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PROPERTY

Why do so many Swiss prefer to rent rather than buy their own home?

Despite Switzerland’s wealth, it has the lowest percentage of home owners in Europe. Why?

Why do so many Swiss prefer to rent rather than buy their own home?
Why are so many people in Switzerland 'content to rent'. Photo by Pascal GUYOT / AFP

For many of us – particularly for those from English-speaking countries – owning a home is a major goal. 

When it comes to personal wealth, owning your own home is probably the greatest signifier. 

Buying property versus renting in Switzerland: What is actually cheaper?

But despite the country’s significant wealth, Switzerland remains content to rent. 

In fact, German-speaking Europe seems to have a preference for renting rather than buying. 

Approximately 59 percent of Swiss people rent – making it the highest percentage of renters anywhere in Europe. 

In fact, Switzerland is the only country in Europe where more than half of the people rent rather than own their home. 

Do Swiss really prefer to rent than buy?

One misnomer in considering renting and buying is that in many cases people in Switzerland and other parts of Europe where rental rates are higher is that they “prefer” to rent. 

Successive studies have shown that high numbers – i.e. above 80 percent – of people would prefer to own their own home rather than rent. 

The high percentage of renters is instead probably more accurately described as people being ‘content to rent’, rather than actually preferring it.

OK then, so why are Swiss content to rent? The reasons for this are many and varied. 

Some are particularly relevant to Switzerland, while others have a cultural, economic and historical basis. 

Cost

A major reason for why people may rent rather than buy in Switzerland is a simple one: cost. 

Like in most other countries, buying a house is expensive – with renting a cheaper option at least in the short to medium term. 

A study published in 2019 found that most Swiss could not afford to own their own home, despite Switzerland’s famously high wages. 

READ MORE: Most residents in Switzerland still can’t afford to own a home, study reveals

House prices remain expensive in Switzerland and are getting more so, with prices rising faster than increases in wages. 

Furthermore, many of the most sought after properties are unavailable, with single family apartments or homes the most popular. 

While cost effective properties in this category are difficult to find in Switzerland for buyers, they are comparatively more available for renters. 

The pandemic also played a role here, with demand for houses, larger apartments and additional rooms increasing, particularly with the growing popularity of working from home. 

Switzerland has the highest percentage of renters in Europe. (Photo by Thomas SAMSON / AFP)

Land

One major reason – and one which is unlikely to change anytime soon unless famously neutral Switzerland decides to invade Baden-Württemberg – is geographical. 

EXPLAINED: Why is Switzerland always neutral?

Switzerland remains a relatively small country and has neighbours on all sides, with little land left to be developed. 

Kuhn and Grabka in a 2018 article entitled ‘Homeownership and Wealth in Switzerland and Germany’ wrote that “scarcity of land” is perhaps the major factor in high home prices in Switzerland, which translates to fewer home owners. 

Home ownership is also higher in regional and rural areas in Switzerland – where land is less scarce – where it pushes above the 50 percent mark, rather than in the country’s powerhouse urban sector. 

In a study published in 2009 entitled ‘Why do the Swiss rent?’, Bourassa and Hoesli agree. 

“Switzerland’s topography obviously limits the amount of developable land, but tight restrictions on development of agricultural land and redevelopment of urban land also contribute to the high prices of houses and apartments.”

The authors also pointed to restrictions on agricultural land use – i.e. on converting it to land to live on – are particularly strict in Switzerland. 

In the wake of the coronavirus pandemic, Switzerland has seen a growing demand for Swiss-made and Swiss-grown food and goods. 

The centre-left Social Democrats, usually champions of free movement and international integration, put forward a ‘Switzerland first’ agriculture and manufacturing program, which won widespread support. 

Therefore, despite demand for housing, these pressures on agricultural land are unlikely to subside anytime soon – and may in fact go in the other direction. 

The wealth inequality cycle

Kuhn and Grabka write that a major reason for the low home ownership rate in Switzerland is the fact that it has always been that way. 

Switzerland has a high level of wealth inequality, with those on the higher end of the scale far more likely to own their own home than those who are not. 

“There are two main explanations why becoming a homeowner is likely to increase wealth accumulation. Firstly, the rise in the value of property may lead to a higher net worth for owners. Secondly, owners on a mortgage are forced to save on a regular basis and thus accumulate wealth faster than usual tenant households”. 

This concentrated wealth not only means that less wealthy people are less likely to buy a home, but it also indicates that they are less likely to become wealthier as a result. 

