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Why are Zurich and Geneva among the world’s most expensive cities?

Switzerland’s two largest cities are frequently ranked among Europe’s (and sometimes the world’s) priciest places to live. But what exactly makes them so expensive? We spoke to an expert to find out.

Why are Zurich and Geneva among the world's most expensive cities?
Geneva and Zurich are among Europe's most expensive cities. Photo: Claudio Schwartz on Unsplash

Quite a few studies in recent years have placed both Swiss cities at the top of the “cost of living” rankings. So it’s not really a surprise to anyone that Zurich and Geneva were placed in the top 10 of the most expensive cities in the world, and the two priciest in Europe, in the Economic Intelligence Unit (EIU) Cost of Living 2022 index released last week. 
But why exactly do the two cities keep getting these unenviable titles year after year?

The Local put this question to Daniel Dreier, a financial  expert at Moneyland price comparison platform.

He cited several factors why both municipalities are — at least in some cases — more expensive than many others.

Property prices/rents 

“The obvious reason here is supply in relation to demand,” he said.

Geneva especially has a complicated housing market — the tiny canton has suffered from an acute housing shortage for many years, with demand far outstripping supply.

One of the reasons for the shortage of apartments and, consequently high rents, have to do with Geneva’s geography and demographics. The canton is nestled in the southwest corner of the country, where it is wedged between France and Lake Geneva. The land for new constructions is limited, while the demand is growing steadily along with the population.

READ MORE: Why is Geneva’s rent the highest in Switzerland?

Zurich is the largest city in Switzerland. Photo: Pixabay

Zurich is the largest city in Switzerland. Photo: Pixabay

However, Dreier points out that  less expensive options also exist in both cities, and “residents of Zurich and Geneva can access affordable forms of housing, such as housing cooperatives”.

He added: “Low-income residents have access to government housing projects.”

Health insurance premiums
This is particularly true in Geneva, which has some of the highest premiums for mandatory health insurance in Switzerland, Dreier said.

“But Zurich also has relatively high health insurance premium,” he noted. “The reason for that is that Switzerland’s health insurance system is based on effective healthcare costs in individual premium regions. Urban dwellers generate higher healthcare costs, partly because of the more extensive healthcare infrastructure.”

READ MORE: EXPLAINED: Why do Swiss healthcare premiums vary so much per canton?

A view of Geneva.

A view of Geneva. Photo by Egor Myznik on Unsplash

High road taxes and car insurance costs.
In general, owning a car is more expensive in Zurich and Geneva than in many other parts of Switzerland, according to Dreier.

He  pointed out, however, that while the two cities are known for their high prices, “other costs, such as groceries, public transportation, petrol, childcare, education, and consumer goods, are largely identical to other parts of Switzerland, or cheaper in some cases”.

Also, it is worth noting that Switzerland’s large cities tend to have more subsidised offers for education, sports, culture, etc. than smaller municipalities,” which provides a cushion against the high costs, Dreier added.

Tax differences

From a personal point of view, Dreier made an interesting observation on why parts of life in these cities may not be as pricey as expected. 

“As a resident of Zurich, I personally don’t find [the city] exceptionally expensive compared to other parts of Switzerland,” he said.

“In fact, I live more cheaply here than my friends in a small-town in Bern with the same size family and standard of living, because taxes in Zurich are much lower for our household profile. But obviously a lot depends on your lifestyle.”

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4,000 francs a month: Zurich set to introduce minimum wage

Switzerland’s largest — and most expensive — city is seeking to introduce a minimum hourly salary from 2024.

4,000 francs a month: Zurich set to introduce minimum wage

In 2022, a committee composed of left-wing parties and trade unions submitted to the city council an initiative called “A wage to live,” which called for a minimum hourly wage of 23 francs per hour to be introduced in Zurich.

Municipal councillors countered with an even better proposal last week, upping the amount to an inflation-adjusted minimum wage of 23.90 per hour — 4,000 francs a month. 

This wage is intended mainly for an estimated 17,000 low-income Zurich residents, two-thirds of whom are women.

The minimum salary “will relieve many of those affected by low wages in the city of Zurich – employees at fast food chains, cleaning companies, and those working in retail”, said Oliver Heimgartner from the local Social Democratic Party.

However, there may still be hurdles to overcome before the proposed minimum wage becomes law in Zurich, as it cannot be excluded that right-wing groups, which oppose minimum wages, will launch a referendum on this issue.

“A minimum wage jeopardises jobs and harms the economy,” MP Susanne Brunner from the populist Swiss People’s Party (SVP) said.

In addition, she pointed out that a municipal minimum wage – that is, one that applies only to the city and not to the entire canton – is a “bureaucratic nightmare.”

If the initiative does go through in Zurich, the city will join five Swiss cantons where minimum wage is already a rule.

Geneva has what has been called the “world’s highest minimum wage” — 24 francs an hour, which was raised from 23 francs in 2020 and 23.27 francs in 2022, to adjust for inflation. 

The Swiss city of Zurich.

The Swiss city of Zurich. Photo by Ilia Bronskiy on Unsplash

Next is Basel-City, which has set its wage at 21 francs an hour, while Neuchâtel and Jura set at 20, and Ticino, at 19.75.

These salaries, negotiated by unions on behalf of workers, reflect the cost of living in each of these regions.

In all these cantons, as elsewhere in Switzerland, most people earn more than the minimum.

Unlike many other countries, Switzerland doesn’t have a nationally mandated minimum wage.

That does not, however, mean that companies are free to pay their workers as much — or as little — as they want.

Instead, the minimum amount is determined through negotiations between employers and unions  — the so-called  collective labour agreement (CLA).

Generally speaking, CLAs cover a minimum wage for each type of work; regulations relating to work hours; payment of wages in the event of illness or maternity; vacation and days off; and protection against dismissal. 

CLAs are sector-specific; in other words, they take into account the particular aspects of each branch. As an example, Switzerland’s largest labour union, The Swiss Federation of Trade Unions (UNIA), maintains 265 collective agreements in the areas of industry and construction.

READ MORE: What is a Swiss collective bargaining agreement — and how could it benefit you?