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House prices in Switzerland set to fall in 2018

Home ownership in Switzerland is becoming more affordable as the cost of houses and apartments continues to fall.

House prices in Switzerland set to fall in 2018
Photo: elxenelze/Depositphotos

Over the past year the cost of residential apartments fell by 4 percent, according to the Swiss Real Estate Offer Index.

The cost of single-family houses also fell, but by a more moderate 0.8 percent.

Property prices reached their lowest level in December, the index shows.

An apartment in Switzerland cost 6,900 francs per square meter in December, down from 7,350 francs in July.

According to Martin Waeber, the director of real estate company ImmoScout24 that compiles the index, the falling prices are explained in part by low interest rates and a high level of vacant properties.

Waeber said these factors would continue to play an important role in the first few months of 2018.

But Waeber was sceptical that the falling prices would lead to a big jump in property ownership as banks continue to set the bar high when it comes to mortgages.

Rental property prices also fell in 2017, according to the index.

The 1.2 percent drop in rental prices brought them to a level last seen in August 2015.

But price developments in the rental market varied considerably depending on the region, the index shows.

In the Lake Geneva region prices rose by 1 percent and in Zurich they increased by 0.4 percent over the year.

In central Switzerland rental prices fell by an above average 1.6 percent, and in Ticino there was a 2.8 percent decrease.

“Less immigration and increased construction could continue to benefit renters,” Waeber said.

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OPINION & ANALYSIS

OPINION: Sweden’s ‘historic investment’ has failed to solve the housing crisis

Five years after Sweden's government promised to solve the country's housing crisis with a "historic investment", things are as bad as ever, David Crouch argues. Radical action is needed.

OPINION: Sweden's 'historic investment' has failed to solve the housing crisis

Forced to move house 20 times in the past eight years, Maria’s situation was desperate. She and her daughter had arrived in Stockholm from Latin America in search of a better life. She found work, no problem – but housing was impossible.

“Sometimes I was paying 12,000kr in rent and it was very hard because I only had 15,000kr in monthly salary,” says Maria (not her real name). So she took a high-interest loan of 240,000kr and tried to bribe someone in the Housing Agency to get to the front of the queue for affordable housing.

But she was caught. Her fate is unknown. And she didn’t even get an apartment.

This recent story, in the excellent newspaper of the Tenants’ Association, sums up the problems facing people who move here to work. The market for rental accommodation is tight as a drum. Finding a home means competing with Swedes, but with all the disadvantages of being an outsider. So people find themselves pushed into short-term, insecure rental contracts at inflated prices.

It wasn’t supposed to be this way. Five years ago this month, the government announced a “historic investment in housing”, including subsidies for construction companies, easing restrictions on building permits, and making more land available.

The housing situation at the time was grim. Spotify had threatened to leave Sweden if things didn’t improve – how could the company attract skilled young people to a city where there was nowhere for them to live? More than half Stockholm’s population – 600,000 people – were in the queue for a coveted rental apartment, because strict regulation meant these rents were low. But it took as long as 20 years to get to the front of that queue.

The result was a thriving rental property black market, with large bribes changing hands. Many tenants exploited the situation by sub-letting their homes, or parts of them. “It is almost impossible for immigrants and new arrivals to penetrate this market – it is all about who you know and how much money you have,” said Billy McCormac, head of the Fastighetsägarna property association, in 2015.

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So what has been the outcome of the grand promises the government made five years ago? House-building at the time was already rising steadily, and it has continued to do so. Look around you in the big cities and you will see that new apartment blocks have sprung up here and there.

But we shouldn’t go only on appearances. To understand the reality, we need to look at some numbers.

The gap between demand for housing and the existing housing stock has indeed started to shrink. “As housing construction has gradually increased and population growth has begun to slow down, the gap has decreased since 2017,” Stockholm’s Housing Agency noted in December.

The Agency has broken records four years in a row for the number of rental homes it has provided. The proportion of young adults living independently has also increased somewhat, the Tenants’ Association found, probably due to the pace of construction.

But this smidgen of good news is outweighed by an avalanche of bad.

The average queuing time in 2021 for a Stockholm apartment was more than 9 years; for somewhere in the city centre you have to wait 18 years. Only 936 homes came with a waiting time of less than one year. More than three-quarters of a million people are now registered in the queue for housing – a big increase on five years ago.

The rate at which the housing shortage is shrinking is nowhere near fast enough to alleviate the huge accumulated demand.

Assuming that the current pace of construction can be maintained, it will be the end of this decade before any significant dent is made in the deficit of homes, according to Boverket – the Swedish National Board of Housing, Building and Planning. The current rate of construction is “only marginally more than the long-term need”, it says.

The challenge is even greater when it comes to producing affordable housing, Boverket says, especially for the young and those entering the housing market for the first time. Almost one in four young Swedes up to the age of 27 are forced to live at home – the second-highest figure since the measurements began.

There are already signs that housing construction is actually slowing down, owing to higher building material prices, rising interest rates and an incipient labour shortage. Construction prices rose by more than 8 percent last year, and there is concern in the industry that war in Ukraine will further affect costs, in turn slowing the pace of building.

There is another fly in the ointment, a consequence of the collapse of Sweden’s governing coalition in November. The new, minority administration was forced to adopt the opposition’s budget, which halted investment subsidies for house building, throwing the construction industry into confusion.

In short, the “Swedish model” for providing people with a roof over their heads is failing. The folkhemmet, or “people’s home”, has not enough homes for its people.

Swedes themselves understand this: in a survey last month, nine out of ten voters said they thought that politicians did not take the housing shortage seriously.

We have waited too long. It is time for fresh thinking and radical action to solve the housing crisis.

David Crouch is the author of Almost Perfekt: How Sweden Works and What Can We Learn From It. He is a freelance journalist and a lecturer in journalism at Gothenburg University

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