Switzerland: Only one in three people live in their own home – fewer can buy

The Swiss population is considered a nation of renters. The home ownership rate in Switzerland is low by international comparison. According to the Federal Statistical Office (BfS), only 36 percent of permanently occupied apartments in this country are occupied by their owners – this is the lowest proportion of all European countries.

Between 1970 and 2015, the home ownership rate in Switzerland rose steadily, which the BfS attributes to the rapid increase in condominium ownership. However, a decline of around 2 percentage points has been observed again since 2015 – and this trend could continue in the coming years.

Falling home ownership rate

At least current figures from the major bank UBS speak for this. According to these, 20 years ago around 60 percent of all Swiss households could afford what was then the “median home”. Today it is estimated that there are only 15 percent or 660,000 households. The term “median home” refers to a real estate property whose price is exactly in the middle of the prices paid for homes in Switzerland – half cost more, the other half cost less. UBS economists currently estimate this price at 880,000 francs.

When granting a mortgage to a property buyer, financial institutions consider whether the person can afford the property. Economists have calculated that in order to buy the “median home” mentioned, a household currently needs an annual gross income of 150,000 francs. This is significantly more than the median household income of 115,000 francs.

This is also due to the fact that the increase in interest rates between mid-2021 and the beginning of 2023 made the use of homes significantly more expensive. In 2021, the running costs – i.e. mortgage interest, maintenance and imputed rental value – for a condominium purchased for 800,000 francs would have been an estimated 17,000 francs per year. Today it is around 50 percent more at 26,000 francs.

Where you can still afford to buy a property

According to the study, buying a home is – unsurprisingly – particularly difficult in large centers and their immediate agglomerations. Depending on the region, this often requires twice or even three times the Swiss median income. A 4.5-room condominium is most affordable in the Mittelland regions of Grenchen, Thal and Oberaargau. There, a gross income of less than 100,000 francs is sufficient to buy a home.

Before a financial institution grants a mortgage, it checks whether the household in question can continue to support it in the future. When it comes to mortgage interest, most financial institutions calculate a rate of 5 percent. You want to ensure that the debtor can service the mortgage even if interest rates are higher. Additional costs and maintenance cost 1 percent of the purchase price.

If the purchase price for a house is 1 million francs and the mortgage is 800,000 francs – of which 650,000 francs are for the first and 150,000 francs for the second mortgage – the following housing costs arise:

The housing costs calculated in this way per year are 60,000 francs. According to bank rules for debt financing, this should not amount to more than a third of the buyer’s gross income. This household therefore needs income of 180,000 francs per year.

The desire to purchase home ownership remains high

However, the desire to acquire home ownership remains strong among the Swiss population. In a survey by the consulting firm Wüest Partner last year, 46 percent of tenant households with residents between the ages of 30 and 50 said they were considering doing this. The discrepancy between the wish and the actual possibilities of fulfilling it is growing, writes Wüest Partner.

In its analysis, the consulting company came to the conclusion that the median prices for a typical condominium with 4 or 4.5 rooms on average in Switzerland are 9 percent more than they should be for a medium-sized household according to gross income and affordability criteria. For 58 percent of households with two working people between the ages of 30 and 50, market prices are too high to obtain a mortgage for 80 percent of the purchase price. For medium-sized single-family homes with 5 or 5.5 rooms, the average asking prices were 27 percent higher than the affordable prices.

According to the UBS study, home prices in Switzerland will continue to rise in 2023. On average, prices for condominiums rose by almost 3.5 percent and those for single-family homes by 2.5 percent.

Prices expected to continue rising

For 2024, the big bank’s economists expect a price increase of 1.5 percent for Swiss condominiums and a 1 percent increase for single-family homes. The influx of people with purchasing power from abroad and strong growth in upper incomes ensure that there are still enough potential buyers despite below-average economic growth. From 2025 onwards, lower financing costs, the shortage on the market and a recovery in the economy could lead to greater price increases.