Machi Navi
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Many Swiss dream of owning a detached house in the countryside and passing it on to their children. For most, that dream is increasingly unrealistic.
This content was published on September 11, 2022 – 15:30
In 2015, before starting a family, Ophélie* and her companion Laurent* wanted to acquire a rural property near their parents’ home in La Broye (canton of Fribourg), where they both grew up. Although they knew the search would be difficult, they started looking for a house on a large plot of land.
After browsing the online ads and visiting a dozen properties, they were disillusioned.
“Either the houses were completely overpriced, or they needed too much work,” says Ophélie.
Their experience is not unusual in Switzerland. According to a studyExternal link by mortgage experts MoneyPark published in June, more than 60% of renters would like to buy a home – and single-family homes, ideally in a rural area, are the most popular choice. But 58% of those polled said there was a shortage of properties for sale and 49% said prices were too high.
Family money required
“All the studies show that the Swiss still have a strong desire to buy houses,” said Yves Cachemaille, real estate expert at real estate company CBRE. “Unfortunately, the prices are prohibitive for a growing percentage of the population. More and more, a single-family home is becoming a luxury.
According to the real estate services company Wüest Partner, real estate prices have, on average, more than doubled since 2000. Over the same period, the average salary has only increased by 25%, according to the Federal Office for statistical.
In most parts of the country, it costs at least 1 million Swiss francs ($1.02 million) to buy a detached house with a garden. Only 30% of Swiss households have the capital to buy an average single-family home, according to a study by Swiss LifeExternal link. Without an inheritance or a family loan, home ownership has become virtually unthinkable for most young adults who depend solely on their earnings from work.
Housing as a source of inequality
The high cost of properties has also exacerbated inequality: homeowners have benefited from low mortgage interest rates in recent years, while tenants are forced to pay extremely high rents, especially in cities.
“While wage inequality has not changed much in Switzerland, inequality has increased due to housing costs,” explains Solène Morvant-Roux, assistant professor of social economics at the University of Geneva. The richest 20% of households spend only 10% of their income on rent; the lowest income segment spends 30%.
“Even with the current rise in mortgage rates, owning a home remains a safe financial investment that makes housing relatively affordable,” Cachemaille said. Mortgage rates rose steadily during the first half of 2022 (the average rate for a 10-year fixed mortgage almost doubled during this period) before stabilizing somewhat.
However, only a minority of the Swiss population can afford this type of investment. Nearly 70% of European Union residents own their homes, but in Switzerland it is less than 40%.
This disparity stems from significant differences in national housing policies during the last half of the 20th century.
“In Spain, after Franco, the state actively encouraged the purchase of a house,” explained Morvant-Roux. “In Britain in the 1980s, [then-Prime Minister] Margaret Thatcher supported individual interests in an effort to contain large-scale social unrest.
But the priorities were different in Switzerland, where the emphasis was on monetary stability and full employment.
“Democratizing home ownership has never become a public policy priority,” the assistant professor said.
Switzerland is also unusual in that most people have to go into debt – often heavily – to buy property. This debt is often lifelong and sometimes passed on to the next generation: “In most European countries, parents leave their homes to their children debt-free. In Switzerland, they hand over a mortgage,” Morvant-Roux said.
This model of long-term loans owes much to the historically significant weight that the Swiss financial sector carried, she added. In the Swiss tax system, taxpayers can deduct mortgage interest directly from their taxable income. As a result, homeowners have little incentive to repay their mortgage debt. Since banks typically derive a significant portion of their financial revenue from mortgage interest, this tax arrangement offers them significant gains.
More recently, the Swiss National Bank’s expansionary monetary policy has resulted in excess bank liquidity. This increased the total amount of mortgage loans, making Switzerland the current world leaderExternal link mortgage debt per household.
Many Swiss remain rooted
The Swiss tend to stay in their existing accommodation, which exacerbates the challenges of buying a property.
“In France, for example, where you work determines where you live, and it’s not uncommon to buy and sell a house two to three times in your lifetime,” Cachemaille said. “In Switzerland, it’s the opposite. People tend to look for work in the area where they live, even if changing jobs means having to travel farther to get to work.
Once the Swiss have finally bought an apartment or a house, they generally keep it. Only 3% of those surveyed by Money Park plan to sell their property within the next three years, and only 15% within the next four to eight years.
Soaring real estate prices have made long-time homeowners even more reluctant to sell their homes. They are afraid of not finding another apartment or a house of the same standard at a decent price. This creates absurd situations: it is not uncommon to find, within the same residential area, a pensioner living alone in 200m2 while a family of five must share an 80m2 apartment.
A shortage likely to persist
Rising mortgage rates could slow the explosion in house prices and listings have increased as the pandemic subsides, but the shortage of single-family homes isn’t expected to end any time soon. Morvant-Roux expects the real estate market to remain under pressure due to Switzerland’s small size, its demographic pressures and the scarcity of land authorized for construction.
According to the bank Credit SuisseExternal link, thousands of apartments and houses occupied by baby boomers are expected to come on the market by 2045. This should, in the longer term, ease the real estate market slightly. But it’s unclear how many baby boomer properties will end up selling, as one in two homes tends to stay with one family.
Like nearly half of her compatriots, Ophelia ended up relying on her family to go from tenant to owner. Thanks to an inheritance, she was able to take over her mother’s house and, with some major renovations, transform it to her liking.
Initially, his partner Laurent was not happy with this option, but the couple now have two children and see the many advantages of ownership. “Not only financially but also emotionally, since this house has belonged to my family for several generations,” Ophelie said.
“We have found a home that suits us,” she added. “We plan to stay here for the rest of our lives and ideally pass it on to our children.”
*These are not their real names.
Adapted from French by Katherine Bidewell/gw
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