Up to 60 percent increase: There was an explosion in apartment prices here

So far we have not seen any price drops in major cities. A dramatic collapse, as many predicted, is simply out of the question. On the contrary. Prices have risen rapidly in the last three years, especially in popular centres. Of course, price increases slowed down last year. But they argue that consumers are getting used to higher interest rates. Additionally, central bank interest rate increases take time to affect the entire real estate market. A slowdown in price inflation can only be good for the overall market.

The highest price increase in Zug

The city of Zug recorded the highest price increase. House prices there have increased by an incredible 60 percent in the last three years. Real estate expert Iazi’s evaluation also shows this. The changes were compared for a single-family home with 5.5 rooms and 140 square meters of living space, and for an apartment with 3.5 rooms and 115 square meters. Sharp price increases are the downside of the city’s economic success.

Low taxes attract many new residents. Zug is now the leader when it comes to corporate deals. The municipality’s coffers are full; Last year, a surplus of 71 million was achieved. This money is invested in infrastructure projects such as schools or road widening, making the city more attractive. The housing market can no longer keep up with strong demand. Rental apartments are rare on the market; The vacancy rate is 0.33 percent. It has now become difficult to acquire property due to the sharp increase in prices. “We don’t want to be like Monaco,” mayor André Wicki said recently. The seriousness of the situation was understood. At the latest after the people of Zug recently adopted the initiative for 2,000 affordable apartments.

Apartments in Zug, Zurich and Geneva are the most expensive

You now pay the same amount for a condominium in Zug as in Zurich: a 4.5-room apartment costs around 2 million in both cities. In Geneva you add another 200,000 francs. At the same time, the vacancy rate in these cities is quite low: 0.52 percent in Geneva, even lower in Zug at 0.33 percent, and almost non-existent in Zurich at 0.06 percent. Prices also rose sharply by around 40 percent in Basel, Frauenfeld and Zurich. At the same time, the 1.07 percent vacancy rate in Basel is still a far cry from the tense situation in Zurich or Geneva.

The high price increases are particularly surprising in the city of Basel, where tenant protection has been tightened. Property owners in the city on the banks of the Rhine now have less freedom and more bureaucracy in setting rents. There are also rent surcharges for conversions and renovations, as well as a cap on net rents for replacements of new buildings. The Housing Preservation Commission (WSK) is responsible for setting maximum surcharges and net rents, carrying out rent controls and issuing relevant permits.

In Geneva, prices increased significantly less. Prices increased by 25 percent, only half of those in Zurich. “The ceiling seems to have been reached in Geneva,” says research author Donato Scognamiglio, founder and chairman of real estate consultancy Iazi. “After a sharp increase in recent years, there is now a slowdown in Geneva.”

No more affordability in major centres.

Anyone looking to buy property in major centers will find this difficult. The issue for the majority of the population when purchasing a property is affordability; This isn’t the case for most people – unless someone inherits or receives a large gift to increase their equity and thus reduce their mortgage burden.

An example: A household income of around 160,000 francs is required today to meet the affordability requirements of a typical apartment with a purchase price of 900,000 francs. For an average detached house, this figure should be over 1.1 million francs. Only 3 percent of households in Switzerland have this income.

Home ownership can still be financed in Thurgau and Schaffhausen

Today the question still arises of where to find an affordable home. To do this, you need to go further from Zurich, for example to Frauenfeld or Schaffhausen. The vacancy rate in Frauenfeld is currently 1.41 percent, in Schaffhausen it is 0.54 percent. Although prices have increased sharply in both cantonal capitals (41 percent in Frauenfeld, 32 percent in Schaffhausen), the price level is still within the affordable range for buyers. You pay 815,000 francs for a 4.5-room apartment in Schaffhausen, and 860,000 francs in Frauenfeld. Just a few years ago people avoided both cities. Today you can see that they are in demand from price increases and population growth. Especially due to Corona making it possible to work from home and thanks to the significantly improved connections to Zurich. If you commute to work, you can reach Zurich in about forty minutes by public transport.

An example: a 4.5-room apartment in Schaffhausen costs 815,000 francs. For this, 20 percent equity capital needs to be collected, that is, 160,000 francs. The total mortgage cost cannot exceed one-third of your income. Banks calculate an imputed interest rate of 5 percent; In this case the mortgage costs are around 33,000 francs. Therefore, an income of 98,000 francs is needed.

What’s next?

So what will happen to property prices in the future? “Price increases will stabilize,” says Donato Scognamiglio. “But there will be neither a crash nor a major correction.” Switzerland is very attractive as a country of immigration and the demand is high. All in all, 80,000 people come and stay in Switzerland every year. The ground is limited, the neighbor only needs to compact it, and we do not want to build higher. Far fewer apartments are being built than necessary. This is how demand pressure affects the price.

Should you still buy now?

“If you have found a suitable property, you should not wait just because interest rates have increased,” says Donato Scognamiglio. “It’s like getting married or attending a penalty shoot-out. You just have to try. Also, real estate is an investment. You buy them for several years, even decades.