2021 property prices in Switzerland have risen sharply. In the 1st quarter, the residential property price index, which is calculated by the Federal Statistical Office FSO, still declined minimally by 0.1 per cent, then it increased by 2.2 per cent in the 2nd quarter, by 2.4 per cent in the 3rd quarter and by 2.6 per cent in the 4th quarter. The bottom line is that home ownership in Switzerland cost 7.3 per cent more year-on-year than at the end of 2020, and even 9.3 per cent more in the canton of Zurich according to the Zurich Home Ownership Index.
In February 2022, condominiums were advertised for a median price per square metre of 8156 Swiss francs and single-family homes for a median price per square metre of 7241 on online platforms (sources: SRF and Swiss Real Estate Offer Index). Home ownership has never been so expensive in Switzerland. In a decade, prices for single-family houses have risen by an average of more than 30 percent and for condominiums even by more than 40 percent.
Real estate prices have been rising for years because mortgage interest rates are still comparatively low, owning is cheaper than renting in many places, and building land reserves are dwindling. This is why demand has long exceeded supply. With the outbreak of the Corona pandemic in spring 2020, the price dynamics have accentuated because many people spend more time at home, need more space, for example for a home office, and place more value on a nice home. Because only a few large houses or flats are available in cities, property prices in the agglomeration rose above average. For example, in Regensdorf (plus 9.6 percent) and Schlieren (plus 1.5 percent) near Zurich, or in Onex (plus 10.9 percent) and Chêne-Bougeries (plus 11.6 percent) near Geneva.
Real estate buyers in Switzerland are on average 43 years old. Buyers of single-family houses (39 years) are 9 years younger than buyers of condominiums (48 years).
The UBS Swiss Real Estate Bubble Index measures the risk of a real estate bubble in Switzerland. If the index is between 1.00 and 1.99, the real estate market is overvalued. In Q4 2021, the index rose by 0.07 points to 1.49 points. This means that the market is historically overvalued and implies an increased potential for correction if interest rates, and thus mortgage rates, should rise more sharply or if the economy should slide into a protracted crisis. However, this does not seem likely at the moment, which is why the UBS experts consider a price correction unlikely in the next 12 months.
At 1.49 points, the UBS Swiss Real Estate Bubble Index is well below the value at the beginning of the 1990s, when the real estate bubble burst and Switzerland slid into recession.
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Property prices will also rise in 2022, but probably less strongly than in 2021. On the one hand, interest rates are still low. On the other hand, the home office has become established in many companies. That is why demand clearly exceeds supply. This is confirmed by the listing period, which fell by 3 to 70 days for condominiums and by 20 to 56 days for single-family homes in 2021. Real estate experts expect average price increases of 2 per cent for flats and 3 per cent for houses. Because of higher interest rates, some people are likely to refrain from buying residential property because housing costs (mortgage interest, amortisation and ancillary costs) are rising and jeopardising affordability. Mortgage interest rates would have to rise massively for demand to drop noticeably and property prices to fall. However, experts assume that the central banks will hold back on raising key interest rates because of the uncertain geopolitical situation in Europe.
Because many people no longer commute daily, the demand for beautiful places with good public transport connections is increasing. For example, at Lake Constance, in the Rhine Valley of Chur, in Gros-de-Vaud, in the upper Baselbiet or in the Zürcher Weinland.
Ask ten realtors about the most important criteria that determine the market price of real estate. Nine will answer "location, location, location". A first example: In the Zurich agglomeration, one minute less commute costs 15,500 francs (condominium) or 21,000 francs (single-family house) more. A second example: every eighth property advertised on the internet costs 500,000 francs or less, every third property 750,000 francs or less. There is definitely affordable residential property in Switzerland that is affordable, but no longer in the top locations. The dream house or flat does not have to remain a dream, but you may have to expand your search radius. The most important qualities for buyers are "patience, patience, patience".
The availability of building land in Switzerland is limited. That's why more and more densely built houses are being built. In 2000, 43 percent of all new buildings were single-family homes, in 2020 only 11 percent.
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Question your search criteria and expand your search radius, for example. Nevertheless, you will need more time and patience in a market with strong excess demand. An innovative and smart property search takes a lot of the work off your hands and monitors the market for you. Our new property search aggregates all listings from the leading online platforms in Switzerland and enriches their data with sound analyses. The result is valuable additional information that makes your search and decision for or against a property easier. For example, you can see our neutral market value estimate at first glance and compare whether the selling price is reasonable or excessive. With our database, we cover 90 percent of the real estate market.
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