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According to Wiki and OECD data, only 42% of Swiss people own their home. This indicator is the lowest in Europe and the third lowest in the World. But why is this the case? Switzerland is one of the richest countries in the world and local income inequality isn't too bad by European standards. It's also one of the few countries placing any restrictions on secondary home ownership, so I'm surprised primary home ownership isn't at a higher rate.

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    Did you take a look at the price of real estate ? It's unaffordable for most people, I would bet that most owner inherited their home. Apr 22 at 13:08
  • @BouncyChips its also very high in Canada but 66% own their home there Apr 22 at 13:10
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    @BouncyChips OECD data disagrees, Switzerland's price-to-income ratio is better than Canada's: data.oecd.org/price/housing-prices.htm Apr 22 at 14:17
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    Part of the reason is that for cultural and/or economic reasons that may not be attractive. The reasons like housing security or stable investment are not just weighty enough in a stable and prosperous economy. On the other hand, taking good care of a house is quite a hassle. Apr 23 at 5:58
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    I disagree with the close votes. Switzerland indeed has multiple political peculiarities that directly contribute to low home ownership (high mortgage interest deductions, "virtual" saved rent is taxed, tax on real estate capital gains). Apr 23 at 8:18

6 Answers 6

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+500

I think there are several factors:

Urbanization

In rural areas, where many people live in single-familiy homes, homeownership is quite high.

However, 74% of the Swiss population live in urban areas, where single family homes are rare, and most live in appartment buildings, which creates challenges for owning your home, especially since the legal instrument for owning part of a building (Stockwerkeigentum) was only introduced in the 1960s (which still lingers because ownership splits usually only occur when a building is new or totally renovated), and is rather cumbersome in practice. Specifically, while you own your appartment, you only own a share of the house, and everything that affects the house entire (everything from lawn care, utitilies, to the outward appearance of the building) is decided by a share holder meeting, and may, depending on the statutes of your association, even require unanimous consent. As such, a good relationship with your neighbors is recommended ...

Indeed, statistics show that the home ownership ratio is very location sensitive, ranging from 58% in the rural canton of Appenzell Innerrhoden down to 15% in the urban canton of Basel Stadt.

Real Estate Gains Tax

To reduce volatility of the housing market, all Swiss cantons collect Real Estate Gains Tax (Grundstückgewinnsteuer). Specifically, if you sell real estate at a higher price than you bought it at, part of the difference goes to the state, with the tax rate getting lower the longer you have owned the property. For instance, if you sell a property in the canton of Zürich after less than a year, you may have to pay up to 60% of the value gained as tax, but if you wait 20 years, you'd only have to pay up to 20% of the value gained.

That is, selling real estate can have rather severe tax implications, particularly if you haven't owned it for long. For those seeking to own their homes, this creates two challenges:

  1. Since people tend to hold onto their real estate, comparatively few properties are available for sale, which makes it harder to find a suitable one.
  2. Once you do found a suitable one you better hope the suitability does not change, either due to changes in your own circumstances (new job in a different location, marriage, divorce, more or fewer children than expected) or changes in the environment (those new neighbors who hate you with a passion).

In contrast, renting carries no such risks. If you don't like it, you can move without any tax implications. Also, in most areas, far more properties are available for rent than for purchase, so you have a greater selection.

As a consequence, most people opt to delay putting down roots until they are ready to start a family.

Availability of Capital?

The relative prosperity, growing population, and land use laws in Switzerland combine to cause rather high land prices, particularly in urban regions. As a consequence, a single-family home costs about 2 million there (in more rural regions, it's more like 1 million).

Swiss banks will loan you only 80% of the value of a home, the other 20% you must provide yourself. That is, you need 200k to 400k in assets to buy a single-family home. Even at Swiss salary levels, saving up that much money will likely take a decade, unless wealthy relatives give you a loan. For instance, OECD reports that it takes 11.3 years of average income to outright buy an average house. That is, an average couple setting aside 10% of their income will be able to afford the 20% downpayment for an average house in 11.3 years.

Indeed, home ownership ratio correlates strongly with household size (single person: 22%, couple with children: 46%, couple without children: 48%) and age (working age: 23%, working age and children: 41%, retirement age: 50%).

I could imagine that a nation with a lower population density, laxer zoning laws or less stringent requirements on downpayments, would make housing affordable earlier in life, and therefore allow a somewhat greater proportion of the population to own their home. However, this effect is likely minor compared to the other causes.

