“The middle class is being pushed out of the cities” Claude Ginesta in an interview with Handelszeitung

How will home ownership and rental property prices develop in Switzerland?
We believe that the price increase over the next two years will be lower than has been the case since 2020. In general, however, residential property prices are expected to remain stable. This is due to low interest rates, continued high demand and the robust economic situation. The vacancy rate for rental properties has fallen sharply, which is also having an impact on rental price increases.  

Where can a family with a maximum annual household income of CHF 200,000 still find a home today?
Experience shows that one third of income may be used for housing purposes, in other words the family has around CHF 65,000 available for housing. Most banks apply the 5 percent rule when calculating mortgage costs. In this example, the family can afford a mortgage of 1.3 million francs. With debt financing of a maximum of 80 percent, the property should cost a maximum of 1.7 million francs. The effective burden (interest and ancillary costs) for such a property is currently around 25,000 to 30,000 francs per year due to the low interest rates. This means that only around 15 percent of income is spent on home ownership.
The “where” is relatively easy to answer: The further away you are from cities, the lower real estate prices are.

Do you see a risk that a sharp rise in interest rates could put the real estate market in trouble?
Interest rates have a very strong influence on the real estate market. However, we see the risk of a very sharp rise in interest rates as relatively low at the moment. Consumer prices and inflation around Switzerland are rising, which is leading to higher interest rates abroad. However, Switzerland still has the exchange rate problem and will attempt to raise interest rates only after a longer delay.

How much demand is there for luxury real estate?
At the moment, luxury properties are in high demand and the number of buyers has grown considerably, which is pushing prices up. Luxury real estate will remain popular in the future. However, we are seeing in other markets that, after a very rapid and large price increase, demand is slowing somewhat and prices are then consolidating at a high level. It can therefore not be ruled out that there will be a “standstill” in Switzerland too. This was already the case in 2013 and 2016.

And will vacation properties in the mountains remain so popular?
I very much expect this to happen. Due to the second homes initiative, no more vacation homes may be built. In addition, the free building land for first homes in the Alpine regions is being consistently zoned out due to the revision of the Spatial Planning Act. This is creating an additional, toxic shortage of supply at state level, which is driving prices even higher. The state did not have the second homes initiative on its radar when the revision of spatial planning was decided and submitted to the people. Now we have the price tsunami – but the state is asleep and is not reacting appropriately. We should be woken up when the nightmare is already a reality.

What has the coronavirus pandemic changed in the real estate market?
On the demand side, we have seen a doubling, which has led to a price explosion. Corona has had a significant impact on both the first-home and second-home markets.

Many young people today can only afford to buy their own home with financial support from their family. Is this a problem for our society?
According to Zürcher Kantonalbank, around 80 percent of financing is currently financed by advance withdrawals and inheritances. In other words, the older generation is helping the next generation to buy their own home. The very low gift and inheritance taxes, as well as the exemption for direct descendants in many cantons, can thus help the younger generation. It is problematic for those members of the population who cannot count on parental support. They will only be able to afford home ownership at a relatively advanced age, which is very unfavorable from a socio-political point of view.

You are also active outside Switzerland. Which foreign real estate markets are particularly attractive?
Real estate prices in Switzerland have risen by around 7.5 percent due to coronavirus. This figure is in the midfield internationally. The USA, Sweden and Australia have “performed” at 15 to 20 percent. On the other hand, markets such as Spain and Italy have hardly performed better. In Italy in particular, the market remains difficult.
The development in the second-home market is better in these countries. Very robust price increases can be observed in Mallorca, southern France, Andalusia and Portugal.
“People talk about densification, but hinder it in various ways.”

Is there sufficient and intelligent densification in Switzerland?
An important and explosive question! People talk about densification, but hinder it in many different ways: There are questionable court rulings and new noise protection ordinances that prevent densification in cities. In addition, the ISOS (Federal Inventory of Swiss Sites of National Importance) places the protection of the “townscape” above urban development.

Politicians who talk about densification should do everything they can to create the legal basis for their promises. At the moment, such empty words and election promises can hardly be taken seriously.

The negative consequence is that the middle class can no longer afford urban housing. State-subsidized housing is available for low-income earners. High earners can also afford expensive urban housing. In socio-political terms, we see the problem with the middle class, which is being pushed out of the cities. This problem must be solved.

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