Housing market remains on solid foundations

High end property may be over-priced Keystone

The Swiss residential real estate sector is expected to dip slightly but remain stable next year, confirming its status as a pillar of strength for the economy.

This content was published on December 21, 2009 minutes

The benign outlook is good news for Switzerland where the sure-footed nature of the housing market has contrasted to the carnage created by bursting bubbles in a host of other countries.

While house prices have been crashing in countries such as the United States, Britain and Spain, the Swiss market has experienced above average growth in the last four quarters.

Real estate specialists Wuest and Partner calculate that houses have surged six per cent in value from September to September while flats have nearly kept pace with a five per cent increase.

Much of the increase has been driven by Zurich and Geneva where prices have risen at an even greater rate despite Switzerland also being affected by the global economic downturn.

Several factors have protected the Swiss real estate market from the chaos that brought property prices tumbling in other parts of the world.

Caution prevails

For a start, Switzerland learned its lessons from the 1990s when lax lending policies by banks overheated the market and led to a crash. This protected the domestic market from the type of bubble that blew up in the US two years ago.

“Lenders have been a lot more cautious this time around and maintained prudent controls even during the boom times,” Credit Suisse real estate expert Fredy Hasenmaile told

Switzerland has also witnessed record levels of immigration – mainly well off professionals from neighbouring European countries - that continues to boost demand for housing. Well over 100,000 new inhabitants flocked over the borders in 2008 alone.

And finally, interest rates were lowered to virtually zero a year ago, keeping up demand for mortgage lending. Credit Suisse estimates that the value of mortgages rose 5.1 per cent in September compared to the same month last year.

However, the effects of recession, stagnant wages and job losses have just started to show up with house prices slowing sharply in the last two months. Wüest and Partner predicts prices will be flat next year and could even drop slightly in less sought after locations.

“The development of property prices has been lagging behind the real economy so far,” Wüest and Partner spokesman Urs Hausmann told “We expect this to catch up over the next 12 months.”

Holiday homes hit

Experts will have their eyes firmly fixed on Zurich and Geneva where high immigration rates have driven up prices well above the average, particularly in the luxury property market.

Hausmann does not think February’s referendum in Zurich to end the practice of giving special tax deals to wealthy foreigners will affect prices in the city. “This is a small niche demand and there are too few people to make an impact,” he told

However, the dearth of wealthy foreigners seeking second homes in holiday resorts does appear to have had a greater impact in 2009.

Property specialists at the Swiss Equity Real Estate Day in Zurich last month reported slackening interest from British and US clients.

Wüest and Partner saw year on year declines in prices of 10 per cent in Verbier and seven per cent in Zermatt.

Soft landing

Opinion is divided on how far property prices may fall next year. Credit Suisse research points to the alleviating factor of slowdown in construction – currently running 9.6 per cent higher than a year ago - and planning applications.

And the number of people migrating to Switzerland may have slowed, but they are still arriving at a healthy enough rate to keep the demand side stable. Credit Suisse forecasts vacancy rates for new properties will increase, but states in a recent report that “there does not seem to be any risk of sharp price falls”.

Wüest and Partner do not predict a huge fall in property prices, but are more worried about an oversupply of new homes in 2010. “Given the unabated construction activity in the multi-family housing sector, the supply of new apartments is set to expand even in the major cities,” the firm stated in a recent report.

However, the experts concur that despite a slight dip next year, the Swiss residential market appears to remain on solid foundations.

Matthew Allen,

Swiss property market

The Swiss property market has recovered from the collapse of the early to mid 1990s that cost banks SFr42 billion ($37.6 billion).

Construction of new housing reached a 10-year high of 47,000 homes in 2005. Some 40,000 new homes are expected to be built by the end of this year, with a 3% fall in construction predicted for 2010.

So far, the demand for new housing has matched supply, with the number of empty properties falling from 1.07% in 2007 to 0.97% last year.

Demand is expected to reduce slightly in the following two years.

But Switzerland is not a country of homeowners, with the rate of ownership rising from just 31% in 1990 to around 37% at present. Credit Suisse expects this to rise to 39% in 2010.

In international comparison, the 34.6% Swiss home ownership rate in 2000 compared with 45% in Germany, 54% in France, 69% in Britain and the US, and 81% in Spain.

End of insertion
In compliance with the JTI standards

In compliance with the JTI standards

More: SWI certified by the Journalism Trust Initiative

Contributions under this article have been turned off. You can find an overview of ongoing debates with our journalists here. Please join us!

If you want to start a conversation about a topic raised in this article or want to report factual errors, email us at

Share this story

Change your password

Do you really want to delete your profile?