Buying property versus renting in Switzerland: What is actually cheaper?
For those who can afford it, buying a place to live in Switzerland can be cheaper than renting - particularly for families, although new research suggests this may be set to change.
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Renting is more common in Switzerland than any other European country, with the Alpine nation the only nation in Europe where less than 50 percent of people own the home they live in.
The reasons for doing so however are complex, with the cost of buying a home a major factor.
READ MORE: Why do so many Swiss prefer to rent rather than buy their own home?
Research into the Swiss property market however shows that buying can in fact be cheaper than renting, at least in the longer term.
Here's what you need to know.
Property: Buying versus renting in Switzerland
High property prices and the need for a 20 percent deposit can make the costs of buying a house in Switzerland prohibitive, leading many to choose renting as a cheaper option.
While this may be the case in the short term, over the long term however buying a property can in fact be the cheaper option in some cases - for those who can afford it.
One of the major factors underpinning affordability in property is interest rates. Switzerland, with its history of minimal inflation, has long had low interest rates, which makes borrowing money a more attractive option.
A report from 2020 found that buying a house in Switzerland can save you a considerable amount of cash over time - particularly for families.
The report, prepared by Switzerland’s Raiffeisen Bank, showed that despite rising house prices - it was still considerably cheaper to buy in the long term when living in Switzerland.
Average rental payments for a 3 to 4.5-room apartment in Switzerland - when compared to mortgage repayment costs - are 20 percent higher than buying a house of the same size on average.
Renting in Switzerland costs almost 20 percent more than buying. Source Raiffeisen Economic Research
The study also takes into account maintenance costs and tax consequences.
However, economic uncertainty - such as the fallout from Russia's Ukraine invasion and the lingering impacts of the Covid pandemic - can put upward pressure on interest rates.
A Credit Suisse study from 2022 found that for the first time in 13 years, renting was actually a cheaper option than buying in the short term, due mainly to a rise in interest rates.
According to the researchers "the first time in a long time, buyers or owners of a condominium have to pay more than for a comparable rental apartment".
The researchers compared advertised property prices and rents, comparing rental expenses with the costs of a five-year fixed mortgage.
Renting was a cheaper option than buying due to a 45 percent increase in mortgage interest since the beginning of 2021.
The costs however were compared on a yearly basis over five years and did not take into account the longer-term impact of paying a mortgage, i.e. that you actually own the home (or part of it) as you continue to pay it off.
EXPLAINED: How to save on your mortgage in Switzerland
Demographic breakdown pushing higher demand in Switzerland
The 2020 study found that one of the major reasons for the cost discrepancy is a higher demand for rental properties than real estate, which is fuelled by Switzerland's unique demographic breakdowns - particularly in urban areas.
The high demand existing in the rental market, which in Switzerland like much of the world tends to be made up of younger people and/or people with less capital, has led to a cyclical situation where the owner-occupier market is effectively “undervalued”, according to the study.
READ: This is how much it costs you to change apartments in Switzerland’s cities
Lower-income people, who find it comparatively harder to secure financing to buy a new home, therefore face extra barriers in taking advantage of the financial benefit of owner-occupying a house in Switzerland.
Around one in four Swiss residents are foreigners, or around one in two in urban areas like Zurich, Basel and Geneva.
Due in part to the difficulties in becoming naturalised, many of the foreigners who live here do not plan on staying in Switzerland in the longer term, which can contribute to even greater demand for rental apartments instead of condominiums.
As the authors commented “Buying would still be attractive compared to renting despite high prices (of buying property). Changing from a rented flat to an owner-occupied home could help households to reduce their housing costs.
“However, especially for financially less well-off tenants, such as young families, it is more difficult for them to realise this savings potential because they do not receive financing.”
The study found that although buying is cheaper than renting - for those who can afford it - house prices are still on the up.
The average increase of single family houses was around four percent higher than in 2019, while condominiums rose by around one percent.
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Renting is more common in Switzerland than any other European country, with the Alpine nation the only nation in Europe where less than 50 percent of people own the home they live in.
The reasons for doing so however are complex, with the cost of buying a home a major factor.
READ MORE: Why do so many Swiss prefer to rent rather than buy their own home?
Research into the Swiss property market however shows that buying can in fact be cheaper than renting, at least in the longer term.
Here's what you need to know.
Property: Buying versus renting in Switzerland
High property prices and the need for a 20 percent deposit can make the costs of buying a house in Switzerland prohibitive, leading many to choose renting as a cheaper option.
While this may be the case in the short term, over the long term however buying a property can in fact be the cheaper option in some cases - for those who can afford it.
One of the major factors underpinning affordability in property is interest rates. Switzerland, with its history of minimal inflation, has long had low interest rates, which makes borrowing money a more attractive option.
A report from 2020 found that buying a house in Switzerland can save you a considerable amount of cash over time - particularly for families.
The report, prepared by Switzerland’s Raiffeisen Bank, showed that despite rising house prices - it was still considerably cheaper to buy in the long term when living in Switzerland.
Average rental payments for a 3 to 4.5-room apartment in Switzerland - when compared to mortgage repayment costs - are 20 percent higher than buying a house of the same size on average.
Renting in Switzerland costs almost 20 percent more than buying. Source Raiffeisen Economic Research
The study also takes into account maintenance costs and tax consequences.
However, economic uncertainty - such as the fallout from Russia's Ukraine invasion and the lingering impacts of the Covid pandemic - can put upward pressure on interest rates.
A Credit Suisse study from 2022 found that for the first time in 13 years, renting was actually a cheaper option than buying in the short term, due mainly to a rise in interest rates.
According to the researchers "the first time in a long time, buyers or owners of a condominium have to pay more than for a comparable rental apartment".
The researchers compared advertised property prices and rents, comparing rental expenses with the costs of a five-year fixed mortgage.
Renting was a cheaper option than buying due to a 45 percent increase in mortgage interest since the beginning of 2021.
The costs however were compared on a yearly basis over five years and did not take into account the longer-term impact of paying a mortgage, i.e. that you actually own the home (or part of it) as you continue to pay it off.
EXPLAINED: How to save on your mortgage in Switzerland
Demographic breakdown pushing higher demand in Switzerland
The 2020 study found that one of the major reasons for the cost discrepancy is a higher demand for rental properties than real estate, which is fuelled by Switzerland's unique demographic breakdowns - particularly in urban areas.
The high demand existing in the rental market, which in Switzerland like much of the world tends to be made up of younger people and/or people with less capital, has led to a cyclical situation where the owner-occupier market is effectively “undervalued”, according to the study.
READ: This is how much it costs you to change apartments in Switzerland’s cities
Lower-income people, who find it comparatively harder to secure financing to buy a new home, therefore face extra barriers in taking advantage of the financial benefit of owner-occupying a house in Switzerland.
Around one in four Swiss residents are foreigners, or around one in two in urban areas like Zurich, Basel and Geneva.
Due in part to the difficulties in becoming naturalised, many of the foreigners who live here do not plan on staying in Switzerland in the longer term, which can contribute to even greater demand for rental apartments instead of condominiums.
As the authors commented “Buying would still be attractive compared to renting despite high prices (of buying property). Changing from a rented flat to an owner-occupied home could help households to reduce their housing costs.
“However, especially for financially less well-off tenants, such as young families, it is more difficult for them to realise this savings potential because they do not receive financing.”
The study found that although buying is cheaper than renting - for those who can afford it - house prices are still on the up.
The average increase of single family houses was around four percent higher than in 2019, while condominiums rose by around one percent.
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