Therefore, this may explain why Switzerland continues to have a low home ownership rate despite its comparative wealth to other countries, i.e. that Switzerland might be wealthier than most, but it remains highly unequal domestically. 

Tax

Despite its reputation, Switzerland’s income tax rates are not as high as some might expect. Other taxes are however quite high in comparison – and contribute to the Swiss being content to rent. 

Bourassa and Hoesli note that tax subsidies for renters exist in several Swiss cantons, writing that “income tax rules in Switzerland seem less favourable to home ownership” than those in the United States. 

This sometimes amounts to a high percentage of the overall cost (i.e. as high as 3.4 percent in Geneva). 

Swiss home owners on the other hand are often hit with taxes, including income tax, property tax and capital gains tax. 

Several Swiss cantons also levy a wealth tax, which disproportionately hits home owners. 

Tenants rights

One explaining factor is the relatively strong tenants rights framework in place in Switzerland. 

Unlike in other countries where renters are subject to regular inspections and are often not allowed to make modifications to the property – or even in some cases to hang a picture – without asking, tenants have far more freedom in Switzerland.

In addition, tenants in Switzerland benefit from restrictions on rent increases and protections for evictions – both of which make renting more attractive than in jurisdictions where this is not the case. 

Some cantons allow rent to be deducted from tax, while cantons also provide subsidies for renters in some situations. 

A consequence of the stronger tenancy laws is that property becomes a less attractive option for investors, which in turn means fewer properties are built, write Bourassa and Hoesli. 

This itself becomes cyclical – in a democratic system where more people rent than buy, they are likely to put additional pressure on policymakers to pass laws which are favourable for renters. 

In countries with a high home ownership rate, the opposite is true, where policy makers will cater to the majority, i.e. those who own homes. 

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SWISS CITIZENSHIP

EXPLAINED: How Switzerland wants to cut social assistance for non-Europeans

The Swiss government has unveiled a proposal which would cut social assistance for non-European residents. Here’s what you need to know.

EXPLAINED: How Switzerland wants to cut social assistance for non-Europeans

As part of a draft revision of the law on foreigners and integration, the Federal Council is proposing to reduce social assistance paid to nationals of third countries.

“During the first three years following the granting a residence permit, the rate of social assistance should be lower than that applied to the native population”, authorities said.

The rationale of the plan is to “create incentives for better work integration”. 

The proposal has been developed by Justice Minister Karin Keller-Sutter. 

The project was in a consultation phase until May 3rd, after which it will be presented to Swiss parliament.

The cut would save an estimated three million francs per year nationwide. 

What does the proposal say? 

Under the plan, the amount of social assistance will be reduced in the first three years for foreigners in Switzerland, provided they come from outside the EU. 

The social aid paid to non-Europeans is already relatively low, with amounts varying from CHF600 to CHF1,000 depending on the canton. 

READ MORE: How Switzerland wants to cut welfare and boost integration for non-EU citizens

Anyone who has a ‘C’ category residency permit and who receives social assistance will lose it more easily than under the previous scheme. 

The law will also see a more defined set of requirements for integration for temporarily admitted persons. 

In addition, the Federal Statistical Office should regularly report accurate figures of how many foreigners are receiving social assistance. 

In addition, the State Secretariat for Migration (SEM) must approve the extension of residency permits of individuals who incur “significant” social welfare costs. 

Keller-Sutter will also draw up a uniform set of recommendations for social assistance for foreigners for the cantons. 

What are people saying? 

While the proposal has not yet been finalised, the idea has sparked heavy criticism, while some foreigners are fearful of what it might mean for them should the assistance be lowered. 

A spokesperson for the Social Democrats told Swiss tabloid Blick a cut would be “unworldly and cynical”, while the Greens say such a move would be unconstitutional. 

The proposal sparked criticism from the Swiss Workers’ Welfare Organisation, whose spokesperson, Caroline Morel, pointed out that “in social assistance, the amount of support benefits is calculated according to needs and not the length of stay in Switzerland”.

“We oppose the downgrading of the residence status of foreigners who receive social assistance. We also oppose lower social assistance rates for the first three years, as these are inhumane and hinder professional and social integration.”

“It is clear that these tightening measures will primarily affect vulnerable people such as children, people with special needs, and women”, she added.

The Swiss People’s Party on the other hand have spoken out in favour of the changes, saying it would help curb increases in social assistance contributions. 

 

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