Market in Depth

Switzerland's housing market gradually improving

Lalaine C. Delmendo | April 11, 2022

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

The nationwide average price of privately owned apartments rose by 1.8% (1.4% inflation-adjusted) during 2021, following declines of 0.4% in 2020, 1.6% in 2019 and 1.9% in 2018, according to the Swiss National Bank (SNB). In fact, 2021 was the Swiss market's best showing since 2014.

By region:
  • In Lake Geneva, the average transaction price of privately-owned apartments rose by 3.3% (2.9% inflation-adjusted) in 2021, after rising by 2.1% in 2020.
  • Zurich recorded the biggest price increase in privately-owned apartments, at 5.3% (4.8% inflation-adjusted), following a slight price decline of 0.7% in 2020.
  • Southern Switzerland had a price increase of 3.1% (2.6% inflation-adjusted), up from the previous year's miniscule growth of 0.3%.
  • Central Switzerland had a slight price increase of 0.3% (-0.2% inflation-adjusted), following a decline of 1.1% in 2020.
  • Eastern Switzerland saw a price increase of 2.9% (2.5% inflation-adjusted), up from the previous year's meager growth of 0.4%.
  • Northwestern Switzerland had a price increase of 1.9% (1.4% inflation-adjusted), following growth of 2.4% in 2020.
  • Western Switzerland had a price growth of 1.9% (1.5% inflation-adjusted), in contrast to a price fall of 0.4% in 2020.
  • Berne's apartment prices rose by 4.3% y-o-y (3.8% inflation-adjusted) in 2021, an improvement from 2020's 1.3% growth.


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

“Higher construction costs and greater optimism among the various players in the Swiss real estate market have pushed up the investment volumes for the new-build approvals granted,” said Wüest and Partner. “A slight increase in new-build activity is expected for this year.”

Prices are expected to continue increasing this year. “Prices are set to increase again in 2022 as the market will still be dominated by a shortage of supply. An average rise of 2.5% is expected for owner-occupied apartments across all the sub-segments, and price growth of 3.0% is expected for single-family houses,” according to Wüest and Partner.

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)

Rental yields are low. In Q4 2021, prime rental yields range from just 1.2% to 1.6%, down from 1.4% to 1.9% a year ago and from 1.7% to 2.3% two years ago, according to Wüest and Partner.

Switzerland house pricesSwitzerland's economy expanded by 3.5% y-o-y in 2021, in contrast to a 2.9% contraction in 2020 but below initial projections amidst the resurgence of Covid infections in late-2021, with restrictions being tightened across the region. The State Secretariat for Economic Affairs (SECO) forecasts Switzerland's economic growth this year at 2.8%. Supply chain bottlenecks, rising inflation, and the conflict in Ukraine are posing major risks to economic recovery.

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 »

ECONOMIC GROWTH

Modest economic growth, appreciating currency

Switzerland's economy expanded by 3.5% y-o-y in 2021, in contrast to a 2.9% contraction in 2020 but below initial projections amidst the resurgence of infections in late-2021 and restrictions were tightened across the region. To boost economic activity, the Swiss government introduced an economic stimulus package worth CHF 65 billion (€ 64.1 billion) - the biggest in the country’s history.

The State Secretariat for Economic Affairs (SECO) forecasts Switzerland’s economic growth this year at a modest 2.8%, as supply chain bottlenecks, rising inflation, and the conflict in Ukraine pose major risks to economic recovery.

Yet it remains above the annual average of 2% from 2010 to 2019.

Unemployment inched down to a non-seasonally adjusted 2.4% in March 2022 – the lowest level since November 2019.

Switzerland gdp inflation
The jobless rate is projected to fall to 2.1% this year and to 2% in 2023, according to projections from the State Secretariat for Economic Affairs (SECO).

In February 2022, core inflation stood at 1.3%, sharply up from -0.3% in February 2021 and 0.2% two years ago, according to the Swiss National Bank. The country’s average annual inflation in the past decade was almost zero.

The Swiss franc is appreciating, amidst safe-haven inflows. In March 2022, the Swiss franc gained 8% against the euro from a year earlier to reach a monthly average exchange rate of CHF 1.0244 = EUR 1, as safe-haven inflows driven by concerns over Ukraine pushed the domestic currency to its highest level ever recorded against the euro. Against the US dollar, the Swiss franc has been almost steady over the same period.

“The Swiss franc is currently sought after as a refuge currency, along with the U.S. dollar and the yen,” said the SNB.

“The Swiss franc continues to be highly valued,” it added. “The SNB remains prepared to intervene in the foreign exchange market if necessary.”

The strong Swiss franc, coupled with rising energy prices, is expected to have a negative effect on trade and exports.

Switzerland monthly exchange rate
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.

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 March 2020 to March 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 period, the SNB has accelerated its foreign currency purchases to counter coronavirus-driven inflows, given the country’s heavy reliance on exports.
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