Market in Depth

Switzerland's minimal house price fall stabilizes

Lalaine C. Delmendo | June 10, 2021

Switzerland's housing market is now stabilizing, after three years of minimal house prices falls due to government-imposed market-cooling measures.

The nationwide average price of privately owned apartments rose by 0.4% (1.1% inflation-adjusted) during 2020, following y-o-y declines of 1.2% in 2019, 1.7% in 2018 and 1% in 2017, according to the Swiss National Bank (SNB). During the latest quarter, apartment prices rose by 1.1% q-o-q (1.3% inflation-adjusted).

By region:
  • In Lake Geneva, the average transaction price of privately-owned apartments rose by 2.1% (2.9% inflation-adjusted) in 2020, after falling by 0.1% in 2019 and 1.4% in 2018.
  • Zurich had a slight price decline of 0.7% (unchanged when adjusted for inflation), after falling by 0.5% in 2019 and 0.8% in 2018.
  • Southern Switzerland had a price increase of 0.3% (1.1% inflation-adjusted), following y-o-y declines of 2.3% in 2019 and 1.6% in 2018.
  • Central Switzerland had a price decline of 1.1% (-0.3% inflation-adjusted) in 2020, after falling by 0.1% in 2019 and 3.2% in 2018.
  • Eastern Switzerland saw a slight price increase of 0.4% (1.1% inflation-adjusted), following a 1% rise in 2019 and a 0.9% drop in 2018.
  • Northwestern Switzerland recorded the biggest price increase in privately-owned apartments, at 2.4% (3.2% inflation-adjusted), after a y-o-y rise of 1.3% in 2019 and a fall of 1.5% in 2018.
  • Western Switzerland had a price fall of 0.4% (up 0.4% inflation-adjusted) last year, following a decline of 1.2% in 2019 and a slightly increase of 0.1% in 2018.
  • Berne's apartment prices rose by 1.3% (2.1% inflation-adjusted) in 2020 from a year earlier, following y-o-y rises of 0.1% in 2019 and 1.8% in 2018.

Improving housing market conditions were due to higher demand buoyed by good financing terms and very low interest rates, combined with low housing supply, according to Wüest and Partner.

“[T]he good financing terms and relatively high pay increases at the beginning of the year, coupled with higher demand (driven by the coronavirus pandemic) for good residential quality and private living space have stimulated interest in owner-occupied housing,” said Wüest and Partner. “On the other hand, the supply of housing on the market is sparse.”

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)

Yet low rental yields continue to discourage foreign homebuyers. In Q4 2020, prime rental yields range from just 1.4% to 1.9%, down from 1.7% to 2.3% two years ago, according to Wüest and Partner. This is supported by GlobalProperty 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%.

Switzerland house prices
Switzerland's economy declined 2.9% in 2020 from a year earlier, in contrast to expansions of 0.9% in 2019 and 2.8% in 2018, as the COVID-19 pandemic battered the services sector, according to the State Secretariat for Economic Affairs (SECO).  The impact was more severe than the 2.1% fall in economic output during the financial crisis – in fact, the worst downturn in 45 years. SECO expects the economy to grow by 3% this year and by another 3.3% in 2022, as output recovers from the pandemic.

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 »


Pandemic-induced economic contraction

Switzerland's economy declined 2.9% in 2020, in contrast to expansions of 0.9% in 2019 and 2.8% in 2018, as the COVID-19 pandemic battered the service sector, according to the State Secretariat for Economic Affairs (SECO). It was the worst downturn in 45 years. Yet Switzerland’s economic contraction is far less severe than its neighbors: -8.8% in Italy, -8.2% in France, -7.5% in Austria, and -5.3% in Germany.

Controlling the spread of the virus triggered a sharp economic downturn in Switzerland during the first half of 2020. In response, the Swiss government introduced an economic stimulus package worth CHF 65 billion (€ 59 billion) - the biggest in the country’s history.

Switzerland gdp inflation
SECO expects the economy to grow by 3% this year and by another 3.3% in 2022, as output recovers from the pandemic.

Unemployment has risen only moderately, thanks to government support programs. Switzerland’s registered unemployment rate stood at 3.6% in February 2021, up from 2.5% a year earlier, according to State Secretariat for Economic Affairs (SECO). The jobless rate is projected at 3.3% this year, before easing to 3% in 2022.

In February 2021, core inflation stood at -0.3%, down from 0.2% in the previous year and 0.4% two years ago, according to the Swiss National Bank. The country’s average annual inflation in the past decade was almost zero.

Swiss franc depreciates, amidst SNB’s massive forex purchases
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 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.

Switzerland monthly exchange rate
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. Against the US dollar, the Swiss franc has been almost steady over the same period.

However since last year, the SNB has accelerated its foreign currency purchases to counter coronavirus-driven inflows. The central bank’s move is expected given the country’s heavy reliance on exports.

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