Over the past two years and in response to a sharp rise in interest rates, residential property prices in France have fallen by 6.4%, while they increased by 1.5% in Switzerland. This difference is not specific to France since other real estate markets have corrected more such as the American or German one. On the other hand, the resilience of Swiss prices is very distinctive.
In Switzerland, the property rate is one of the lowest in Europe. In 2023, only 36.8% of households owned their home, compared to 65% in France. Three factors explain this difference. Firstly, the high cost of real estate constitutes a significant obstacle. The average price per square meter in large Swiss cities is among the highest on the continent (15,523 CHF in Geneva and 16,676 CHF in Zurich) and is 78% higher than the average price observed in Paris (9,282 euros or CHF 8,700). Over the last 15 years, median prices have changed by more than 6% each year. The share of households with sufficient gross income to acquire a property has decreased from 45% to 18% in a decade.
Secondly, construction activity is sluggish and the housing deficit is very significant. The number of building permits requested was 25% higher than the level granted, the lowest level in 25 years. The housing deficit, already significant, increases each year by 10,000 additional new homes, partly linked to strict regulations and an increase in construction costs (+16% over the last five years). The vacant housing rate is now at a historic low (1%).
Third, conditions of access to financing are much stricter in Switzerland than in France. Swiss banks require a minimum personal contribution of 20% of the value of the property, of which 10% must come from equity. Furthermore, the Swiss financial system is based on mortgages where part of the capital remains a perpetual debt, unlike French loans where the capital is fully amortized over the life of the loan. The financing arrangements themselves differ profoundly between the two countries. In France, property loans are generally repaid over a fixed period of 15 to 25 years, often at a fixed rate. In Switzerland, on the other hand, around 70% of mortgages are at variable rates, which exposes borrowers to fluctuations in the financial markets.
The rental market in Switzerland is also very different from that of France. Swiss rents are higher: the median rent is 1412 CHF compared to around 700 euros in France. Furthermore, this market is highly regulated, with rents often indexed to the reference mortgage rate (1.75%) which protects the rental premium for investors, while rent control is only applied in certain so-called areas. tense in France and most often aims to cap their level.
Real estate taxation represents a major distinction between France and Switzerland. In Switzerland, owners must declare a fictitious income, called “rental value”, corresponding to the theoretical rent they could receive if they rented their property, which is taxable even in the case of personal occupation. In terms of taxation of real estate capital gains, a specific tax, levied by the cantons, applies with decreasing rates depending on the holding period. Thus, sales in the first five years can be taxed up to 40%, but after 15 to 20 years, gains can be partially or completely exempt depending on the canton. Furthermore, if the proceeds from the sale of a principal residence are reinvested in another principal asset, the tax may be deferred or canceled.
In France, the tax system is more advantageous for owner-occupiers. Primary residences are exempt from any capital gains tax upon their resale, while secondary residences are taxed at 19%, plus 17.2% social security contributions, with progressive exemptions after six years of ownership (22 years for income tax and 30 years for social security contributions). However, France imposes an annual property tax on all owners, which does not exist in Switzerland. Overall, Switzerland favors long-term holding with progressive cantonal exemptions, while France favors advantageous immediate taxation, particularly for main residences.
Regulation and urban planning also play a key role in the differences between the two markets. In Switzerland, around 60% of the territory is unbuildable due to strict policies for the protection of natural spaces, and due to the Weber initiative which limits the proportion of second homes to 20% per municipality to prevent speculation. In comparison, France has fewer similar restrictions, allowing greater flexibility in real estate projects.
Finally, recent trends show divergent dynamics. Since 2010, Swiss property prices have increased by 6% per year on average, compared to 3% in France. In Switzerland, mortgage interest rates have remained historically low, at 1.5% for 10-year maturities at the end of 2024, compared to 3% in France, or double. The ecological transition also has an impact, particularly marked in Switzerland. In 2022, 45% of Swiss residential buildings were equipped with sustainable heating systems, compared to 28% in France.
The Swiss market therefore stands out from the French market through superior performance, increased stability and optimized protection of the rental premium. On the other hand, access to acquisition is made more difficult by more restrictive financial conditions and less attractive taxation.
Article written by Arthur Jurus, Head of Investment Office Private Bank ODDO BHF Switzerland
