Buying real estate in Zurich
As an expatriate, the prospect of investing in real estate can be quite enticing. Some countries have especially appealing real estate markets, prompting expatriates to consider property investments. How about Switzerland, and specifically Zurich?
Expats in Switzerland face certain limitations on property ownership, and property prices, which can be notably high depending on the area, may influence investment decisions. If you have sufficient capital, purchasing property in Zurich can still be a solid investment, potentially yielding substantial returns when considering the overall trend in real estate values in the city.
Homeownership in Switzerland and Zurich
According to a study by the Federal Housing Office (FHO), the percentage of owner-occupied homes in Switzerland (both by Swiss and foreigners) is relatively low, with only around 36% of permanently occupied homes being owner-occupied. This figure has shown a steady increase in recent years but is currently experiencing a slight decline due to price levels. According to the same study by the FHO, Switzerland has the lowest proportion of owner-occupied housing in Europe, with Lithuania leading in this aspect.
The proportion of owner-occupied housing in the canton of Zurich is among the lowest among Swiss cantons, at 27.6%.
The OFL explains the phenomenon as follows:
The relatively late introduction of condominium ownership: Before 1965, it was generally not permitted to own an apartment building in Switzerland, aside from the canton of Valais. Since this type of housing is most prevalent in urban areas, the low rate of home ownership was especially notable in cities.
Today, there has been a substantial rise in apartment building ownership. However, property prices are impacting the proportion of households able to afford home ownership.
Unfavorable cost/income ratio: Compared to other countries, Switzerland's relationship between the cost of home ownership and average household income is quite unfavorable.
A recent study by Crédit Suisse states that the debt financing rate is 80%, with a theoretical interest rate of 5%. A household with an average income of CHF 119,000 would need to allocate 40% of its income to the purchase of a new home in the intermediate segment and 59% to a new mid-range detached house.
Good-quality rental housing at reasonable prices: According to the OFL survey, rents remain affordable on average, with the average gross rental charge stabilizing at 20% of a household's gross income.
Additionally, the quality of rental housing is comparable to that of owner-occupied properties.
These, among other reasons, contribute to the low homeownership rate in Switzerland.
The real estate market in Switzerland and Zurich
According to the OFL, the demand for housing in Switzerland is steadily increasing while the supply is only growing slightly. This is primarily due to escalating construction costs and delays in housing densification. Consequently, the number of vacant dwellings has significantly decreased since 2020, which is expected to persist.
As a result, rents are expected to increase. In contrast, the prices of owner-occupied homes are likely to rise only moderately.
Real estate market figures in Zurich
According to the Swiss Federal Statistical Office, the Swiss residential property price index increased by 1.1% in Q4 2023 compared to the previous quarter. The average annual rise for owner-occupied homes was 2.2% in 2023.
Zurich is particularly impacted by high property prices. It's important to differentiate between the canton of Zurich and the city itself, where properties are sold at considerably higher prices.
Residential property prices in the canton of Zurich have increased by 1.1% over the past year, while in the city of Zurich, they have risen by 3.3%.
RealAdvisor, an aggregator of real estate information and services, indicates a 145.9% increase (prices per m² for houses and apartments) over the past 20 years.
Property prices in Zurich (city)
Buying an apartment
According to the RealAdvisor database, the median price for buying an apartment in Zurich is currently CHF 16,087 per square meter.
The median price for apartments currently for sale is CHF 1,690,000. For 80% of the apartments on the market, the selling price ranges between CHF 867,500 and CHF 2,950,000.
Buying a house
The median price per square meter for buying a house in Zurich is CHF 15,796.
The median price for homes currently on the market is CHF 2,490,000. For 80% of the homes available, prices range between CHF 317,500 and CHF 9,100,000. This shows a wider variation in house prices compared to apartment prices.
The most popular neighborhoods in Zurich?
The Zollikon, Hirslanden and Hottingen districts are particularly popular.