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    I think the answer above does not at all support the claim that the housing market in Switzerland is "dysfunctional". It is differently structured than in Anglo-American countries because of deliberate political choices: to encourage long-term renting, and to discourage treating residential property as an investment asset. Apr 23 at 6:38
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    The mortgage interest deduction is absolutely an important thing in Switzerland, and encourages interest-only mortgages. Typically, you would pay off part of your mortgage, and keep the rest indefinitely. Conversely, you have to pay tax on the putative rent you are saving by living in a home you own (Eigenmietwert). I wish I knew enough to turn this into an answer. Apr 23 at 8:16
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    and is rather cumbersome in practice. Specifically, while you own your appartment, you only own a share of the house --- this is very typical across Europe. For instance this is the same in France, Italy and Poland. I doubt that it would be different elsewhere because not having such a system would be very cumbersome (the only realistic alternative I can think of is to have someone owning the building minus the flats but this doesn't sound good at all)
    – WoJ
    Apr 24 at 18:45
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To buy a house, you must contribute at least 20% of the purchase price. Without this, it is impossible to buy an apartment or house, even if your income allows you to just pay the interest rate for the bank credit you took for buying that property. This is a rule applied by all banks and in all cantons (source). This limits the number of possible buyers, as a house often costs at least few millions.

Also, there are some laws that make renting attractive. The landlord cannot raise the price significantly just because the "market price" is now higher (they can a little bit, but this is very constrained). Many families benefit from old renting contracts with fixed prices below the today's market value that cannot be easily raised.

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Aside from the other answers that are quite detailed, there is also an additional factor that comes to play:

Additional taxation

After purchasing a property in Switzerland, you will be taxed on it as if you were renting it to a third party. Meaning that, if you could rent out your property to someone else for CHF2,000 / month, the revenue taken into account in your wealth tax will then be increased by CHF2,000 * 12. Note that you can deduct some items from this sum such as the mortgage interest but in my opinion this is a major deterrent to purchasing a property for Swiss residents.

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    Specifically this refers to the Eigenmietwertsteuer, "Wer Wohneigentum besitzt und darin lebt, muss den sogenannten Eigenmietwert als fiktives Einkommen versteuern." = income, not wealth tax. This is based on the value of the house according to several indicators, differs per canton. This theoretical rent "income" will be added to your income and on that you indeed pay taxes. Rule of thumb: a third of the Eigenmietwert is payed in taxes, so for 45k/y Eigenmietwert, you'd pay 15k additional income tax.
    – Adriaan
    Apr 24 at 5:25
  • It's not as much a deterrent as much as it is a remover of motivation to live in your own home. Because with this tax the end effect is net 0 compared to renting (where your landlord has factored that tax into your rent). It's just a stark difference to a lot of other nations where this is a direct incentive towards homeownership (because then you'd save the renting tax). So the deterrence is only presence in comparison to other nations (which, fair enough, is what OP is doing).
    – Hobbamok
    Apr 24 at 14:09
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The following is quoted from an article called "Why is home ownership so low in Switzerland":

  1. Housing prices

    Housing prices in Switzerland are very high. According to the Swiss Federal Statistics Office, average house prices in Switzerland are twice the average cost of houses in other European countries. In Zurich alone, the average price of an apartment has increased by 40% since 2001, while the price of a detached house has doubled.

  2. High-Interest Rate

    The reason why it’s so expensive to own a home in Switzerland is that the banks charge a lot of interest on their money. How does this affect you? If you have a mortgage on your house, then you’re paying high-interest rates for years. The result is that it takes more and more money to afford the house over time. This means that the majority of people never own their homes and just rent them out.

    Many people in Switzerland are afraid to buy a home because of the high-interest rates. It’s expensive to pay high-interest rates. Most people don’t have enough money to afford the high-interest rates. For example, if you take out a loan for a house and you pay 3% interest, then you have to pay €1,500 every month. So how do you afford this? It’s impossible! But now, the Swiss government is trying to make buying a home cheaper and easier. The reason why they want to do this is that they want to increase homeownership in Switzerland.

  3. Culture of renting

    In Europe, homeownership is a deeply rooted part of society. Most young people are taught that owning a home is important and a good investment. In contrast, in Switzerland, the culture of renting is very strong. Naturally, this is a main reason for low rate of homeownership.

    In fact, the culture of renting is so strong that in Switzerland, renting is more common than buying a home. According to the Swiss Federal Statistics Office, the majority of people in Switzerland are renters. In fact, the rate of renting is so high that the country has one of the highest rates of renting in the world.

