss franc continues to be highly valued,” said the SNB. “The Swiss franc is currently sought after as a refuge currency, along with the U.S. dollar and the yen,” it added.

The strong Swiss franc, coupled with weak demand from abroad, is expected to have a dampening effect on overall economic growth, said the SNB in its March 2024 Monetary Policy Assessment.

The Swiss franc gained 39% against the euro and almost 30% against the US dollar on January 15, 2015, when the SNB removed its CHF1.20 = EUR 1 exchange rate cap. The SNB decided to abandon the cap, in place since 2011, in the 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.

From January 2018 to March 2020 (pre-pandemic), the Swiss franc appreciated against the euro by almost 11%, as investors have sought safe-haven currencies amidst geopolitical uncertainty caused by Brexit and the US-China trade tension. The gains offset the 8% depreciation of the franc against the euro in 2017.

However from Q1 2020 to Q1 2021 – during the onset of the pandemic – the Swiss franc depreciated against the euro by 4.3% but appreciated against the US dollar by 3.1%. During the said period, the SNB has accelerated its foreign currency purchases to counter coronavirus-driven inflows, given the country’s heavy reliance on exports.

The Swiss franc appreciated again against the euro and the US dollar by 12.1% and 3.3%, respectively, from Q1 2021 to Q4 2022.

Switzerland Monthly Average Exchange Rates graph

Sluggish economic growth, slowing inflation

During 2023, Switzerland’s economy expanded by a minuscule 1.3%, amidst a challenging international environment and heightened inflationary pressure worldwide. In the years prior, the economy grew by 5.4% in 2021 and by another 2.7% in 2022, following a 2.3% contraction in 2020, thanks to the Swiss government’s introduction of an economic stimulus package worth CHF 65 billion (€ 66.63 billion) - the biggest in the country’s history.

Switzerland’s economy is expected to expand by another unimpressive 1.1% in 2024, significantly below average, based on forecasts released by the State Secretariat for Economic Affairs (SECO). The projected real GDP growth rate next year remains weak, at 1.7%.

“Overall, Switzerland expects global demand to remain below its historical average until the end of 2025. Against this backdrop, the Expert Group on Business Cycles projects growth of 1.1% for the Swiss economy in 2024 (unchanged forecast). As was the case last year, this is well below average,” said SECO.

“Investment expectations have been revised downwards since the December forecast. The loss of investment momentum is mainly due to falling industrial capacity utilization and higher financing costs. Nonetheless, consumer spending should continue to support growth, helped by a favorable labor market situation and a decline in inflation.”

Before the Covid-19 pandemic from 2010 to 2019, the country had been growing by an annual average of 2%.

Switzerland GDP Growth and Unemployment Percentage graph

Switzerland’s labor market remains in good shape. Unemployment stood at a non-seasonally adjusted rate of 2.4% in March 2024, unchanged from the previous month but up from 2% in the same period last year. From 2010 to 2022, the jobless rate averaged below 3%. Even during the pandemic, unemployment only marginally increased to 3.2% in 2020 and 3% in 2021, before falling down to 2.2% in 2022.

The jobless rate is projected to average 2.3% for the full year of 2024 but will increase slightly to 2.5% in 2025, according to SECO projections.

Inflationary pressures continue to ease. In February 2024, the nationwide inflation slowed to 1.2%, down from 1.3% in the previous month and 3.4% a year earlier, according to figures from the Swiss National Bank.

Before rising to an annual average of 2.5% in 2022-23, the country’s average annual inflation in the past decade was almost zero.

Switzerland Core Inflation Percentage graph

 Sources:

Switzerland - More data and information