| RAMZI CHAMAT | OAKS GROUP SA
Real estate in Switzerland has long been considered a solid and stable sector, offering both security and returns. However, recent years have seen a rapid and sustained rise in property prices, making home ownership an increasingly difficult challenge for much of the population. While demand continues to grow due to economic and demographic factors, supply remains insufficient, exacerbated by construction constraints and strict regulations. On top of this, global economic uncertainty and historically low interest rates play a crucial role in sustaining this upward trend.
Understanding the underlying causes of this rise, as well as its implications for buyers, homeowners, and investors, is essential for anticipating future developments in the Swiss real estate market. Additionally, regional dynamics introduce significant disparities, adding further complexity to the issue. This document delves into the multiple factors driving property price increases in Switzerland and the challenges ahead in a landscape shaped by potential reforms and economic uncertainties.
The Swiss real estate market is experiencing a prolonged period of rising prices, a trend that is accelerating in 2024. Several factors are contributing to this increase, such as strong demand driven by immigration, historically low mortgage rates, and limited supply due to a slowdown in construction. These elements are putting increasing pressure on housing prices, creating a complex environment for buyers, homeowners, and investors, with notable regional disparities and uncertain future prospects.
Certain areas, particularly mountainous and tourist regions, are seeing spectacular price increases, while others are experiencing localized adjustments. Meanwhile, major fiscal reforms, such as the abolition of the imputed rental value, are being discussed and could profoundly reshape the Swiss real estate market in the coming years. It is therefore essential to understand the causes of this price rise and evaluate its short- and long-term impacts.
The rise in real estate prices in Switzerland has persisted for several years without showing signs of slowing down in 2024. This situation, paradoxical in a globally uncertain economic context, can be explained by several converging factors: strong demand fueled by immigration, historically low mortgage rates, and limited supply due to declining construction activity. These conditions favor a continued increase in prices, with significant disparities depending on regions and property types.
Several reasons explain this upward trend. Firstly, demand is consistently strong, particularly due to the arrival of foreign workers in sectors like high technology, finance, and healthcare. This pressure is especially felt in major cities and economic centers like Zurich, Geneva, and Basel.
At the same time, supply remains constrained due to the slowdown in construction, hindered by high costs, regulatory constraints, and the scarcity of available land. This imbalance between supply and demand is exacerbated in densely populated areas, where prices continue to rise. Additionally, low mortgage rates encourage homeownership, making purchases more affordable for many households and thus contributing to the increase in prices.
Although the general trend is upward, regional differences are significant. Mountainous areas, the cantons of Grisons and Valais, as well as tourist destinations like the Bernese Oberland, are experiencing marked increases, often above 4%. This surge is explained by strong demand for secondary residences and vacation homes, despite a slight decline in interest for such properties. In contrast, some regions, such as Northwestern and Eastern Switzerland, are seeing prices stabilize or even slightly decline, particularly around Lake Zurich and Lake Zug.
Despite some local adjustments, the overall upward trend is expected to continue into 2024 and beyond. Experts even anticipate an acceleration in 2025 due to the continued decline in mortgage rates and rising rents, which are prompting more tenants to consider buying property. The limited availability of properties on the market, combined with persistent demand, leaves little room for price stabilization in the short term.
A major tax reform could also influence the market: the abolition of the imputed rental value. This debate, ongoing since 2017, has sparked disagreements between the National Council and the Council of States regarding the extent of the abolition and the deduction of mortgage interest. If this reform is adopted, it could take effect as early as 2027, following a public vote in 2026. Homeowners would be directly impacted, with tax relief for some and penalties for others, particularly those needing renovations.
The rise in real estate prices in Switzerland is part of a long-term trend of strong demand and limited supply. Regional disparities highlight a heterogeneous market where local conditions play a crucial role. By 2025, upward pressure could intensify, driven by favorable financial conditions and a persistently restricted supply. However, ongoing fiscal reforms, particularly the abolition of the imputed rental value, could disrupt the current balance, redefining the rules for homeowners and investors.