Tale of Two Cities
There is rather a wide spectrum of property prices to choose from when buying a property in Switzerland. Although Switzerland is one of the more expensive countries in Europe, there is a fair amount of variation in prices between cities. While one may suppose that the capital should have the highest prices, it turns out that Bern has had some of the lower prices relative to the other main Swiss cities. Instead, the two cities that tend to ask premium prices are Geneva in the west and Zurich in the north-east.
These two economic centres are the most populated cities in Switzerland, with c.a. 341,730 and 183,981 people living in Zurich and Geneva, respectively. This compares to only 121,631 living in the capital. Additionally, Zurich and Geneva are key global commercial capitals, with both cities ranking in the top 25 on the Global Financial Centres Index – not forgetting that Geneva is also one of the regional headquarters for the United Nations.
As such, the residents of Zurich and Geneva tend to have higher earning capacity than that of Switzerland in total. According to the Federal Statistical Office, the average gross monthly wage in Geneva is c.a. 1.01x the State average, while for Zurich it is 1.06x the State average. While this may not appear particularly high, the State average would be skewed upwards by these two cities, which represent a large proportion of the country’s total population.
With higher monthly earnings and the commercial nature of the two cities, it is understandable why the property prices in Zurich and Geneva would be higher than elsewhere in Switzerland. The congregation of the population to these cities has led to a close-to-zero vacancy rates for both owner-occupied apartments and single-family houses.
However, due to the rise in the cost of properties, it has become a growing trend for home owners to fall within the older age group. The higher prices require not only high incomes but also greater assets, which restricts the purchasing power of the younger generation. Furthermore, due to a change in society and the need for increased mobility and flexibility, younger professionals have shifted away from property ownership towards property rentals.
Part of the demand has also been supported by immigrants who have moved to Switzerland with the hope of owning their own properties. Immigrants generally favour the main commercial centres of the country with the aspiration of securing stable jobs. Initially immigrants tend to rent accommodation due to the weaker purchasing power from the country of origin, but once a job has been secured, the new immigrants are able to begin to accumulate their savings in order to improve their future capability to purchase a property.
These two factors make finding a rental apartment tricky, as further reflected by the vacancy rates on rental apartments of just off 0% for the main cities, including 0.2% in Zurich and 0.5% in Geneva. This could make purchasing a property in Switzerland’s main cities as a rental investment a potentially interesting opportunity, with 2016 prime yields of 2.0-3.0%.