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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

Geneva vs Lausanne: Which Swiss city is the best to live in?

Thinking of moving to Switzerland? Geneva or Lausanne may be on your radar. From job opportunities and wages to the population and housing, there are several things to consider when choosing between the two.

Geneva vs Lausanne: Which Swiss city is the best to live in?

Only about 60 km separate the two cities, but in many ways, Geneva and Lausanne are a world apart.

For instance, local residents are likely to tell you that the two towns have a totally different character and vibe: Geneva is the bigger, more cosmopolitan, and edgier of the two, while Lausanne is known as being more quaint and laid back.

People who live in Lausanne have been known to say that Geneva, due to its proximity to France and a large number of cross-border commuters employed there, is more French than Swiss (obviously, this is not meant as a compliment).

Genevans, on the other hand, claim that Lausanne, and its inhabitants, are provincial and dull.

But even though there are clearly differences between the two cities, they have something in common as well: they are both French-speaking; both lie along Lake Geneva; and both have a high proportion of foreign residents.

READ MORE: Why the Swiss city of Lausanne is so popular among foreigners

Based on the data we collected from various official sources, here’s how these two cities compare to each other:

Geneva

Population: The larger of the two, Geneva’s population is just over half a million people, which makes it the second-largest Swiss city (after Zurich).

About 40 percent of Geneva’s permanent population are foreign nationals. In addition, about 100,000 border commuters from France are employed in Geneva —both city and canton.

Wages: Geneva’s salaries are among the highest in the country: the median net wage is 5,433.29 francs.

Rents: Rents are the highest in Switzerland, mostly because the demand outstrips the supply, and land for new construction is scarce.

READ MORE: Why are rents in Geneva the highest in Switzerland?

How much you pay each month depends on where you live — some neighbourhoods, especially those farther away from the centre, are cheaper than others.

In general, rents for a two-bedroom flat in the downtown area are 4,219 francs a month, and 3,016 francs away from the city centre.

International connections: Geneva has one of Switzerland’s three international airports, the other two being in Zurich and Basel.

It also has a number of TGV rail links — nine daily trains in both directions between Geneva and the Gare de Lyon in Paris.

To reach other European cities, however, commuters have to transit through Lausanne (see below).

International companies: In addition to more than 40 UN agencies, Geneva is also home to multinationals such as Caterpillar, Dupont, Cargill International, and Proctor & Gamble, to name just a few.

Day or night, Geneva shines. Image by Djamel RAMDANI from Pixabay 

And now let’s look at Lausanne.

Population: 149,000 people, about 40 percent of whom are foreign nationals.

Average net salary: 5,069 francs.

Rent: A three-bedroom accommodation in the city centre costs 3,127 francs a month.

Rent for the same sized-flat outside of downtown area goes for about 2,570 a month.

In all, rent prices in Lausanne are 22 percent lower than in Geneva, while the purchasing power is 6.2 percent higher in Geneva. 

International connections: Geneva’s airport can be reached in about 40 minutes by the A1 motorway.

In terms of trains, slightly fewer TGVs (seven) connect the city with Paris.However, Lausanne’s geography (versus Geneva, which is nestled tightly between Vaud on one side, and France and the lake on the other) allows better access to the rest of Europe.

For instance, aside from the seven Paris-bound TGVs, several trains circulate each day between Lausanne and Milan.

International companies: Lausanne is home to a number of multinationals, including Philip Morris International and The International Institute for Management Development (IMD).

It also hosts the International Olympic Committee, as well as  dozens of international sports federations for golf, gymnastics, rugby, bowling, skating, baseball, softball, and other sports.

Lausanne is also home to one of Switzerland’s foremost academic institutions, the Federal Polytechnic Institute (EPFL), a bilingual French-English university, which employs about 6,000 people from around the world. 

Lausanne’s Cathedral overlooking the city. Photo by Fabrice Coffrini /AFP

The verdict: Geneva or Lausanne?

Slight differences in the salaries and rents aside, both cities have a lot of offer.

If the location of your job doesn’t enter into play, the choice of one city or another depends on personal preference.

If you prefer a big city with a distinctly international flair and a quick access to France to do your shopping, Geneva may be a better choice.

But if you are more partial to a smaller, but nevertheless a very charming town, then Lausanne is right up your (cobblestoned) alley.
 
READ MORE: Swiss town ranked the ‘world’s best small city’
 
 
 

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