Switzerland’s residential real estate market is seeing growth in construction starts and completions, sales, rents and pricing for both single-family homes and apartments. Market observers believe the robust trends are the result of positive economic expansion, low interest rates and increased demand in housing. The increasing value of the Swiss franc, however, may stifle growth moving forward as inflation rises and costs increase. The Swiss government is moving to combat this introducing various financial measures and opening up the real estate market to foreigners. For more on this continue reading the following article from Global Property Guide.
- Prices of owner-occupied apartments rose 5.08% (4.45% in real terms) over the year to Q1 2011
- Prices of single-family homes rose 4.37% (3.75% in real terms) over the same period.
- Apartment rents increased 1.44% (0.84% in real terms) over the year to Q1 2011.
- Prices of single-family homes rose by 35.9% (25.1% in real terms)
- Prices of owner-occupied dwellings increased by 53.6% (41.5% in real terms)
- Prices of rental apartments rose by 35.8% (25% in real terms)
There were about 269,202 apartments under construction, up 11.14% from a year earlier. On the other hand, the total number of new apartments authorized dropped by 1.5% to 49,517 units over the same period. In the year to end-Q1 2011:
- New apartments completed were up by 4.5% to 8,798 units
- The number of apartments under construction rose by 5.74% to 68,307 units
- The number of apartments authorized increased 2.02% to 13,719 units
- Low interest rates spurred strong real estate demand.
- Switzerland is widely viewed as a “safe haven” by wealthy foreigners.
- An increase in the number of immigrants has led to higher demand for houses. Over the past four years, net migration totaled 330,000 people.
- After the collapse of house prices in other countries, Swiss citizens and residents moved their investments back to the domestic housing market which is relatively more stable.
- The Swiss economy emerged from recession in mid-2009, and in 2010 the economy expanded 2.55% from a year earlier.
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The strong Swiss franc has been weakening exports and stoking inflation. Swiss National Bank (SNB), the country’s central bank, has introduced numerous measures to halt the franc’s rise to record levels against the beleaguered euro and US dollar.
- The Franc’s money market liquidity was almost quadrupled. SNB boosted the monetary base from CHF30 billion to CHF80 billion. Then in August 10, 2011, SNB announced it would increase it further to CHF120 billion
- Currency swaps were introduced
- The key rate was slashed to close to zero in August 3, 2011, after the franc climbed to just below parity with the euro. The special rate for bottleneck financing facility was 0.59% in June 2011
Despite this, residential property prices are expected to continue rising in 2011, albeit at a slower pace compared to the previous year, according to Credit Suisse.
The Swiss have for a long time restricted the sale of property to foreigners. Now the Federal government has set an annual quota of permits for non-resident foreigners seeking to acquire property in Switzerland. In addition, cantonal authorization is needed before gaining a title. Each canton has slightly different rules, varying from commune to commune within the canton.
However in 2010 each canton gains responsibility for its own foreign property acquisition laws. This may result in faster transfer of property titles, as opposed to the current delays.
Foreigners cannot acquire residential real estate for buy-to-let investments except for subsidized housing which has below market rents.
This article was republished with permission from Global Property Guide.