Switzerland is known worldwide not only for its breathtaking landscapes, countless mountains, lakes, and well-preserved medieval old towns but also for its economic prosperity. According to Statista, in 2022, Switzerland was the global leader with respect to wealth per adult, potentially setting the stage for unparalleled investment opportunities in the country’s steadily appreciating real estate market.

The question is: Does the situation look that appealing when scrutinized on the regional level? A comparison with France provides insight: over an 8-year span, the housing price index surged by 34.7% for the whole country, yet Paris and Marseille experienced growth rates of 27.5% and 41.9%, respectively as of the end of October 2023.

Therefore, in this article, we will explore the reality of the real estate market in two of Europe’s most expensive cities: Zurich and Geneva, aiming to discern which city holds more allure for investors.

Zurich vs. Geneva: Compared

1. Housing Price Index

Over the past decade, Switzerland’s residential house price index has witnessed a remarkable growth of 34.2% – and both Zurich and Geneva have ridden this wave. In fact, Zurich saw a staggering growth of 50.5% in its housing prices during the last 10 years, surpassing the country’s average.

On the other hand, real estate prices in Geneva rose at a significantly lower pace, with an increase of 24.6% over the same period. This seems to place Zurich ahead of Geneva in terms of housing price appreciation, positioning it as a promising hub for further real estate growth and creating an enticing prospect for potential investors. That said, before we draw our final conclusions, let’s take a closer look at some underlying factors.

Housing price index growth in Switzerland, Zurich, and Geneva over the past 10 years
Source: RealAdvisor

2. High demand, low supply

In the fourth quarter of 2022, Switzerland’s housing supply was clinging close to all-time lows, with vacancy rates of only 1.6% for condominiums and 1.5% for single-family homes. While Zurich mirrors this challenge with an even lower vacancy rate, hovering around 0.5%, the shores of Lake Geneva stand out as an exception, boasting comparatively higher supply rates exceeding 2% in a select few municipalities.

Housing supply rate for Switzerland, Zurich, and Geneva
Source: Credit Suisse

Despite a slight setback in demand at the end of 2022 and into 2023, we perceive this as a short-term phenomenon likely to rectify itself in 2024 due to an anticipated rise in tourist flows and an increase in immigration.

3. Tourism

Besides being an economic powerhouse and global business and financial hub, Switzerland is known worldwide for its picturesque landscapes, making it a hotspot for tourism. In 2022, Switzerland counted a total of 38.2 million overnight stays, marking an increase of 29.4% compared to 2021 and only a 3.3% decrease compared to pre-pandemic levels. Zurich, with its 5.4 million overnight stays, and Geneva, with almost 3 million stays, both played integral roles in this tourism surge.

Overnight stays in Switzerland
Source: Federal Statistical Office

Despite fluctuations during the pandemic, both Zurich and Geneva showed an outstanding resilience and are on the verge of returning to pre-pandemic levels, with the former comprising 5.96 million overnight stays in 2019 and the latter 3.2 million.

The pace of growth in overnight stays in both cities seems to project not only a tourism revival in 2023 but potentially also an all-time record, setting new highs beyond pre-pandemic figures.

4. Academic influx

Another often neglected and perhaps surprising driver of housing demand in Switzerland is the influx of international students. Switzerland is home to some of the best universities in the world including, but not limited to, ETH Zurich, the Swiss Federal Institute of Technology in Lausanne, and the University of Geneva. This has led to notable academic interest, reflected in a steady rise in international student numberswith approximately 74’440 students living and studying in Switzerland in 2022.

The increasing number of national and international students in Switzerland could lead to interesting opportunities for real estate investors. According to data from JLL, an astonishing EUR 11.6 billion has been deployed across the EMEA region for purpose-built student accommodation. As a consequence, should this trend persist, Zurich and Geneva are poised to experience heightened demand, most likely resulting in higher prices for real estate.

5. Quality of Life

When deciding on a real estate investment location, assessing the overall quality of life is paramount – and Switzerland undoubtedly stands out as a top choice in this regard.

