Swiss Real Estate - Rising Prices and Supply Shortage

From the Alps to Zurich — How the housing market is splitting Switzerland

• The Swiss housing market shows significant heterogeneity depending on the region. Housing prices in large cities such as Zurich, Geneva or Basel are significantly higher than in rural or less urbanized areas. The reasons for the regional gap are the stable economic growth, high employment rates and developed infrastructure of the large cities. Zurich, as the country's financial center, continues to increase property prices, while regions with less economic potential lag behind in this regard. In the first quarter of 2024, private home prices increased by 5.5%, with premium properties experiencing the greatest increase in price. At the same time, prices in the Alpine regions remain relatively stable, attracting mainly tourists and foreign buyers, but remaining unaffordable for local families. This situation exacerbates regional inequality, concentrating wealth in large cities and creating barriers to the development of less attractive areas from an economic point of view.
• In addition to regional differences, social inequality is also increasing at the level of individual access to real estate. For the middle class, young people and those planning to become homeowners for the first time, buying a home is becoming an increasingly difficult task. On average, the Swiss buy their own property 14 to 17 years later than residents of neighboring European countries such as Germany and France. The main obstacle is strict financial accessibility. Buyers must invest at least 20% of the property’s value from their own savings and meet strict income requirements of banks. While in the 1990s, with mortgage rates of 7-8%, buying was possible even with one salary per family, today, having combined two salaries, many families still cannot afford housing due to rising prices and high requirements. This situation creates significant barriers to entry into the real estate market, especially for the younger generation. The need to accumulate a significant amount of equity and meet strict financial criteria postpones the purchase of a home to a later age, which in turn affects other aspects of life, such as starting a family and planning for the future.
• Foreign nationals also play a role in the Swiss real estate market. Expats with a category C residence permit have almost the same rights as Swiss citizens, which allows them to actively purchase housing. At the same time, persons with a category B residence permit are limited exclusively to purchasing new homes. Although such restrictions are intended to protect the interests of the local population, they also increase tension among residents competing for limited resources. The influx of foreign capital and demand from expats are driving up prices, especially in regions that are attractive to foreigners, such as Geneva, Zurich or the shores of Lake Geneva.
• In the current situation on the real estate market, renting serves as an alternative to owning. High real estate costs force more than 60% of Swiss residents to prefer renting a home instead of buying. However, rental rates are also showing an increase: in 2024, they increased by an average of 4% compared to the previous year, and demand in the rental market reached pre-pandemic levels. Despite this, the rental market in Switzerland remains fairly balanced. New projects are offsetting demand, and in cities there is even an accelerated construction of apartment buildings. This creates opportunities for more affordable housing, especially for young families and students who cannot yet afford to buy their own property.

Market structure — luxury housing and mass demand

The luxury segment forms about 15% of the overall Swiss real estate market, while more than 85% is accounted for by existing properties such as apartments and private houses. Particularly expensive housing in Zurich, Geneva or on the shores of Lake Geneva is in high demand among foreign buyers and investors. At the same time, mass housing continues to increase in price at a slower pace, while remaining in demand among local residents. This market structure reflects not only the economic, but also the social stratification of society.

Economic forecasts — what to expect from the market

• Analysts predict that housing prices will continue to rise in the coming years. The reduction in the key interest rate by the Swiss National Bank in March 2024 will have a positive impact on the market, although the effect will not be immediate. It is expected that during 2025, property prices may increase by another 3-4%.
• In addition, there is a possibility of additional demand growth due to changes in mortgage regulations aimed at increasing the availability of loans. However, such measures are unlikely to completely eliminate the existing inequalities in the market. Most likely, the gap between the elite and mass segments will continue to widen, and the availability of housing for the middle class and young people will remain under pressure.
• Another factor that may affect the Swiss real estate market is the general economic situation in the country and the world. Any shocks, such as a recession or geopolitical instability, can cool demand and slow down price growth. However, in the long term, the Swiss housing market is likely to remain attractive to investors due to the stability of the economy and the reliability of the country's legal system.

Innovation and Sustainability

• With growing demand and limited supply, the Swiss real estate market is faced with the need to implement innovative solutions and focus on sustainability. One promising area is the construction of energy-efficient and environmentally friendly housing that meets modern quality of life standards. Such projects not only help reduce the environmental impact, but can also offer more affordable options for buyers and tenants. The use of advanced technologies, optimized layouts and the use of smart building management systems make it possible to create functional and comfortable housing within limited budgets.
• In addition, the development of infrastructure and transport accessibility can help balance regional differences and make less popular areas more attractive for living and investment. Government support for such initiatives, as well as cooperation between the private sector, research institutes and public organizations, will play a key role in ensuring the sustainable development of the Swiss real estate market.

In conclusion, it can be said that the Swiss real estate market is at a turning point in its development. Growing inequality and pressure on housing affordability require decisive action from all market participants. Only through a concerted effort and a focus on the long-term interests of society can a stable and sustainable future be secured for the Swiss housing market. Despite the challenges, the Swiss housing market remains one of the most stable and attractive in the world. The unique combination of high quality of life, a reliable legal system and economic stability makes real estate in Switzerland a valuable asset for investors and a desirable target for many buyers. For those considering buying or renting a home in Switzerland, the current market situation can be complex and require careful analysis. However, with a clear strategy, realistic expectations and a commitment to long-term investment, real estate in the country remains a reliable and promising investment.