How much is my property worth?
How are Swiss prices changing?
Is there a house price bubble?
Where should I invest my money?
Current SituationResidential real estate continues to be in demand in Switzerland and mortgage rates are still at historic lows (about 1% for a 3M Libor Mortgage). The population is increasing, thanks to a relatively strong economy and (for the moment) open borders for EU citizens.
Furthermore, Swiss citizens are slowly changing their attitudes towards rental accommodation and realising that buying can often work out cheaper than renting and can offer a more secure long term future.
However, new homes are being built at a record rate, and this is going some way to satisfy demand in certain categories and regions and consequently tempering price rises.
Furthermore the government is petrified of suffering a housing bubble, and has made a number of moves to prevent one occurring.
As a consequence, price trends vary considerably by region and type of property, and although nationwide the general trend is modestly up, the rate of increase has been reduced and in certain regions, prices are in fact falling.
For example, recent building and economic factors in the Geneva and Lausanne regions (and to some extent Zurich) mean that for the first time in a while, prices for owner occupied apartments are actually falling. This is not the case in central, eastern and southern Switzerland, where prices are still catching up with gains made elsewhere in recent years.
Overall, prices of new apartments still appear to be rising across the country by about 5% per annum, whilst detached houses have barely changed except in the Lake Geneva region where they have fallen by up to 5%.
To work out what your property is worth now, we have produced a price calculator, based on statistics from the Swiss National Bank and Wüest & Partners: Have a look at price trends in your area and work out how much your real-estate investment is worth now. We keep our figures up to date, so you are guaranteed to have the latest information.
The most sought after properties are detached houses, and historically in Switzerland, these cost about 8 times average annual household income. This makes owning a home in Switzerland expensive by international comparison. (In the UK, a home only costs 5 times average income) What makes homes still affordable though, are the low mortgage rates of around 1% (well below the long term average of 5%), and the long terms of these mortgages (100 years is common). On the down side, what prevents many people from becoming property owners is the legal requirement to place 20% deposit as an initial down payment on all property purchases. A fairly modest house in the Geneva region costing 2 million francs will therefore require a whopping 400'000 CHF down payment. If you don't already have a house to sell, then you need to be a very good saver!
Another important factor: the rules permitting sale of property to foreigners. Well heeled immigrants tend to want to purchase their own property, and there is the added factor of second home ownership, especially popular in alpine regions. See our analysis of the rules governing Swiss real estate sales to foreigners.
Outlook for 2015Many economies in Europe are still struggling to pull out of recession and Switzerland isn't immune from this economic malaise. Neighbours France and Italy have been struggling for a while and even Germany has show recent jitters.
Continued threats to the Euro and nervousness about the European banking sector (particularly Italy) are impacting international money and currency markets.
The disastrous decision by the Swiss government to give up Swiss banking secrecy will lead to an uncertain future for vast numbers of bankers in Geneva and Zurich. There is a significant risk to employment and bonuses.
The uncertain political climate, with tensions in Ukraine and the Middle East together with a rampant epidemic of Ebola in West Africa will impact the world economy and will have an effect on the movement of people and capital.
The Swiss franc, enormously popular in times of world economic distress, is in demand, but this doesn't suit the Swiss National Bank who want to limit the strength of the franc to 1.20 CHF to the Euro. Anything stronger than this puts the 2 cornerstones of the Swiss economy at risk - notably tourism and engineering exports.
In February 2014, the Swiss people voted to call a halt to "mass immigration" and revert to the system of quotas that existed before the free movement of EU nationals became law. The government now has till 2017 to put something acceptable in place that satisfies this referendum.
The Swiss tax regime is no longer as competitive as it once was, and fewer companies are re-locating purely for tax reasons. This has had an effect on the high end property transactions that well heeled employees have tended to make in the past.
To avoid a speculative property bubble, the Swiss government is proposing to completely prohibit any money being withdrawn from pension funds for the purchase of real-estate. Previously they reduced it from 20% of the purchase price down to the current 10%. Before this becomes law, there would most likely need to be a referendum, and it is unlikely to become law for the next couple of years. Nevertheless, the effects could be felt immediately as people rush to beat any perceived deadline.
In November 2014, the Swiss people voted not to insist that the Swiss currency be backed by 20% gold bullion (Currently it's around 7%). This leaves the Swiss National Bank room to manoeuvre and to maintain it's cap on the franc, primarily using the threat of continuous money printing. Despite this, the franc is still seen in favourable light when compared to many other currencies, and likely the interest rates will continue to be at or below zero.
These varied factors make prediction of the property market difficult.
If we look at the high end market for detached houses it's likely in the long term that Geneva and Zurich will suffer because of the weakened banking sector and from less favourable company tax packages on offer.
On the other hand, wealthy Russians, Ukrainians and others might be keen to move their money and property portfolio to more stable and trustworthy Switzerland, despite the lack of banking secrecy. The prospect that the Swiss franc may rise if the government can no longer print money endlessly will only encourage them, since their Swiss franc investments can only go one way in currency exchange terms. For non-residents purchase of property is theoretically restricted to tourist zones, e.g. ski resorts, but the wealthy find ways of buying property in the location of their choice.
At the more modest end of the market, the very low interest rates available on mortgages act as a strong incentive to would-be buyers and the Swiss preference for rented accommodation is diminishing. There is also pressure to move fast as the government wants to limit pension fund withdrawal, and people will want to beat the deadline.
Furthermore there is also a deadline for the free movement of people. Companies that want to or need to hire from within the EU must do so before restrictions are imposed (at the latest Feb 2017). This potential influx of people is sure to put pressure on the property market and drive prices higher.
On the downside is the threat of job-instability, the significant barrier of finding 10-20% of the purchase price, the downward pressure on wages and the other hurdles put in place by the banks to restrict lending.
Overall, the market looks promising. Interest rates will surely stay low whilst the Swiss franc is under threat of rocketing higher against the euro, and unemployment is at only 3.1 percent - a figure likely to attract workers from across Europe, especially as the window of opportunity is closing.