Rising Property Prices: Many Swiss Households Struggle to Afford Home Ownership

The challenges of purchasing residential properties in Switzerland are becoming increasingly formidable. Even households with an income of 200,000 francs find that only about half of the listed properties are financially within reach.

According to economists from UBS, the financial feasibility of acquiring homes is evolving into a significant barrier. Their analysis indicates that for an average property of 110 square meters, priced at approximately 1 million francs, buyers need a gross income of at least 175,000 francs alongside 200,000 francs in personal savings when financing 80% of the purchase.

Property prices have surged in numerous regions, outpacing salary increases, as noted by real estate advisors. The UBS analysis highlights that in areas surrounding Zurich, only communities located 20 minutes away become affordable for families earning 200,000 francs. The most affordable locations in that region include Aarau and Baden. Conversely, the Geneva area offers only two municipalities--Dardagny and Avully--within a 30-minute commute that meet the affordability criteria.

In Basel, the situation is somewhat more favorable, with nearby towns like Allschwil, Pratteln, Liestal, and Sissach falling within the affordable range. In Bern, except for the city itself, properties are generally accessible in the metropolitan area.

Young individuals, particularly those with lower savings, are increasingly finding themselves unable to purchase homes, often having to delay or abandon their homeownership aspirations. Recent studies reveal a stark decline in ownership rates among those under 65, with homeownership among 35 to 39-year-olds dropping from one-third to one-quarter from 2011 to 2022.

This trend is expected to persist due to several factors. The influx of migrants has bolstered demand for homes, with Switzerland's population growing from 8 million to 9 million over the last 12 years, driven largely by immigration. This has created an overwhelming demand for housing that the current supply cannot meet.

The availability of affordable homes remains limited. In the last quarter of 2024, only 3.8% of all condominiums and 2.8% of single-family homes listed were deemed affordable. As the population ages, many current homeowners are delaying selling, either because they intend to pass their properties on to heirs or because suitable properties are scarce, making it less appealing to move. Consequently, many older homeowners are remaining in their residences.

Additionally, a significant factor behind the rising prices is the insufficient construction rate compared to demand, compounded by a lack of available land for new developments. The recent drop in interest rates has also spurred demand for homeownership; since the peak in 2023, interest rates for mortgages have decreased significantly, making homeownership more financially attractive.

As a result, ongoing costs for homeowners have reduced, encompassing not just mortgage payments but also maintenance and future renovation reserves. The current financial environment is favorable for homeowners, with overall costs now lower than renting a comparable property. The premium associated with owning a home over renting has shifted from a 15% increase to a 13% decrease.

Furthermore, rising rental prices enhance the appeal of purchasing property. According to a recent report, rental rates for residential properties in Switzerland experienced their most significant increase in two decades in 2024, rising by a median of 4.5%. This surge can be attributed to two hikes in the reference interest rate that became apparent in 2024.

The UBS economists predict that property prices will continue to rise in 2025, projecting an increase of around 3%. This aligns with views suggesting that the drop in interest rates will lessen financing costs, thereby invigorating demand. Additionally, many households experienced positive financial growth over the past year, while the number of available properties remains exceedingly low.