With the new year now in full swing, many will be wondering how the Swiss housing market will evolve over the next 12 months. Several experts have now had their say as to whether the cost of buying a house in Switzerland will go down, what will happen to those renting properties, and whether the infamous rental value tax will be scrapped.
Starting with homebuyers, Raiffeisen chief economist Fredy Hasenmaile predicted that house prices in Switzerland would experience a “slight” drop in 2024, especially for apartments. This is after average house prices rose by 1,3 percent between the third quarter of 2022 and 2023, according to data from the Federal Statistical Office.
However, those rushing for their chequebooks should act with caution, as house prices are not expected to fall dramatically and will still be largely unaffordable in most cantons. “A radical change in the price curve remains very unlikely due to the shortage of owner-occupied housing,” Hasenmaile explained.
For those looking to take out a Swiss mortgage, there is also some good news, with 10-year fixed mortgage rates now around 2 percent, 1 percentage point lower than in autumn 2022. With inflation now within the Swiss National Bank’s target, Adrian Wenger, mortgage specialist at VZ Vermögenszentrum, told Blick that while official rates may rise initially, most mortgage providers are expecting the SNB to cut interest rates “sooner than expected.”
Hasenmaile confirmed that his bank predicts that a drop in mortgage interest rates is entirely possible by the spring, and that “by the end of 2024, we expect mortgage rates to be lower than today.”
When asked whether the imputed rental value tax will finally be scrapped, Usina Kubli, head of real estate research at Zurich Cantonal Bank, told Blick that it will not be a quick process. For reference, in short, the rule sees the theoretical annual rent of a property added to a homeowner’s annual income on their tax return and taxed as such - it is seen as one of the main hurdles to overcome to own a home in Switzerland.
Despite moving towards ending the policy, she noted that parliament is yet to agree on a conclusive plan. When it does, she predicted that the idea would likely have to face a referendum; “The future will tell us whether an agreement can be reached and whether the abolition of the rental value will withstand a referendum.”
Others are not so optimistic, with Wenger arguing that "given the budgetary problems in Bern, I can't imagine that anyone would want to give up the additional tax revenue generated by the rental value tax."
Moving on to rental costs, Kubli said that “the growing shortage in the rental housing market continues to be felt”, largely because Switzerland is still not building enough housing. She predicted that housing shortages in major cities would intensify in 2024, making it more difficult to find affordable homes.
What’s more, many rents are also set to rise automatically thanks to the increase in the reference interest rate announced in December 2023. The 3 percent average rise will come into force in most cantons in April 2024, after which Raiffeisen predicts that there will be no further rise in the reference rate for several years.
Finally, those who pay for their utilities directly as part of their rental contract will also see prices rise due to the higher cost of electricity - expected to be 18 percent more expensive on average in 2024.