Homeownership in Switzerland, historically low, is falling further because of the high cost of housing and tax penalties.This content was published on February 21, 2002 - 17:48
Real estate analysts at Switzerland's largest bank, Credit Suisse, said they were "surprised" by a dip in building applications for single- and multi-family dwellings.
The Swiss typically tend to rent rather than buy property, but low interest rates in the mid-1990s made investing in real estate an attractive option. However, homeownership has been dropping off recently.
The boom in home buying has "passed its peak," Credit Suisse said in a survey of real estate published on Thursday. It expects residential construction to remain weak in the next two years.
Nation of renters
Switzerland has traditionally been a nation of renters. Just 30 per cent of Swiss people are homeowners while the rest are tenants.
One reason for this are the low rents over the past 15 to 20 years compared with cost of buying, says Ulrich Brown, senior economist at Credit Suisse.
"The price level of homes in Switzerland is very high compared with other countries like Germany, the Netherlands or Britain, so fewer people can afford homes here," Brown told swissinfo.
Thomas Oberle of the Swiss Homeowners Association added that the high standard of rented accommodation also discouraged the Swiss from investing in property.
He told swissinfo that the Swiss preferred renting because it avoided the complications involved in owning property and made it easier to move.
Oberle argues that current laws penalise homeowners because the money they "save" from not having to pay rent is treated as income and taxed accordingly. Those with high mortgages benefit from the tax through deducting the yield on their home.
He says the government is failing in its constitutional duty to promote home ownership, and that those who do buy their own homes tend to stay in debt to keep their taxes down.
"There's no real incentive to pay off your mortgage because people try to balance the income tax and mortgage rate. So people are not ready to pay off their mortgage and continue to be in debt," he said.
The authors of the Credit Suisse report say the reason for the dip in house buying is likely to be a result of demographics. But they add that the lack of demand for new homes is difficult to explain given the tight housing market.
They found that demand for living space in Zurich and Geneva has "risen particularly fast" - so fast, in fact, that the housing situation in those two cities is "so overstretched that it can no longer be referred to as a functioning market".
Brown forecasts that the building and buying trend in these densely populated areas will pick up in the near future. "It takes some time for investors to find the right place to buy the land, to plan and build, about one and a half to two years."
The real estate report says "there is a definite trend towards a return to the cities", with the notable exception of Basel, which has seen is population drop in recent years.
The drift towards Zurich and Geneva has led to high demand for office space, which has long been in short supply, leading to exorbitant rents.
However, the study author's say the economic slowdown has pushed down office occupancy rates, and rents should drop accordingly.
by Samantha Tonkin