The current situation on the Swiss real estate market

A lot happened on the Swiss real estate market in 2024. Swiss homes became 2.4 percent more expensive in 2024 compared to the previous year. Homes in the mountains recorded the largest price increase. Real estate prices also rose above the average in the regions of Winterthur, Schaffhausen, Oberes Rheintal and Schwyz. In contrast, there were slight downward price adjustments in the regions of Basel, Bern, Geneva and Lugano, as well as in the city of Zurich.

While hopes of lower interest rates and an increase in the number of properties being advertised slowed down price momentum in the first half of 2024, demand picked up again significantly in the second half of the year. The number of current search subscriptions on online platforms for buying a home in December 2024 was almost 20 percent higher than in the previous year.

The now significantly improved financing conditions are likely to have been an important driver of the price dynamics. The running costs of owner-occupied homes are expected to be almost 15 percent lower in 2025 than in the previous year thanks to lower interest rates. This means that the running costs of owning a home will be lower than for comparable rental apartments. In addition, economic and income growth is likely to remain robust in 2025, which will support buyers’ willingness to pay for owner-occupied homes. These two factors – low running costs and economic and income growth – will continue to boost demand for owner-occupied homes. At the same time, however, there is an increasing affordability problem in many places. For households with an average income, fewer and fewer homes are affordable, which may have a price-inhibiting effect.

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In the current interest rate environment, the following applies to mortgage borrowers: In our estimation, a ten-year, fixed-rate mortgage is currently the most attractive financing option over a period of ten years (as of February 2025). It is currently around 20% cheaper than a money market mortgage, i.e. financing with a variable interest rate.

However, potential exit costs should not be overlooked if, for example, a change in circumstances requires the mortgage to be terminated prematurely. Ultimately, the need for security and your personal situation determine which type of mortgage is best.

When buying real estate, one thing is crucial in both the short and long term: the desired property must be affordable. Roughly speaking, the most a household can afford is a property that costs around six times the gross household income. But that is not the end of the story. The running costs are often underestimated when realizing the dream of owning a home of your own. In addition to mortgage payments and amortization, these also include maintenance costs. These should be estimated at around 1 to 1.5 percent of the value of the building. And even if you fall short of this amount in a given year, it’s still a good idea to save for maintenance, because the next major renovation is sure to come.

When choosing your dream property, it is worth keeping an eye on the location-related costs, i.e. tax burden and health insurance premiums, in addition to the property price, as these vary considerably depending on the municipality. The difference between the cheapest and the most expensive municipality for 100 square meters of living space is around 30 percent. Property prices tend to be higher in municipalities with low taxes, which can completely cancel out the tax savings, especially for households with lower incomes. Accordingly, living in low-tax municipalities is particularly worthwhile for households with high incomes, as income taxes account for the majority of location-related costs for them.

A good location is also important if the owners want to rent the property out rather than using it themselves. The financial success of such a buy-to-let investment depends crucially on the rental quality and price development of the individual property. Strong population growth combined with above-average rental growth increases the attractiveness of the local market for buy-to-let investors. 

When purchasing such an individual property for reletting, however, any cluster or vacancy risk must be taken into account. Property management by the owner involves a certain amount of effort, and hiring an external management company means additional costs. Furthermore, the investor must have sufficient liquid funds at all times for unforeseen repairs or renovations. In addition, rising interest rates increase the financial burden, especially in the case of high debt financing.