Where in Switzerland is renting an apartment cheaper than buying?
For years, buying a property in Switzerland was considered to make better financial sense than renting. But in a number of municipalities this is no longer the case, a new analysis reveals.
Owning a home — if you can afford to buy one in the first place — is usually cheaper than renting in a long run, as mortgages are tax deductible, and most rents aren’t. Generally, renting in Switzerland costs almost 20 percent more than buying.
For instance, a recent report by Raiffeisen Bank found that buying a house in Switzerland can save a considerable amount of cash over time – particularly for families.
However, this particular report was written in 2020 and reflected the situation on the property market as it was at then.
A more recent study, carried out earlier in 2022 by Credit Suisse, shows that for the first time in 13 years, renting is actually a cheaper option than buying — at least in the short term.
The reason for this reversal is that fixed-rate mortgages have become significantly more expensive since the beginning of 2022 due to inflation.
While previously the price of Swiss land and properties was high, mortgage interest rates were among the lowest in Europe.
For instance, at the end of December 2021, annual interest rates for five-year fixed mortgages were 0.97 percent, and 1.17 percent for 10-year terms, according to Moneyland consumer site.
By the end of June, however, rates rose to 2.57 percent and 2.99 percent for five and 10-year terms, respectively.
However, while the interest rate is an important reason for the current costs, “the price of land makes a massive difference" as well, according to Donato Scognamiglio, managing director of IAZI property consultants.
“In the urban areas, where people like to be and the density is high, you pay an enormous amount for land”, he said.
This means that for many people who are looking to purchase a home now, renting may be a cheaper option than buying, at least in some Swiss regions.
What's the situation in various cities and areas?
In 451 communities where renting was more expensive than buying a year ago, the situation is now reversed, according to a cost analysis by SRF public broadcaster.
The difference is most striking in Zug, where a number of international companies are located: buying a property in the tiny canton is now at least 55 percent more expensive than renting.
Similar trends are found in other notoriously pricey property markets: in Zurich, Geneva, and Basel, buying a home now costs 35 percent more than renting. This tendency is also seen in Lausanne, Lugano, St. Gallen, and Chur.
Not surprisingly, given that they are the most expensive cantons (and real estate markets) in Switzerland, Zurich and Geneva have the highest price tags for properties.
"Zurich is such a sought-after location, it was difficult to find any properties there even before the interest rate hike", Scognamiglio said. "Now it's even clearer that you have to rent”.
Buying in Zurich municipalities of Oberrieden, Küsnacht, Zumikon, Kilchberg, Rüschlikon, Thalwil, Erlenbach, Herrliberg, Meilen, and Zollikon is now between 45 and 50 percent more expensive than renting.
As for Geneva, “buying is up to 30 percent more expensive than renting in the communities around the second largest city in Switzerland”, SRF said.
While that may well be, rents in Geneva are also high, compared to other Swiss municipalities. This is because the land for new constructions is limited by the canton's geography — it is wedged between France and Lake Geneva — while the demand is growing steadily,
If you have your heart set on owning a dwelling rather than renting one, your best bet is to look beyond the cities and their immediate suburbs.
Generally speaking, buying in rural areas or small, non-industrial cantons, is cheaper than renting, because prices there are significantly lower.
As an example, Jura has the least expensive building land, followed by Solothurn and Glarus, according to Moneyland.
A map on the SRF site shows where it is currently cheaper to rent than to buy, and vice-versa.