Many people consider Switzerland to be a paradise, and there are plenty of arguments to support it. Residents benefit from stunning alpine landscapes, a pleasant climate and a system of direct democracy which has kept the country consistently prosperous.
Switzerland is also considered to be a relatively safe location for property investment. While relatively tight regulations mean that the Swiss property market rarely experiences massive booms, demand for living space consistently exceeds supply in the small country.
Growing demand keeps property prices on a steady upwards climb, while the longstanding stability of the Swiss franc in relation to other currencies makes Swiss property a potential vehicle for protecting wealth from inflation.
What does land in Switzerland cost?
Despite being a small country, Switzerland is geographically and politically diverse. While the price of land is consistently high throughout the country, the most desirable areas command per-square-meter prices several times those charged in the lowest-cost areas.
The cantons of Zurich and Geneva are home to some of the highest property prices. For example, the median price of building land in the city of Winterthur in the canton of Zurich was 697 Swiss francs per square meter in 2018. In the city of Zurich, the median per-square-meter price of building land was 1776 Swiss francs in 2018.
On the other end of the scope, estimates have placed the average cost of land in the most affordable cantonal capitals at as little as 180 francs per square meter in Glarus (Canton of Glarus), 400 francs per square meter in Altdorf (Canton of Uri), and 450 francs per square meter in Delémont (Canton of Jura).
Land in rural areas and small towns may sell below those prices, particularly in areas which do not have strong tourism, industrial or service sectors. This is also true in cantons with high median property prices. For example, in the rural municipality of Bauma in the Canton of Zurich, the average modelled price of one square meter of building land was just 350 francs in 2019.
Is Swiss real estate a good investment?
Although the cost of property in Switzerland is relatively high, demand for rental properties is also strong, especially those located near major agglomerations (Geneva, Zurich, Basel). While rental yields may not be as high in relation to property prices as they are in some other countries, the steady demand for housing and the stability of the Swiss franc can make the right Swiss property a good investment decision.
However, it is important to note that Swiss law tends to favor tenants, and that the costs of maintaining and renovating a building in Switzerland are high. Income earned through the rental of Swiss property is subject to taxation in Switzerland, even if you reside outside of the country. Read the moneyland.ch guide to investing in Swiss real estate for more information on renting out property in Switzerland.
The main strength of the Swiss property market lies in the consistent high demand for housing which has resulted in a steady increase in land prices. In Winterthur, for example, the median price of one square meter of building land climbed from 110 francs in 1974 to 697 francs in 2018. In Rüschlikon – a highly desirable town just outside of Zurich – property prices climbed from a median of 281 francs per square meter in 1974 to 2600 francs per square meter in 2019 – a value increase of more than 825%.
While building land prices are humbler in rural areas, value increases are almost as notable. In rural Turbenthal, for example, the median price for 1 square meter of building land climbed from 65 francs in 1974 to 680 francs in 2019 – an increase of nearly 950%.
Taxes and fees which affect property purchases
It is worth noting that cantons and municipalities typically levy taxes on capital gains derived from the sale of property. These taxes are levied on cantonal and municipal levels, and vary greatly between cantons. If you are purchasing a property as an investment with the aim of selling it at a profit, it is worth looking into capital gains taxes charged by the municipalities in which prospective properties are located.
Additionally, many cantons charge a property transfer tax, and virtually all municipalities charge a notary fee (typically 0.25% of the property’s value). The notary fee is normally covered by the buyer.
Additionally, property taxes or land taxes are levied by most cantons and many municipalities. These taxes apply from the time you purchase a Swiss property, even if you do not live in Switzerland. However, there are 7 cantons which do not levy property taxes: Zurich, Zug, Schwyz, Aargau, Glarus, Solothurn and Basel-Landschaft.
Hazards to watch out for when buying property in Switzerland
If you are buying a plot of land with the intention of building on it, make sure you understand that the cost of connecting the property to water, wastewater, electricity, roads and telecommunications lines can set you back tens of thousands of francs. If a plot is not already connected to these basic utilities, add at least 100 francs per square meter to the square-meter price when estimating the total cost of the property. If you are seriously considering buying a plot and constructing or reconstructing a building, consider getting utility installment quotes from the municipality and relevant service providers.
Be wary of leasehold agreements (German: Baurecht, French: droit de superficie). These are common in Switzerland, and basically amount to a lease on land which gives you permission to build on that land. In other words, you own the house, but you do not own the land it is built on. In exchange for using the land, you pay the landowner a ground rent. In expensive areas, ground lease payments can easily cost 1000 francs per month.
Unlike leasehold agreements in some other countries, Swiss ground leases are not open-ended, but have clear lease terms (minimum 30 years, maximum 100 years). A fair number of leasehold properties also find their way onto the real estate market, so make sure you understand leasehold agreements before looking into investment properties. Only freehold ownership lets you benefit from increases in land prices.