Switzerland’s stable housing market

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.

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).

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.

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.

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

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)