Switzerland: Price History

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Gentle house price hikes continue

Swiss house prices in 2006 continued the modest upward movement which started in 2000. The price index of ‘rental apartments’ (i.e., apartments built for renting) increased by 3.2% y-o-y in 2006, slightly lower than 2005’s 3.7% y-o-y growth.

Other residential units followed a similar pattern; price index for owner-occupied apartments was up by around 1.9% while the index for single-family homes was up by 1.8% (all figures in nominal terms)

From 2001 to 2006, the price index of rental apartment in Switzerland have risen only 18.7% in (while owner occupied apartment prices are up 21%). This is tame compared to the 100% five-year house price growth in Spain, 86% in the UK, 78% in France.

The 1990s - a crashing decade

During the 1980s, Swiss apartment prices rose by an average annual rate of 8.8%. The boom continued in the early 1990s, in particular, apartment prices rose 18% in 1990 and 12% in 1991.

To tame what it saw as run-away house price inflation, the Swiss National Bank (SNB) increased mortgage interest rates to 7.9% in October 1992, up from 4.9% in January 1989.

Most mortgages are variable term, so the impact was severe. Apartment prices fell by 9% in 1993, followed by another 9% in 1994, and 8.3% in 1996. From 1993 to 2000, apartment prices fell by an average of 6% yearly.

By 2000, apartment prices were back to their 1987 level. The crash had wiped out a decade’s gains.

Owner-occupancy rising

Around 61% of all households rent in Switzerland. Among the oft-cited reasons are the efficient workings of the rental market, and the fact that about 20% of the population are not Swiss nationals, and until recently were prohibited from buying real estate.

Owner-occupancy, however, is slowly gaining popularity; in 2006 36.5% of housing units were owner-occupied, compared with 30.3% in 1990. More units are now constructed for ownership; for every 100 new houses only 26 are rental apartments.

One reason is that while house prices fell in the 1990s, rents never fell. So now owner-occupancy is cheaper than renting.

In the past two decades (1986-2006):

• Rents increased 70.4%
• Apartment purchase prices increased 42.7%
• Owner-occupied housing purchase prices increased 43.6%

The taxation system also slightly favours buying rather than renting - mortgage payments are tax deductible.

Finally, owner-occupancy is encouraged by historically low mortgage interest rates at 3.04% April 2006, much lower than the peak rates of 6 to 8% in the 1990s.

Finally, the provision to allow foreigners to buy property for their primary residence is also expected to increase owner-occupancy in the future.

Rental market

Rental yields Switzerland’s major cities are quite low, at 3.8% to 5%. Apartments in Geneva, home to various international organizations such as the ILO, WHO, WTO, and the Red Cross, have gross yields of 4.1% - 4.9% In Zurich, Switzerland’s biggest city and the financial capital, apartments have gross yields of 3.8%–5.1%.

Vacancy rates inched up a little from 2005’s 1% to 1.2% in 2006, very low by international standards. The low vacancy rate reflects a severe housing shortage, to which the market is responding. About 45,000 homes were completed in 2006, higher than 2005’s 42,000 units and the highest figure for ten years.

Switzerland - more data and information

• Swiss house prices, rents, and letting income - real data!
• How expensive are houses in Switzerland, compared to the rest of Europe?
• How much rent can be earned from Swiss property, compared to the rest of Europe?

Your Comments

posted by Nicole Dufour | 2006-12-12

Buyer's agent - Swissdom represents buyer's looking to buy property in Switzerland and France, Geneva

posted by Ian Croucher | 2007-08-05

lawyer, Geneva

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