Business is booming in Switzerland’s property market. About 47,000 homes will be completed this year – more than at any time in the past ten years.This content was published on February 24, 2005 - 17:27
But for the majority of Swiss who live in rented accommodation, that news will be irrelevant. Their rents will probably increase.
The Credit Suisse real estate study shows that about 65 per cent of residents live in rented accommodation, while only 35 per cent are home owners.
The figures might come as a surprise to many outside the country, where many believe every Swiss lives in a chalet in an alpine setting.
However, the trend toward home ownership is slowly rising.
"In the past, land and home prices were high and this factor led to a significant increase in rented accommodation," Alois Bischofberger, chief economist of Credit Suisse told swissinfo.
"Now, with very low interest rates, declining land prices and declining construction costs, having your own home has become more affordable," he explained.
But don’t expect home to mean a detached or semi-detached house. The figures show that condominiums (owner-occupied apartments) will be the most important sector in residential construction this year.
As for the majority of people living in apartments, it looks like the new homes being built will not reach a level to cause major rent reductions.
The authors of the study say that rising interest rates will, instead, push up existing rents.
"There are not many [rented] homes that are not occupied. Demand is high. The rise in rents will probably continue this year, perhaps not in every part of Switzerland, but certainly in most of the economically important regions," Bischofberger said.
Judging from the findings of the study, people should think twice whether they should rent accommodation or buy their own property.
For the time being, with low mortgage rates, the answer is clear.
"Our analysis shows that if you take a relative comparison, buying has become cheaper," argued Bischofberger.
Outsiders might think that the Swiss don’t exactly figure among the movers and shakers of this world. But think again. They are certainly movers.
Between 1995 and 2000, more than two million people moved home. Or to put it another way, roughly one in three residents moved during those five years.
More than 45 per cent of the movers chose a new home within the same municipality. Four out of ten moved within the same canton, while only 15 per cent relocated to a different region.
The study also found that with the exception of the northern city of Basel, an exodus from the cities came to a stop at the beginning of the new millennium.
Many people are now looking to live close to cities, attracted to the proximity of their workplace, cultural events, sporting and shopping opportunities, as well as schools and universities.
While it is once again fashionable to live in the cities, it does come at a price, since rents are higher than in suburbia.
Unlike in Zurich, Basel, Bern and Lausanne, where rents fall as the distance from the centre increases, you pay more in the immediate suburbs of Geneva than in the city centre.
This is explained by Geneva’s particular geographical position. The best locations lie in the suburban municipalities by the lake, rather than in the city centre.
The CS study also looked into the office property market and found that overcapacity is likely to continue. Growth in the economy as a whole is nowhere near high enough to absorb the excess floor space, particularly in and around Zurich.
"A lot of construction is still going on in the Zurich area and it takes time to construct an office building. Some of the building permits were given three or four years ago and this year and perhaps next, these new objects will come onto the market with a significant delay," Bischofberger said.
This means that additional office space will be added to the already "very huge supply".
"This will probably have some kind of depressing effect on the market in the sense that prices are likely to decline," Bischofberger added.
Credit Suisse also examined the prospects for investment in real estate in Switzerland and was fairly upbeat. More than 20 different products investing in Swiss real estate are traded on the Swiss stock exchange alone.
"I think that real estate is an important part of any asset allocation. If you take the long-term yield, it amounts to 5.5 to 6.5 per cent, so the return is high if you compare it with the average yield on government or corporate bonds."
"It’s lower than the returns you can get if you invest on the stock markets but the risk is also lower," Bischofberger told swissinfo.
swissinfo, Robert Brookes in Lausanne
In 2000, the Swiss home-ownership rate was 34.6 per cent, up from 30.3 per cent in 1990.
It is likely, based on the 2000 census, that the rate is now about 36.5 per cent.
As a rule, rural cantons have higher rates of home ownership than the conurbations.
The historically low level of interest rates is boosting the current performance of the real estate market.
In 2005, Credit Suisse expects demand to fall slightly as disposable income stagnates, immigration stays low and interest rates rise modestly.
The rise in interest rates will lead to an increase in existing rents.
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