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Everything you need to know is included in our Switzerland Property Pack
Are you thinking of investing in property in the land of Alps? Are you thinking about whether you should buy now or postpone until next year?
Various opinions exist regarding market timing. Your Swiss friend might suggest that now is the worst time to buy property, whereas your colleagues in Zurich may have a different opinion and suggest waiting for better opportunities.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Switzerland, we prioritize evidence-based work, relying on reliable data and statistics rather than personal opinions or rumors.
We've done extensive research on official reports and government website statistics, resulting in a comprehensive database. Here's what we've learned, which can provide valuable insights for your decision-making process regarding real estate purchase in Switzerland.
Dive in and enjoy!
How is the property market in Switzerland currently?
Switzerland is, today, an incredibly stable country
Positive
If you want to invest in real estate, prioritize stability as it fosters a reliable and thriving market environment, attracting both domestic and foreign investors. It is an information you need as a foreigner looking to buy a property in Switzerland.
You probably know it already, Switzerland is extremely stable. The last Fragile State Index reported for this country is 18.9, which puts it in the top 10 globally.
Switzerland has a long history of political neutrality and direct democracy, which has enabled it to maintain a strong sense of national identity and stability over time. Additionally, Switzerland's economy is highly diversified across multiple industries, making it resilient to economic shocks and helping to ensure its stability.
First signal is very positive, let's now look at the economic forecast.
Switzerland is positioned for growth in the coming years
Positive
Evaluate the country's economic condition before deciding to invest in property.
According to the IMF's estimations, Switzerland is set to conclude 2023 with a growth rate of 0.8%, which is somewhat disappointing. Regarding 2024, we're talking 1.8%.
However, this low number is just for the short-term, as Switzerland's economy is expected to increase by 6.8% during the next 5 years, resulting in an average GDP growth rate of 1.4%.
The moderate growth rate in Switzerland is beneficial for those looking to invest in property because it provides stability and predictability. The moderate growth rate ensures that property values remain relatively consistent, making it a safe and reliable investment.
However, there are other factors to consider beyond GDP growth.
Swiss business owners keep demonstrating firm belief in the economy
Positive
How do the Swiss view their economy? The GDP forecast doesn't provide a complete understanding. Luckily, in Switzerland there is an official metric that is frequently updated. We're lucky because this isn't true for every country.
The Business Consumer Index (BCI) is a metric used to assess business leaders' confidence in the current and future economic conditions, relying on surveys and assessments.
According to the Swiss Economic Institute (KOF)'s data, the latest Business Confidence Index value is 21 for Switzerland. This is a really strong score.
12 months ago, the score was even stronger, it registered at 31.
When local businesses in Switzerland exude confidence about the future, it brings promising prospects for property investors. It signals a robust economy with increased job opportunities and higher incomes. This positive outlook generates a higher demand for properties, creating a favorable climate for investors to generate rental income and potentially witness property values appreciate over time.
Stagnation looms over Switzerland's housing market.
Neutral
Switzerland's home prices have increased by 15.3% in 5 years according to Swiss National Bank.
It means that if you had bought a chalet in the Swiss Alps for $800,000 five years ago, then it would now be worth around $922,000.
These days, the Swiss housing market is experiencing a bit ofstagnation in its growth. Property values have demonstrated minimal changes, and market activity has experienced a plateau.
However, the slow growth observed in Switzerland's housing market can be interpreted as a positive signal and a promising sign for individuals seeking a secure investment environment. It indicates a level of stability and predictability in the market, which can be attractive for those prioritizing long-term and secure investments.
You can find a more detailed analysis of the real estate prices in our property pack for Switzerland.
Everything you need to know is included in our Switzerland Property Pack
Switzerland's population is getting (a bit) richer
Positive
Population growth and GDP per capita are important factors to consider when buying real estate because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Switzerland, the average GDP per capita has changed by 2.0% over the last 5 years. It's not much, but the growth is here.
This means that, if you purchase a mountain chalet in Zermatt and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be an increase in rental demand in Swiss cities like Zurich, Geneva, or Basel in 2024.
Rental yields are not high in Switzerland
Neutral
Now, we have to look at the rental yield.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Switzerland is purchased for CHF 1,000,000 and generates CHF 50,000 in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in Switzerland offer gross rental yields ranging from 1.1% and 3.8%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Switzerland.
It means that your investment won't generate significant returns or income.
Everything you need to know is included in our Switzerland Property Pack
In Switzerland, inflation is projected to remain minimal
Neutral
Inflation is the general increase in prices of goods and services over time.
It's when your regular train ride from Zurich to Geneva costs 50 Swiss francs instead of 45 Swiss francs a couple of years ago.
If you're planning to invest in a property, high inflation can offer several benefits:
- Property values often increase over time, leading to potential capital appreciation.
- Inflation can lead to higher rental rates, thereby increasing the cash flow from the property.
- Inflation decreases the real value of debt, making mortgage payments more affordable.
- Real estate can serve as a hedge against inflation, safeguarding the value of the investment.
- Diversifying into real estate provides stability during periods of inflation.
According to the IMF, the inflation rate in Switzerland will increase by 6.9% over the next 5 years, with an average annual increase of 1.4%.
This data infers that Switzerland is expected to have near-zero inflation then. Unfortunately, buying a property now may not lead to significant price increases or high profits in the future.
Is it a good time to buy real estate in Switzerland then?
Let's wrap things up!
Looking ahead to 2024, investing in property in Switzerland appears to be a promising opportunity, supported by a range of compelling indicators. The country's exceptional stability offers a secure foundation for property investment, creating an attractive environment for investors to consider.
Switzerland's projected growth in the coming years adds to its allure as a property market. This anticipated expansion suggests the potential for property values to appreciate, providing investors with the possibility of capital gains over time.
The firm belief expressed by Swiss business owners in the economy adds to the favorable outlook. This sentiment can contribute to a positive investment landscape, reinforcing investor confidence and enhancing the overall appeal of property ownership in Switzerland.
Considering the neutral signals such as housing market stagnation, average rental yields, and minimal projected inflation, the overall combination of Switzerland's stability, growth potential, confident business sentiment, and increasing population affluence aligns well with property investment goals, making 2024 a propitious time for real estate investment in the country.
We genuinely hope this article has provided you with valuable insights and information.. If you need to know more, you can check our our pack of documents related to the real estate market in Switzerland.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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