The Swiss middle class is facing a predictable reality:home ownership has become a quest fraught with pitfalls.
In the alarming words of Raiffeisen’s chief economist, Martin Neff, access to home ownership for this segment of the population appears to be in jeopardy.
The prospects for improvement seem slim, if not non-existent, in contrast to rising Swiss property prices.
A closed property market and unshakeable prices
Despite the constitutional mandate to encourage home ownership, Switzerland seems to be going against the tide.
Martin Neff points out that landlords have been subjected to increasing tax pressure as a result of the rental value, thereby further weakening the Swiss middle class, which had already been affected.
The current real estate market landscape offers no respite, as demand far exceeds supply.
Against this backdrop, prices are showing no signs of falling, leaving potential buyers with little hope. According to Martin Neff, the fall in property prices remains an illusion. A massive collapse in prices remains unlikely.
Tenants, for their part, have not been spared by this crisis.
The Director of the Federal Housing Office, Martin Tschirren, warns that rents could rise by more than 15% by 2026.
Following the increase in the benchmark interest rate of 25 basis points, landlords are allowed to increase rents by 3%. However, Martin Tschirren points out that “40% of the increase in costs since the last rent review could also be taken into account”.
According to its forecasts, the next interest rate hike should come in December or March next year.
The Federal Housing Office (FHO) recently announced that the benchmark interest rate has been maintained at 1.5%, confirming the stability of this rate, which was introduced in 2008 after falling steadily to its lowest level of 1.25%. In June, the rate was raised for the first time to 1.5%.
This situation is partly the result of a potential increase in the reference rate, combined with the shortage of housing and the rising cost of energy and building materials.
Hopes at half-mast and policies on hold
The vision of a Switzerland where home ownership is a reality for the middle class seems to be receding ever further into the distance.
The low propensity of the population to become homeowners in international comparison (36%) reflects a deeper problem.
Despite constitutional encouragement, political efforts to support this aspiration have been modest to say the least, if not non-existent.
Yvan Schmidt, an independent consultant and real estate expert, highlights the lack of support from the authorities. He deplores a regulatory environment that is not conducive to the aspirations of the Swiss middle class to own their own home.
Faced with this impasse, innovative property investment solutions are needed from political decision-makers to redress the balance and make home ownership a feasible reality for the Swiss middle class.
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