Property market eases but renovation required

Many properties in Switzerland are in need of repair. imagepoint

Nearly two-thirds of residential housing built in Switzerland between 1961 and 1980 is in dire need of renovation, according to a new survey on real estate.

The report, released by banking giant Credit Suisse on Tuesday, also said that the property market is expected to ease this year even though demand for living space remains high.

Experts warn that the quality of Switzerland’s housing stock is declining unnecessarily because of neglect. Many homes that are falling into disrepair may have to be demolished unless something is done to educate homeowners about the need to patch up their properties.

The reports concludes that homeowners should be spending up to 1.5 per cent of the building’s value per year on regular services and minor repairs, plus a further 1.3 per cent on structural work.

“Buildings constructed during this period (1961-1980) do not have a particularly good reputation in terms of build quality,” Credit Suisse head of real estate analysis Ulrich Braun told swissinfo.

“Most homeowners are lay people with no experience in construction so they are not aware of the need to renovate their homes. More needs to be done to educate them or this could become a serious problem.”

New homes

Around 45,000 new apartments and houses will be built in Switzerland this year, the report estimates. But demand for new housing varies from region to region and the overall vacancy rate is predicted to rise slightly.

The average cost of buying a single-family home is only ten per cent higher in real terms than in 1970. Home prices have recently risen more in Geneva and Zurich, but not as strongly as in London, Sydney, Boston or Paris.

The number of empty offices is set to peak this year, but steadily improve from 2007 as the Swiss economy picks up steam. The situation is worst in Zurich, with some 360,000 square metres of office space standing empty last year compared with around 50,000 square metres in 2001.

The situation in Zurich was caused by the boom and bust cycle of the information technology and financial sectors in the late 1990s. Braun does not believe Zurich can generate enough jobs in the current economic upturn to fill the empty offices.

“We need 80,000 to 100,000 extra jobs to fill this empty office space. Where will they come from? I do not think IT will be so strong this time around,” he said.

The Credit Suisse report further predicts that rising interest rates will lead to a rent hike of about 2.5 per cent in 2006 for existing tenancies. Swiss law allows adjustment of rent in line with mortgage interest rates. But rental rates on newly constructed residential units are not expected to rise so quickly.

This is further bad news for tenants following figures from the Swiss Tenants’ Association last year that showed rental costs have shot up 85 per cent in the past two decades.

swissinfo, Matthew Allen in Zurich

Key facts

Some 45,000 new homes will be built in Switzerland this year, compared with 42,000 in 2005. The rate of non-occupancy is expected to rise 0.2% to 1.2% in 2006 and to 1.4% in 2007.
A boom in the retail industry is expected to drive up the number of new shopping complexes to the highest level since 1975.

In brief

Condominium prices have increased by 50% in Geneva and 32% in Zurich since 2000. In comparison, London housing prices have doubled in the past decade and risen by 80% in Boston and Sydney.

The popular tourist area of Engadine in eastern Switzerland joins Zurich and Geneva as the most expensive areas to buy property in the country. A condominium with 135 square metres of living space can cost more than SFr1,500,000 in these places. An identical property in the cantons of Jura and Valais can be bought for less than SFr450,000.

Of every 100 newly built homes in Switzerland today, 45 are condominiums, 26 are rental apartments and 29 are single-family dwellings.