Spotlight on Geneva
The City of Geneva is dominated by multi-family buildings, with only some of the outlying districts offering individual housing options. These individual houses account for a minor 9.9% of total dwellings in the City. This reflects the built up nature of Geneva and the need to supply as much accommodation as possible to the population of nearly 200,000 within a limited 15.9km² area.
The City’s population has been supported by a strong influx of foreigners into the Geneva Canton especially over the last few years. In 2015 a record high of 7,601 foreign immigrants arrived in the Canton. The majority of the immigrants are aged 15-39 and those arriving for long term residence are mostly seeking employment within the financial or hospitality sectors. Therefore, it may be assumed that the new residents could be considered as potentially being better off and thus able to afford the level of prices demanded within the City.
According to the 2015 official statistics, there was a net increase in the number of inhabitants in the City of Geneva of 3,788. Assuming that an average household size for the new inhabitants is around five people, it would imply that there was a need for nearly 760 additional dwellings in 2015 alone. Considering the low level of vacancy rates, the only alternative means of supplying the accommodation required would be through the construction of new properties.
The 2015 spike in supply appears to have closely met the increase in potential demand. This can be seen from the 2015 statistics, during which time the City had a net increase in dwellings of 754 properties, including 734 new constructions. However, the pace of development has dipped back in 2016, with a net increase during the first three quarters of only 286, including only 132 new dwellings. The limited increase in supply has probably supported the 0.5% rental vacancy rate.
Therefore, the need for property development and the limited availability of land on which properties can be developed has supported the steady rise in prices of both existing housing as well as land that is zoned for construction and development. Even despite the increase in prices, the sale of such land continues to increase. For example, in Q3 2016, the number of constructible land plots sold in the Geneva Canton increased from 145 to 193 y-o-y and the number of development land plots sold increased from 17 to 19 y-o-y.
Therefore, with the continual flow of new inhabitants into Geneva and the potential shortage of new supply of accommodation, purchasing a property in Geneva as an investment would appear attractive. The low vacancy rates would suggest that it would be relatively easy to find a tenant and the lucrative nature of the sectors in which the majority of the immigrants work would imply that they would be able to afford middle- to higher end properties. Combining this with the low mortgage rates in Switzerland, the purchase of a property for the purpose of owning a rental investment could prove to be financially rewarding.