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EXPLAINED: Why are major Swiss cities so expensive?

EXPLAINED: Why are major Swiss cities so expensive?
You need lots of those to live in Zurich, Geneva or Bern. Photo by Claudio Schwarz, Unspalsh
Three Swiss cities are ranked among the most expensive in the world in a new international survey. Here's why that is so.

Zurich, Geneva and Bern are among the costliest cities in the world for international residents, according to the 2021 Cost of Living City Ranking released by Mercer on Tuesday.

Zurich is in the fourth place, Geneva in the eighth and Bern in the 10th.

Mercer focused specifically on international employees.

“The rankings demonstrate how currency fluctuation and shifts in the prices of goods and services can affect the purchasing power of expatriate employees”, the company said.

The ranking of 209 cities measured the comparative cost of more than 200 items, including housing, transportation and food.

While Swiss locations did not place at the very top, unlike in other similar studies, Switzerland is the only country that has three of its towns listed among the top 10 costliest cities.

Is Switzerland really so expensive?

It is true that the prices for many goods and services are notoriously high here. While the Swiss are more or less used to it, especially those who have correspondingly high salaries, for people coming from abroad, high costs here are the ultimate culture shock.

Various studies have shown time and again that Swiss consumers pay much more for basic goods and services than their European counterparts, with the exception of Norway and Iceland.

For instance, one such study found that people in Switzerland have to pay 168 francs for a basket of consumer goods costing on average 100 euros in the EU.

Some services are also more costly than in other countries, including annual health insurance premiums, housing (especially in big cities), and public transportation.

Why are Swiss cities — and Switzerland in general — so expensive by international comparison?

As The Local explained in an article published in April, there are many reasons for this phenomenon.

Among the most often cited ones are protectionism and lack of competition, which are inter-related, as the former invariably leads to the latter.

Trade protectionism is a policy that protects domestic industries from foreign competition. This means that certain Swiss products have no foreign competitors vying for the consumers’ attention, and forcing to lower the price.

However, there is another reason as well.

study by the University of Applied Sciences of Northwestern Switzerland shows that foreign producers and suppliers impose large price increases in Switzerland, exploiting high salaries and consumers’ purchasing power.

This means that Swiss buyers are overpaying for their purchases by more than three billion francs, the study found. 

This is the reason why so many people living in border regions go shopping in France, Italy, and Germany, where the same items are considerably cheaper. 

This practice is widespread in e-commerce as well.

Anyone who wants to order something online from a foreign store is often redirected to the supplier’s Swiss site, where the prices are often much higher. This is called “geo-blocking”.

READ MORE: Why is Switzerland so expensive?

What about Zurich, Geneva, and Bern? Why are they so expensive?

One explanation may be that, at least in Zurich and Geneva’s case, they are two largest cities in Switzerland, where most employment opportunities are found — not just for Swiss residents, but for foreign nationals as well.

Researchers from University of Geneva found largest concentrations of people in and around large cities, which are close to economic centres and job opportunities — such as the shores of Lake Geneva or Lake Zurich. 

Bern is a smaller city but, as the nation’s capital, also attracts arrivals from abroad, especially those working in the foreign diplomatic missions.

Another explanations why Switzerland’s major cities are more expensive to live in is that higher density of the population drives up the price of land, which means rental costs are higher. 

In all three cities, monthly rents for a four-room apartment are, on average, upwards of 2,000 francs (see details below). Outside big cities and in rural areas this price is much lower.

So how much does it cost to live in Switzerland’s most expensive cities?

To the price of rent, you need to add the cost of health insurance, which differs based on the kind of coverage you choose, as well as your age.

There is also the cost of public transportation, utilities, food, and other services you may need, like  childcare.

These links provide a good overview of what it costs to live in Zurich, Geneva, and Bern.

READ MORE: How to decide where to live in Switzerland based on affordability

But there is some good news as well.

While the cost of living is high, so are the average salaries

This chart shows that Swiss cities, including Zurich, Geneva, and Bern, rank among those with high purchasing power.

READ MORE: Cost of living: The most – and least – expensive cantons in Switzerland


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