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

Where can a family with a maximum annual household income of 200,000 francs find residential property today?
Experience shows that one third of the income may be used for housing purposes; in other words, the family has about 65,000 francs 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 about 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 property prices are.

Do you see a risk that a strong increase in interest rates will put the real estate market in distress?
Interest rates have a very strong influence on the real estate market. However, we see the risk of a very strong interest rate hike as relatively low at the moment. It is true that consumer prices and also inflation are rising around Switzerland, which is causing interest rates to rise abroad. However, Switzerland still has the exchange rate problem and will try to raise interest rates only after a longer delay.

How much demand is there for luxury real estate?
At the moment, luxury properties are very much in demand and the group of buyers has grown strongly, which puts upward pressure on prices. Luxury real estate will remain popular in the future. However, we observe in other markets that after a very rapid and large rise in prices, demand slackens somewhat and prices then consolidate at a high level. Therefore, it cannot be ruled out that there will also be a "marching halt" in Switzerland. This was already the case in 2013 and 2016.

And will holiday properties in the mountains remain so popular?
I am very much assuming so. Due to the second-home initiative, no more holiday properties may be built. In addition, the free building land for primary residences in the Alpine regions is being consistently zoned out due to the revision of the Spatial Planning Act. This creates an additional, toxic shortage of supply at the state level, which drives up prices even further. The state did not have the second-home 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 shows no appropriate reaction. One should be woken up when the nightmare is already a reality.

What has the Corona pandemic changed in the real estate market?
On the demand side, we saw a doubling, which led to a price explosion. In both first and second home markets, Corona had a striking impact.

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

You are also active outside the country's borders. Which foreign real estate markets are particularly attractive?
Property prices in Switzerland have risen by around 7.5 percent as a result of Corona. This figure is in the middle range internationally. The USA, Sweden and Australia have "performed" at 15 to 20 percent. On the other hand, markets such as Spain or Italy have recorded almost no higher performance. Especially in Italy, the market is still difficult.
The development in the second-home market is better in these countries. For example, very robust price increases can be seen in Mallorca, the south of France, Andalusia or in Portugal.
"People talk about densification, but they hinder it in many different 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 decisions and new noise protection ordinances that prevent densification in cities. In addition, the ISOS (editor's note: Federal Inventory of Swiss Sites of National Importance Worthy of Protection) places the protection of the "townscape" above urban development.

Politicians who talk about densification should do their utmost to ensure that the legal basis for their promises is created. At present, 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-subsidised 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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