Zurich home prices stokes by hiring from giant international companies like Google

Zurich has become one of Europe’s hottest housing markets thanks to tax breaks and low interest rates which have made it one of expensive hottest housing markets، with prices surging % 5.8 in August، the biggest increase since May 2022 to be past London، Madrid and Paris and showing how local shortages can offset interest rate hikes as demand in the Swiss financial hub stoked by hiring from companies including Google.

Zurich has apartments in the central district، which  are being listed at near record levels of over €18 thousand ($19 thousand) per square meter، more than double that of London، Madrid and Paris.

Housing prices in Zurich has the biggest increase in 16 month

Bloomberg reported that  housing prices in Zurich rose % 5.8 in August from a year earlier، the biggest increase in 16 month even when widened out to the Zurich canton، which includes some remote mountain villages but also homes for many commuters، asking prices are almost at the level of Paris. 

Zurich، which is located between mountains and a large lake، has natural limits to how much housing it can offer، but high salaries and the beautiful surroundings is a big draw for people from around the world that more than 33% of the city’s about  450 thousand residents are foreigners.

Google has become one of the biggest local employers in Zurich

While financial services are a traditional strength، accounting for one in 10 jobs in the area، Alphabet’s Google has become one of the biggest local employers in Zurich. 

Currently، more than 5،000 people from 85 countries work for the tech giant in Zurich، which has three campuses in the city and a fourth is due to open later this year near an existing location in the trendy district، not far from the famous red-light district Langstrasse. 

Housing prices in Zurich more than London، Madrid، Paris، Vienna and Berlin

Housing prices in Zurich have risen since last year، while London، Madrid، Paris، Vienna and Berlin posted year-on-year declines in their latest monthly figures، prices in the bulk of markets monitored by the Bloomberg City Tracker are still rising، albeit trends have slowed or flattened

 
The increases of housing prices in Zurich suggest consumers might be gradually adjusting to higher interest rates as tight housing markets help to keep a floor under prices، but it takes time for central bank rate hikes to work through the system، and conditions are finely balanced with consumers already squeezed by inflation and valuations high.

Prices mostly weaker across the nine cities 

Month-on-month trends show that listing prices were mostly weaker across the nine cities، including  Zurich، London، Madrid، Paris، Vienna and Berlin، tracked by Bloomberg، though activity is typically slow during the summer months. 

To capture the latest housing market trends in European cities، Bloomberg compiles figures from a range of providers where some are asking rates and indicative levels، while others are official figures on transactions. 

Despite Sweden’s property crisis prices rose % 4.3

Despite Sweden’s property crisis، prices in Stockholm، where there is a dearth of rental options، rose % 4.3 from a year ago، while Madrid and Milan، which had less of a boom during the cheap money era، posted increases of more than % 3 as price gains in all three cities were slower than in previous months.

Zurich though، is a clear outlier as UBS bank Group، which is based in the city، ranked it as having the highest risk in the world of suffering a real estate bubble where homes in the Swiss city cost over % 50 more than a decade ago. 

High-income earners in Zurich have helped lift prices

An increasing number of high-income earners in Zurich have helped lift prices، which have not yet adapted to higher interest rates، the UBS bank bank said on Wednesday (Sep 21) in a report.

Alexander Koch، an economist at Raiffeisen Switzerland stated that increasing demand from immigration in Zurich is colliding with constrained supply and offsetting higher interest rates، and the trend is unlikely to change soon.

There is low supply but at the same time، increasing demand

He warned that there is low supply but at the same time، there is increasing demand due to employment growth and immigration as real estate issues are always very difficult in politics، and implementation usually takes many years.

Corporate settlement has been encouraged in Switzerland since 1998، which ushered in tax privileges for holding companies and expats، but now concerns are growing that it has gone too far  as that type of growth is more than offsetting concerns over job cuts from UBS’s takeover of Credit Suisse، which are expected to take place gradually.

An increase of almost % 10 over the last decade in Switzerland

About 8.9 million currently live in Switzerland، an increase of almost % 10 over the last decade، and limiting the country’s growth has become a key issue ahead of elections on Oct 22 but the  business model of a low-tax country has actually worked، with all the unpleasant consequences. 

The conservative Swiss People’s Party، which is set to increase its lead، is pushing for a vote to change the constitution to not let the population exceed 10 million people until 2050 by limiting asylum rights as the left-leaning Social Democratic Party names company settlement as the problem.

Migrants increase due to professional reasons

In a survey conducted in 2022، % 37 of migrants cited professional reasons and only % 6 cited seeking asylum as the main reason for settling in Switzerland، as for every manager who immigrates، there are an estimated 10 others who provide services in the surrounding area; that’s how this immigration comes about.

To help regular folks live off their pay cheques، Zurich earlier this year implemented a minimum wage of 23.90 Swiss francs per hour، which equates to a monthly full-time salary of roughly 4،000 francs، % 80 more than the minimum living wage in the City of London، while Google pays entry-level software developers as much as 200 thousand francs a year.

Switzerland has generous salaries

Switzerland also has a noticeable advantage in financing costs compared with its neighbours and on top of the generous salaries، even though the Swiss National Bank is expected to raise the interest rate to % 2، that is half the European Central Bank’s % 4، while local banks often require deposits of at least % 20، mortgages can sometimes extend beyond 50 years، easing repayment burdens.

With all that money sloshing around، prices have surged to unprecedented levels، for example، a 50 sqm loft apartment with a bedroom in a mezzanine is listed for almost US$1 million as one of its key selling points: it is about a 15-minute bike ride from Google offices.