Market in Depth

Switzerland's house price falls continue

Lalaine C. Delmendo | May 20, 2020

Success at last!  After about 15 years of uninterrupted house price rises, the Swiss government's efforts to cool the country's overheated property market have finally succeeded. House prices have been falling since the second half of 2017.

The nationwide average price of privately owned apartments fell by 1.12% (-1% inflation-adjusted) during the year to Q1 2020, following y-o-y declines of 1.22% in Q4 2019, 2% in Q3, 1.89% in Q2, and 1.44% in Q1, according to the Swiss National Bank (SNB). During the latest quarter, apartment prices fell by 0.56% q-o-q (-0.43% inflation-adjusted).

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)

The property market's slowdown is due to the Swiss National Bank's stricter lending criteria, which are designed to lower housing debt (currently 90% of all household debt). The rise of the Swiss frank against the euro since 2015 has also made Swiss real estate more expensive for foreign investors, reducing demand.

Low rental yields are also discouraging foreign homebuyers. In Q1 2020, prime rental yields range from just 1.5% to 2.1%, down from 1.7% to 2.3% a year earlier, according to Wüest and Partner. This is supported by Global Property Guide's own research suggesting that rental apartments in Geneva yield about 2.8% to 3.3%; while in Zurich, gross rental yields stand at an average of 3.27%.

Nationwide apartment prices fell by 1.9% in 2018 and by another 1.6% in 2019.
By region:
  • Lake Geneva had a house price decline of 0.07% (-0.64% inflation-adjusted) in 2019, after falling by 1.44% in 2018.
  • Zurich had a house price decline of 0.46% (-1.02% inflation-adjusted), after falling by 0.84% in 2018.
  • Southern Switzerland recorded the biggest price decline in privately owned apartments, at 2.28% (-2.83% inflation-adjusted) in 2019.
  • Central Switzerland had a house price decline of 0.11% (-0.67% inflation-adjusted) in 2019, after falling by 3.17% in 2018.
  • Eastern Switzerland saw a slight house price increase of 0.95% (0.38% inflation-adjusted), following a 0.93% drop in 2018.
  • Northwestern Switzerland had a house price rise of 1.3% (0.73% inflation-adjusted), after falling by 1.45% in 2018.
  • Western Switzerland had an annual house price fall of 1.19% (-1.74% inflation-adjusted) last year.
  • Berne's house prices were almost unchanged in 2019 from a year earlier (-0.51% when adjusted for inflation).

Switzerland house prices
Switzerland's economy grew a minuscule 0.9% in 2019 from a year earlier, sharply down from an expansion of 2.8% in 2018 and the weakest performance in a decade, according to the State Secretariat for Economic Affairs (SECO). The economy is expected to contract by a huge 6.7% this year, as fallout from the COVID-19 outbreak has been worse than initially feared.

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.

Analysis of Switzerland Residential Property Market »

Rental Yields

Poor rental yields in Geneva and Zurich

If you are buying in Switzerland it is usually not the rental yield that interests you, because in the past Swiss rental returns been comparatively poor, and in any case buying by foreigners is significantly restricted. But as the global house price boom has gathered steam over the past 15 years, Swiss rental returns have stayed steady. Swiss rental returns are still classified by us as "poor". But rental returns in much of the world are now worse than they used to be, and Swiss returns are no longer particularly low.

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%

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

Read Rental Yields »

Taxes and Costs

Swiss rental income tax is very high

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.

Read Taxes and Costs »

Buying Guide

Total transaction costs are low in Switzerland

Closing costs are relatively low in Switzerland. Roundtrip transaction costs, i.e. the total costs of buying and selling a property, range from 3.5% to 8.9%. The estate agent's fee comprises a large chunk of the cost at roughly 3% to 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.

Read Buying Guide »

Landlord and Tenant

Swiss law is pro-tenant

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.

Read Landlord and Tenant »


Economy to contract sharply; unemployment rising

Switzerland’s economy grew by a minuscule 0.9% in 2019 from a year earlier, the weakest performance for a decade, according to the State Secretariat for Economic Affairs (SECO).

The restrictions to control the spread of the virus, such as the closure of companies in the retail, hospitality and leisure sectors, are expected to trigger a very sharp economic downturn during the first half of 2020.  The central bank has forecast that the Swiss economy will contract by 6.7% this year - the worst downturn since 1975, in the aftermath of the oil price shock.

Switzerland gdp inflation
“This is one of the worst economic crises since World War 2,” said SECO economist Ronald Indergand. “The speed and the force of the downturn is simply unprecedented. Within two months the economic situation has been wrecked.”

In response, the Swiss government introduced an economic stimulus package worth CHF 65 billion (€ 62 billion) to help companies hit by the pandemic. It is the biggest in the country’s history.

Switzerland’s registered unemployment rate stood at 2.9% in March 2020, up from 2.5% a year earlier, according to State Secretariat for Economic Affairs (SECO). The jobless rate is projected to rise to 3.9% this year, which would be the highest since 1997.

In March 2020, core inflation stood at -0.1%, down from 0.5% a year earlier, according to the Swiss National Bank. The central bank expects inflation to slow to around -0.3% this year, amidst falling oil prices, significantly weaker growth prospects, and stronger Swiss franc.

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