For example, here are the purchase values for the Zollikon district:
- For an apartment: CHF 20,218 (average price per m²);
- For a house: CHF 20,601 (average price per m²).
Property prices in the Küsnacht, Enge, Oberstrass, and Kilchberg districts are only slightly more moderate. In the Enge district, for example, values for apartments and houses are around CHF 18,274 and CHF 18,095, respectively.
If you're looking for more affordable real estate, you'll need to venture further from the city center. Areas like Thalwil, Meilen, and Friesenberg offer better prices. The Aussersihl district, located near the old town, also offers relatively lower prices, likely due to its working-class and industrial history and less convenient public transport.
Many homeowners also commute from Zurich to nearby cantons like Zug, where property prices are lower.
Can foreigners buy real estate in Zurich?
According to the Federal Office of Justice (FOJ), the Federal Act on the Acquisition of Real Estate by Persons Abroad restricts the purchase of apartments and houses by foreign nationals living outside Switzerland and by companies based abroad.
Good to know:
The LFAIE defines "persons abroad" as both foreign nationals living outside Switzerland and those residing in Switzerland who are not citizens of an EU or EFTA member state nor holders of a settlement permit (C permit).
If you fall into this category and want to buy a property, you'll need to obtain authorization from the cantonal authority responsible for the property you're interested in. This authority will review your application. For contact details, visit the FOJ website.
Important:
Being able to buy property in Switzerland as a non-resident does not automatically grant you the right to stay in the country.
If you are a resident of Switzerland, a national of an EU or EFTA member state, or a holder of a C permit, you can buy real estate in Switzerland without the restrictions that apply to non-resident foreigners.
Non-EU/EFTA nationals living in Switzerland
To be allowed to buy property in Switzerland, you need to have a residence permit and use the property as your primary residence.
If you purchase a plot of land and intend to build on it, you must begin construction within one year of acquiring the property.
Crossborder workers
If you're a cross-border worker in Switzerland (holding a G permit) from the EU/EFTA, you can purchase a second home in the area where you work. However, you cannot rent out the property while you are working as a cross-border commuter in that region.
Buying a vacation home in Switzerland
The number of vacation homes available for purchase by foreigners is limited by a national quota, currently set at 1,500 per year. This quota is distributed among the various cantons.
In some cantons, such as Geneva and Zurich, it is not possible for foreigners to buy vacation homes at all. You can find the current quota allocations for each canton in the Appendix to the Ordinance on the Acquisition of Real Estate by Persons Abroad.
Even if the restrictions do not apply to you, it's a good idea to consult the relevant authorities or a real estate professional. They can help you navigate the legal and administrative requirements to ensure your real estate transaction complies with Swiss law.
The process of buying real estate in Switzerland
Given the high costs involved, you'll likely need a bank loan to finance your purchase.
Swiss banks will thoroughly assess your financial situation before approving a loan. They require a down payment of at least 20% of the property's purchase price. They will also ensure that your total debt, including the mortgage and ongoing costs, does not exceed one-third of your gross income.
Mortgage interest rates can vary depending on the loan term. Currently, the rate is around 2.5% for loans ranging from 2 to 10 years.
Securing a housing loan is often the most challenging part of the process, while finding a real estate agent and a notary tends to be relatively straightforward.
Costs of buying property in Switzerland
In addition to the purchase price of the property, you will need to consider the following costs:
Notary fees: generally between 0.02% and 1% of the total purchase price.
Deed registration fees: depending on the canton, these range from 1% to 1.5% of the total purchase price.
Property transfer taxes: also, depending on the canton, these can amount to around 4% of the purchase price.
Value-added tax (VAT): which represents around 7.6% of the value of the property.
Real estate agency fees: where applicable.
For single-family homes and apartment buildings, these fees amount to 2-3% of the final sale price. For land, the fee is 5%. The exact commission may vary depending on the agency's services.
Good to know:
In Switzerland, the seller is normally responsible for paying real estate agency fees.