In fact, according to the 2023 Global Liveability Index, Zurich ranks 6th globally, excelling in stability, healthcare, culture & environment, education, and infrastructure. Similarly, Geneva closely follows, sharing the 7th spot with Calgary, Canada.

Top 10 positions within the Global Liveability Index 2023
Source: The Economist Intelligence Unit

Unlike tourists and international students who usually only aim to stay somewhere for a limited period of time, people contemplating a more extended stay prioritize a location’s quality of life as a factor that strongly influences their decision to settle long-term. Cities like Zurich and Geneva are therefore likely to continue attracting new residents, thereby increasing the demand for long-term and permanent housing alternatives.

What makes Zurich stand out?

1. Switzerland’s financial capital

Zurich’s financial center forms the keystone of Switzerland’s entire financial sector. In 2021, it accounted for 42% of all jobs and 45% of the gross value generated in the country’s financial sector. Moreover, in the same year, 1 in 10 jobs in Zurich were connected to its financial center in one way or another.

Share of the Zurich financial center in the Swiss financial center for 2021
Source: Department for Economic Affairs of the Canton of Zurich

What’s more, Zurich’s vibrant network of over 116’000 companies, ranging from global corporations to innovative enterprises, fosters an environment that attracts highly skilled workers from both within the country and overseas. This amalgamation further drives demand for rental housing in the region of Zurich.

2. Housing shortage among expats

Unlike for residents, the increasing housing shortage in Switzerland creates lucrative opportunities for real estate investors. This rings particularly true considering that Switzerland has the lowest homeownership rates among the most advanced economies.

Both of the aforementioned realities also hold for Zurich. In this case, however, the upward pressure on housing prices is further fueled by the city’s countless job opportunities, amplifying the demand for housing. Zurich is home to many international corporations perpetually seeking top-tier talent, resulting in increasing immigration. Consequently, it’s not surprising that around one-third of Zurich’s population is made up of foreigners.

Given that buying residential property can be subject to strict regulations depending on the buyer’s residence permit, the hiring sprees of Zurich’s international companies intensify the demand for rental properties in the region and thus drive revenue.

What makes Geneva stand out?

1. Global center of diplomacy

While Zurich is a major global financial hub, Geneva holds a distinct position as one of the world’s most important centers of diplomacy. Nestled along the shores of the namesake lake, often dubbed “the Capital of Peace,” Geneva is home to the European headquarters of the UN and hosts 41 of the most important international organizations, including the World Health Organization (WHO). Moreover, the city accommodates around 750 non-governmental organizations and plays a part in 180 diplomatic missions.

This not only underlines Geneva’s pivotal role in global multilateral cooperation but also presents promising financial prospects. Indeed, Switzerland is investing around CHF 112 million (USD 126 million) as part of its host state strategy for 2020-2023, aiming to strengthen and expand Geneva’s role as a global center of diplomacy.

Additionally, over CHF 2.5 billion will be invested over the coming decade in major renovations as well as new building and mobility projects in the city’s international district.

These investments will most likely increase Geneva’s attractiveness even further. To put things into perspective, currently, about 32’000 international civil servants, diplomats, and employees of NGOs are working in International Geneva. This, in part, explains why the current demand for housing exceeds supply.

2. Overnight stays are back to pre-pandemic levels

As already mentioned, tourism and overnight stays in Geneva have almost bounced back to pre-pandemic levels. While the same holds true for Zurich, Geneva’s central role in diplomacy makes it stand out. Not only does it fuel international arrivals but it also significantly improves the city’s resilience against economic shocks. The tourism industry is typically very cyclical, resulting in decreased tourist numbers during periods of economic or geopolitical instability.

Thankfully, international organizations and NGOs located in Geneva host over 4’000 conferences a year with participants from all over the world. In addition, Geneva counts more than 4’700 annual visits by heads of state and other high-ranking government officials. These events and official visits both generate additional demand for short-term stays, which remain largely uncorrelated with economic cycles.

Final thoughts

Zurich and Geneva are both among Switzerland’s most promising cities for real estate investments. Each city has unique characteristics that fuel the demand for residential properties, with no disruption of this trend in sight. This is precisely why Le Bijou is constantly looking to acquire new properties in both of these top-tier locations.

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