According to recent statistics only 36% of homes in Switzerland are owned by those who live in them. This rate falls to an incredible 12% in municipalities with more than 100,000 residents!
This compares negatively to the EU, where the picture is very different. In fact, recent EuroStat figures show that in 2021, 70 % of the total EU population lived in their own home, while the remaining 30 % lived in rented housing. In all EU Member States, except Germany, (where the number of tenants renting equals 50 % of the population), most people in the EU, now live in their own home.
Home Ownership in Switzerland
The percentage of home ownership in Switzerland is highly dependent on location. The lowest rates being recorded in urban spaces, where building land is both an expensive, as well as rare commodity. Sparsely populated areas on the other hand tend to have higher rates of home ownership.
Bank lending rules in Switzerland are very strict and property prices high relative to earned income, (with a ratio of 17.6 X GDP per capita to purchase a property), and investing in an own home is not for the faint-hearted. Banks ask for a minimum deposit of 20% and typically lend up to 5 X annual income maximum. The purchase of a CHF1 million property (generally only enough to buy an apartment or small townhouse in Switzerland) would mean a CHF200’000 deposit and annual earnings of ca. CHF200’000. Contrary to some viewpoints (i.e. everyone in Switzerland is wealthy), this makes owning an own home, a dream for many inhabitants of Switzerland.
A recent Federal Housing Office (OFL) report stated that there are an estimated 2’200 homeless in Switzerland and another 8’000 people at risk of losing their homes. This might seem small given the population of Switzerland is nearly 9million, but it highlights the fact that housing – and lack of it – is a hot topic currently.
The (homeless) problem is most pronounced in cities and the percentage being higher in German-speaking – rather than in French & Italian-speaking parts of Switzerland. This was the conclusion of information collected from over 600 municipalities across 22 cantons. This number represents around 28% of the total number of municipalities in Switzerland.
The main reasons cited for homelessness included overspending, debt, drugs and social factors associated with migration. The high cost of accommodation was also cited as being a factor which caused homelessness.
Housing in Switzerland is expensive. This is directly reflected in the low rates of home ownership and high levels of household debt which stands at 130% of GDP and is the highest worldwide, and which mainly occurs through mortgage loans.
Second Home Ownership
Switzerland is famous for its political system of direct democracy and in March 2012, the Swiss electorate voted by a margin of 50.6% to accept a law restricting the construction of secondary homes that are only used occasionally by owners with their main residence being somewhere else.
The initiative was named after Franz Weber (Lex Kohler) after one of the main figures behind the initiative. Now, no more than 20% of any municipality’s housing can be dedicated to second homes. Those with percentages above 20% run into building restrictions.
Every year the Swiss Federal Office for Spatial Development publishes a list of municipalities with the percentage share of second homes. This year 421 from 2’255 communes exceeded the 20% share and with more than 80% of these communes being in Switzerland’s major ski resorts.
Construction of new homes – current situation
The population of Switzerland is growing and will soon hit the 9 million mark according to recent demographic trends. This should be good reason for investors to build new homes for incoming workers. But in reality that is not happening. In fact the opposite is true.
Rising interest rates mean less people are now buying their own property. It also means that fewer investors are looking to real estate as an attractive sector to invest in. The simple reason is that rising property prices and rents that are relatively low comparatively speaking, mean the return on investment is not interesting enough for investors. This is slowly but surely leading to a shortage of rental properties. Additionally, taxation on privately owned homes is somewhat punitive: tax is paid on the rental value of the owner’s property is if it were income, and any gains when selling a property are taxed whereas other capital gains are not.
Some cantons are combating this with current assets and aim to restrict short term rentals and federal rulings suggest that it is illegal in Switzerland anyway for a renter to sub-let a room or their entire apartment. Geneva, where accommodation is scarce and expensive, has imposed a 60-day annual Airbnb limit in order to head off any over-concentration of short-term offers. Zug, another popular canton and town has recently introduced a 30 day annual limit for the short leasing of properties.
The fear is that short term rental companies have a detrimental effect on normal long-term housing markets and can lead to an over tourism of urban centres, meaning less housing for those who actually live and work there.This is not a new or Swiss only phenomenon. Major city centres such as Barcelona, Paris, Berlin, London, and Amsterdam, have all introduced strict rules in recent years for short term rentals. Mallorca has banned the AirBnB platform outright.
In Summary: Property prices and bank restrictions make owning an own home very difficult for the vast majority in Switzerland. Most people rent living accommodation. But with an influx of workers from abroad, and a slow down in the construction of new apartments and homes, rental accommodation is becoming scare. In the short term, certain cantons are restricting the number of days per year properties can be rented out to try and free up rental properties for local residents. As a result of increased costs and inflation, living accommodation rent increases of up to 4.3 percent are predicted by the end of 2023.
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