A study by the Avenir Suisse think tank says structural problems like inflexible cantonal laws, not the growth in the number of expatriate workers, are to blame for the local housing problems in Geneva.This content was published on August 29, 2012 - 17:08
According to the new report entitled “A home-made shortage,” the chronic lack of real estate in the city cannot be explained by demand, such as recent large inflows of foreign workers active in commodity trading, banking or the many multinationals present in the region.
“Geneva’s housing shortage is caused by cantonal regulation, which reduces the offer of land and vacant property,” the study’s author Marco Salvi told a press conference on Tuesday.
Rents have risen far faster in the Lake Geneva region than elsewhere in Switzerland in the last decade, and spiralling demand is often cited as the reason for the imbalance in the market.
The study said Geneva tenants generally stayed in their apartments to avoid rent increases, thus causing the market to seize up and property not to get renovated. The whole Geneva system of land rights owned and regulated by the local authorities is also dysfunctional, as they vainly attempt to impose the “correct price” for land and rent, said Avenir Suisse.
Unlike Zurich, Geneva was not building enough new homes due to its concept of a development zone, said Salvi.
The development zone covers a third of the available residential building zones of canton Geneva and 60 per cent of the urban and suburban zones.
It is covered by local and national laws stipulating the precise use, location and type of buildings; the price of land; quotas of social housing and rents and yields that are fixed for a decade.
"We have a frozen town," said the author.
The think tank called for the abolition of the local law governing the demolition, transformation and renovation of homes. It recommended freeing up prices and taxing the proceeds, building on some of Geneva's agricultural land and constructing upwards.
The Geneva Real Estate Chamber welcomed the study’s proposals to reform current legislation, which stifles dynamism, it said in a statement.
But the local tenants’ association Asloca disagreed, arguing that the market should be better regulated. However, proposals to increase the density of housing in the city and free up agricultural land as quickly as possible were essential, said Asloca lawyer Christian Dandres.
Favourable political climate
Xavier Comtesse, the head of Avenir Suisse in the French-speaking part of Switzerland, felt the current local political climate was favourable to reforms of the housing market, which had been blocked for years.
Comtesse added that mobility was a major issue in the Lake Geneva region threatening development. The problem had reached its limit with a “motorway that was choked up in the morning and in the evening” and “repeated incidents on the Geneva-Lausanne” rail link.
Every day some 85,000 people commute into Geneva to work from across the French border and from neighbouring canton Vaud.
In Zurich and Geneva the local populations increased by eight per cent between 2005 and 2011. In Zurich, which has a lighter regulatory touch, the number of new apartments and homes built has risen to meet this eight per cent growth. Several industrial sites in the city suburbs are now being re-developed into future residential housing, for example.
However, Geneva struggled to a five per cent increase in new apartments and homes over the same period. Despite promises, only 1,020 units were built between April 2011 and March 2012 in Geneva.
The difference in rental prices between the Lake Geneva region and the rest of Switzerland has continued to grow since the start of the 2000s. The cost of new rental agreements rose by an average of 5.6 per cent annually – double those in the Zurich region.
Cooling nationwide market
Apart from these two property hot spots, the Swiss property market appears to be cooling overall. The Swiss National Bank (SNB) said on Monday that it would not for now seek to force banks to boost their capital buffers to safeguard against mortgage risks.
Low interest rates have contributed to a boom in real estate prices, especially in the Zurich and Geneva markets. To rein in a possible credit bubble, the SNB announced the creation of new capital buffer requirements in June.
“Signs of overvaluation remain in certain regions and segments of the residential property market,” the SNB said in a statement. “In the second quarter of 2012, however, there were some indications of a possible slowdown of this momentum.”
But the central bank added that its action should “not be interpreted as an all-clear”, citing continued signs of high-risk lending behaviour in the housing sector.
In Brief: Geneva and Zurich
French-speaking Geneva is at the western end of Lake Geneva, surrounded on almost all sides by France. The canton has 103 kilometres of borders with Switzerland's neighbour and just 4.5 kilometres with the rest of the country.
The city itself has 185,000 inhabitants, while the canton has 453,439 (2008). The metropolitan Geneva area (which includes nine other towns) covers most of the canton and spreads across into France (population 730,000).
Some 40 per cent of the Geneva population is foreign. Some 50,000 people move to or away from Geneva every year.
Zurich is the largest city in Switzerland with a population of over 380,500, an increase of 19,500 since year 2000. 1.1 million people live in the Zurich agglomeration, while there are 1.9 million in the metropolitan area. By 2008, 31% of the city's population was made up of non-Swiss from a total of 166 different countries. Germans make up the largest group with 27,870 living in the city, followed by Italians 13,598 and Serbia and Montenegro with 10,245 (2011 figures).
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