Purchasing real estate Home ownership: a good location has its price

Where would you like to live – and what can you afford? What to consider when deciding on the location of residential property.

byUBS Insights 16 Apr 2020
Image: UBS

Anyone buying residential property is faced with numerous decisions. In addition to the type or property, its amenities and how to finance it, there is another extremely important factor to take into account: the location. You should thoroughly investigate the location of your future home. Not every meadow zoned as building land will prove to be a wise investment in the long term. There is no rule of thumb to distinguish good locations from less attractive ones. Particularly sought-after locations in cities or with a view of a lake are obviously more expensive than plots in peripheral locations. Demand for the latter has been weak for some time, which may make properties in such locations more difficult to resell.

Location: the main points

Ask yourself what is important to you. The appropriate environment and type of housing development depend on each person’s living situation. Committed city dwellers long for something different than a couple dreaming of a little house in the country. Families also have different needs depending on the age of their children. As well as making allowance for your way of life, you should also take economic considerations regarding your future municipality into account.

What are the most important factors for you?

Use our checklist as a basis for searching for your dream property.

You should consider the following points in your personal checklist:

  • Accessibility by public and private transport
  • Distance to your workplace, proximity to after-school care, kindergartens and schools
  • Infrastructure such as shopping facilities, doctors, sports and cultural facilities
  • View, sun exposure, noise and emissions
  • Development of prices and population, construction activity
  • Economic strength, job opportunities
  • Tax burden

Prices: almost only rising

As a result of the extremely low mortgage interest rates, owning your own four walls can be significantly cheaper than renting a comparable apartment. In contrast to the low interest rates, the price level for single-family homes and flats has risen in Switzerland in recent years – and the rate in cities and conurbations is above average. “Around three quarters of the total population live in municipalities that experienced price increases in 2019,” says Matthias Holzhey, economist and Head of Swiss Real Estate Investments at UBS.

Stagnating or even falling prices have so far been the exception rather than the rule. Nevertheless, it should be noted that in 2019, individual municipalities in peripheral regions were affected by falling market prices. This applies to certain municipalities in Valais, the Bernese Jura, Ticino, Toggenburg in Eastern Switzerland or some locations in Glarus. This is often due to a combination of several factors, such as below-average job opportunities and a decline in population. “Population development naturally always has consequences for longer-term price development,” says economist Holzhey.

There is much to suggest that the interest of home buyers and investors will continue to focus on cities and large agglomerations in future. This is shown by the population forecasts of the Federal Statistical Office, which stretch into 2045: the conurbations of Zurich and Geneva will continue to grow in the medium term, while other cantons such as Jura, Neuchâtel, Uri, Appenzell Innerrhoden and Nidwalden will record weaker growth.

Benefit from our know-how

You should contact your client advisor before you decide on a property. Our advisors have sound specialist knowledge and will be happy to assist you – for example in assessing the market value of the property or answering questions on indirect amortization with pension funds and the resulting tax savings, the tax burden in general and, of course, financing. Client advisors have access to a range of tools that allow them to conduct a detailed location assessment. The Regio tool provides solid data from 2,000 Swiss municipalities, such as price trends, taxes or population development. In addition, a market price valuation answers questions about specific properties such as whether the purchase price demanded is in line with market conditions, how the property rates in terms of location quality, accessibility and infrastructure, and what are the estimated renovation costs of existing properties.

Contact your client advisor

Our advisors have sound specialist knowledge. Call them, they look forward to hearing from you.