  4. Homeownership is not for everyone

    In Switzerland, there are many people who don’t want to own a home. They like the idea of renting. Why? Because it’s easy. You can just move to a new place whenever you want. You don’t have to worry about your home, because you can always rent it out. You don’t have to worry about the cost of maintenance.

The prices of homes is very high, the average house in Switzerland costs 1.19 million Swiss francs, which is currently 1.34 million US dollars and 1.08 million British pounds.

The interest rate is at 1.5% currently, so the second argument is wrong, but because the principal is so high, people can't afford a home.

There's a culture of renting in Switzerland. People don't want to go through the hassle of owning a home.

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    Note that housing prices in Switzerland are not the highest in the OECD (see the price-to-income ratio here: data.oecd.org/price/housing-prices.htm). So prices alone couldn't explain this phenomenon. Apr 22 at 14:17
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    I don't see how even 3% interest is "high"...
    – Questor
    Apr 22 at 19:46
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    This answer doesn't provide good evidence of Switzerland against "Europe" (which is a nonsensical comparison, as Switzerland is very much in the middle of Europe). Sweden, Netherlands, and Norway also have strong rent protections and expensive housing in urban areas, but much higher home ownership rates.
    – gerrit
    Apr 23 at 7:20
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    Australians pay AUD 1 million for a house, interest rates are presently at 7%, and home ownership is higher than Switzerland.
    – david
    Apr 24 at 5:42
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It's not a full answer but too answer-y for a comment:

Especially compared to the US, home ownership isn't as necessary for a decent, stable life.

Given the low renter protections in the US (and compared to Switzerland many other countries), it is paramount to own your home to have any sense in security or feeling of home about your living conditions.

In the Swiss market, thanks to culture and regulations (both empowering each other) this is not necessary. You can make your rented flat your home. Average rental terms (and expectations) are long, so it makes sense to invest into your place (even though technically it's not absolutely yours).

This is a stark contract to the US where - at least on social media - any minute change to the structure is countered with "but what about the landlord"

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  • Can't landlords in Switzerland still kick you out if they want to move into the property themselves? So you never have security about the house you're living in. Apr 24 at 11:43
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    @JonathanReez nobody ever said that you do. Yes there's still SOME risk. Just like your owned house could burn down, be hit by a meteor or taken through eminent domain. However, due to the Eigenmietwertsteuer (amongst other factors) the financial incentives are slim for your landlord and there are some protections for hardship cases. (including no alternatives being available)
    – Hobbamok
    Apr 24 at 11:49
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    @JonathanReez lol, are you just completely and absurdly disregarding the insane (monetary and psycholocigally as well as time) costs of moving just to make a very weak point in an absurd hypothetical? I gave you an answer to your question, what is your problem?
    – Hobbamok
    Apr 24 at 16:24
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    @JonathanReez it almost seems like you jus "asked" that "question" to make a political point. This is the wrong website for that, go to r/landlords or whatever.
    – Hobbamok
    Apr 24 at 16:25
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    @JonathanReez That kind of behavior is very much illegal in, for instance, California. I would be quite surprised if it were legal in Switzerland. Anyway, it's really only relevant in inverse proportion to the number of properties a landlord owns. I would imagine that the median Swiss landlord owns far more than 1 property. Apr 25 at 4:41
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A big factor is urbanization. It is no coincidence that many of the poorest countries — typically with a lower urbanization — in the world are on top of the Wikipedia list, and many of the richest ones — typically highly urbanized — at the bottom. City dwellers tend to live in condominiums which traditionally are rental properties. Farmers, by contrast, often own their property.

I find real estate prices and interest rates which are mentioned by others not very convincing because in an equilibrium market, rental prices must have adjust accordingly to provide a return of investment. If real estate is cheap, both ownership and renting will be cheaper as well.

Since Germany and Austria have comparatively little home ownership as well even relative to other highly urbanized countries, there may be a cultural reason.

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  • The only two countries doing worse than Switzerland (as per Wiki) are Nigeria and UAE. Germany is 7% better. China is at 96% despite being extremely urbanized. Switzerland really is a big outlier by developed country standards. Apr 24 at 13:19
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    @JonathanReez The google blurb claims 66% urbanization in china vs. 74% in Switzerland. But true, it is an outlier in Western Europe, just not that extreme compared to Germany and Austria. My urbanization argument was more aimed at an explanation why it is generally at the bottom of the list; it does not explain differences with similarly urbanized countries. Apr 24 at 13:37

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