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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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LIVING IN SWITZERLAND

Do foreigners in Switzerland have the same legal rights as the Swiss ?

Foreigners living in Switzerland may be wondering what their basic rights are compared to Swiss citizens. The answer depends on several factors.

Do foreigners in Switzerland have the same legal rights as the Swiss ?

There are currently 2.2 million foreign nationals living in Switzerland — roughly 25 percent of the population.

Simply put, everyone residing in the country legally, regardless of nationality, has the same basic constitutional rights as Swiss citizens do — for instance, the right to human dignity, free expression, equality, protection against discrimination, and freedom of religion, among other rights.

They also have the right to fair and equitable treatment in the workplace, in terms of wages, work hours, and other employment-related matters.

As the law states, cantons and municipalities “shall create favourable regulatory conditions for equal opportunities and for the participation of the foreign population in public life”. 

If they are arrested or imprisoned, foreigners also have the right to fair trial and to the same treatment as their Swiss-citizen counterparts, including legal representation and due process of the law.

Even those who are subject to deportation have the right to be represented by a lawyer.

And the Swiss legal system doesn’t necessarily favour Swiss litigants over foreign ones. For instance, in some cases, foreign nationals whose request for naturalisation was denied but who then appealed the decision, eventually won.

The most recent example is a man in the canton of Schwyz whose application for citizenship was rejected due to a minor car accident, but a Swiss court overturned the decision, ordering that the man be naturalised this year.

READ MORE : Foreigner wins appeal after being denied Swiss citizenship due to car accident

Where the rights and privileges differ between foreigners and Swiss, as well as among foreigners themselves, is when it comes to work and residency rights.

 EU / EFTA nationals

People from these countries, who have B or C permanent residence status have sweeping rights in terms of residence, employment (including self-employment), and home ownership.

The only right that is denied them is the vote, though some cantons and communes grant their resident foreigners the right to vote on local issues and to elect local politicians. 

READ MORE : Where in Switzerland can foreigners vote?

Apart from the limit on political participation, EU / EFTA nationals can live in Switzerland in pretty much the same way as their Swiss counterparts.

There are, however, some groups of foreigners whose rights are curtailed by the Swiss government.

Third country nationals

They are people from countries outside Europe, for whom various restrictions are in place in terms of entry, employment and residency.

For instance, their “future employer must prove that there is no suitable person to fill the job vacancy from Switzerland or from an EU/EFTA state”, according to State Secretariat for Migration. This could be seen as a discrimination of sorts, but that’s what the law says.

Once employed, however, “their salary, social security contributions and the terms of employment must be in accordance with conditions customary to the region, the profession and the particular sector” — in other words, no discrimination is allowed.

Another area where non-European foreigners are disadvantaged in comparison with their EU / EFTA counterparts is home ownership. While third-nation B-permit holders can buy a property to live in (but not rent out), they can’t purchase a holiday or second home without a special permission.

To sum up, all foreigners in Switzerland, regardless of their status, are entitled to fundamental “human” rights, including freedom of speech and religion, and freedom from discrimination in life and employment.

They also have the right to legal protection and representation during litigation or other court actions.

However they don’t have the right to participate in the country’s political process and, depending on their status, have equal access to residency and employment.

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