By Thomas Fuller
Zurich: In any other country, Philip Skiba, a well-paid analyst working in the finance industry, might not hesitate to buy a home. But in the town where he lives, on the outskirts of Zurich, even the ugly houses, as he describes them, go for millions.
Last year, a simple, beige stucco home in his suburb went up for sale. The price: 7.5 million Swiss francs (about $13 million).
“My first thought was, this is ridiculous; it’s almost an insult,” said Skiba, 41, who shares a rented apartment with his girlfriend. When the house sold several weeks later, it reinforced for him the reality of homeownership in Switzerland these days. Buying a single-family home anywhere near Zurich is not just a luxury.
Philip Skiba on the terrace of his rental home in Zollikon, Switzerland, with a view of Lake Zurich.Credit: Clara Tuma/The New York Times
“It’s beyond luxury,” Skiba said. “Two kids, a house, a garden, two cars – I don’t know anybody who has that.”
Switzerland’s 9 million residents are some of the wealthiest people on the planet – and they are mostly renters. Increasingly, even urban professionals here find themselves locked out of the real estate market. The average price for a studio apartment in Zurich is $1.7 million, according to research company Wüest Partner. On a square-metre basis, Zurich is about 80 per cent more expensive than Paris.
Mortgage broker Andreas Weber rents.Credit: Clara Tuma/The New York Times
At a time when young people in places like coastal California, New York, Sydney and London cannot see a path to buying a home, Switzerland offers the world a glimpse of a post-ownership society. About 36 per cent of the Swiss own their homes or apartments, the lowest rate in the West and well below the 70 per cent average in the European Union and the 67 per cent in the United States and in Australia. While many young Swiss people say they see positives in a lifetime of renting – mostly, avoiding the hassles and commitments of homeownership – they admit feeling resentful that they don’t have a choice.
“I think most people in Switzerland still have a dream about a single-family house and a garden,” said Andreas Weber, 36, who works in Zurich. “It’s just not possible anymore.”
Weber is the managing director of Corefinanz, a mortgage brokerage, but he is a renter himself, living in an apartment 30 minutes by train from central Zurich. “I’m not there yet,” he said of buying his own place. The average age of a first-time homebuyer in Switzerland is 48, 15 years older than in neighbouring France.
In the United States and many other countries, homeownership is encouraged by the government and generally considered a rite of passage. In Switzerland, where the terrain is 70 per cent mountains and expensive real estate on limited buildable land has been the reality for generations, a lifetime of renting is not considered a personal failure or a shortcoming of the system.
The centuries-old architecture in Zurich and other Swiss cities, untouched by world wars and framed by majestic mountains, commands top dollar from ambitious buyers.Credit: Clara Tuma/The New York Times
“I know many people who would never want to buy,” said Alice Hollenstein, a psychologist who specialises in urban issues. “They just don’t value homeownership. They think it’s old-fashioned.”
There is also less judging. Swiss renters say they don’t get lectured on the importance of building wealth through homeownership. “The majority rents, and it’s not stigmatised at all,” said Christian Hilber, a native of the northern town of Basel who specialises in real estate at the London School of Economics. “If anything, people say, ‘You own your place? Why?’”
The country has been renter-majority since the end of World War II, and in some ways, it has served the nation well. In 2008, when predatory lending and loan defaults plunged the US into recession, the Swiss economy barely trembled. Switzerland’s financial authorities require scrupulous vetting of borrowers; “subprime lending” never entered the vocabulary.
But any preference for renting here collides with a stark financial reality: national surveys show that in recent decades, Swiss homeowners have been better off, at least in terms of wealth. The median net worth of a Swiss homeowner in their 30s is six times higher than that of a renter of the same age. And the wealth gap only widens with age. In their 70s, Swiss homeowners are 11 times wealthier than renters their age, according to a study by Ursina Kuhn at the Swiss Foundation for Research in Social Sciences in Lausanne.
The catch is that in order to become a homeowner, “you need wealth to get more wealth,” as Kuhn put it.
Martin Hoesli, a professor at the University of Geneva who has studied Swiss homeownership for decades, said that even though the math favours homeownership in the long run, many Swiss cannot afford a deposit, which by law is a minimum of 20 per cent of the purchase price. Add to that the 4 per cent in transfer costs, and the minimum deposit for the average-priced house – currently $2.9 million, according to Wüest Partner — is $526,000.
This Schälchli is at $0 at the end of the month, after paying his rent.Credit: Clara Tuma/The New York Times
That’s a daunting number for This Schälchli, 37, who owns a hole-in-the-wall cafe at a busy intersection in Zurich. Schälchli serves more than 200 cups of coffee a day, he said, but the revenue barely allows him to pay the $3300 a month for his one-bedroom apartment, which he shares with his girlfriend and their infant son.
“I’m at zero at the end of the month,” Schälchli said of his personal finances. He doesn’t dare dream of owning his own place. “The amount of money you spend in a lifetime in rent – it’s absolutely crazy,” he said. “But there’s no obvious solution for me right now. My family has no cash. I think I’ll be renting for the rest of my life.”
Until recently, Hollenstein, the psychologist, thought the same, but for different reasons. Renting has its advantages here: landlords are restricted from raising rents without cause, like a rise in interest rates or renovation. It also allows people to live in more desirable areas. Hollenstein, 41, rents a beautiful apartment in downtown Zurich, the heart of a well-preserved medieval city.
“You don’t have to take care of the building,” she said. “If the heating doesn’t work, you just put in a call. It’s not yours.”
But things changed four years ago when she and her partner had their first child and realised they wanted a more permanent nest. They found a 139-square-metre house east of Zurich, 25 minutes away by train, for $3.6 million and planto move in after they finish renovating the place. The house, Hollenstein said, “is pretty – and pretty boring.”
Alice Hollenstein in the garden of her new house in the Zurich suburbs which came with a hefty price.Credit: Clara Tuma/The New York Times
She is still coming to terms with the shock of putting decades’ worth of savings into a single investment. “The moment we bought the house, I thought, ‘I have lost my freedom.’ It panicked me,” she said.
She has been slightly embarrassed to tell her friends, most of whom are renters, that she was able to buy. “Their reaction was not, ‘Wow, great!’” Hollenstein said. “It was more like, ‘Really?’”
Many Swiss rely on perpetual refinancing to afford their homes. Switzerland is the land of luxury watches, fine chocolates and lifelong mortgages. It’s not uncommon for borrowers to extend their loans until their deaths, which is advantageous from a tax perspective because mortgage interest is tax-deductible. It also gives a lot of business to the country’s vaunted banking industry.
For the visitor driving through this enchanting Alpine countryside, it’s not difficult to understand why housing prices are stratospheric. The centuries-old stone alleyways of cities like Bern and Zurich, intact and untouched by world wars, are living museums. The skyline in Zurich takes in soaring, snow-capped mountains. The lake that rims the city is so pristine that bathers sometimes dip into the water directly from the city’s sidewalks and promenades.
Andreas Fuhrer, left, and Siwat Chuencharoen in their house outside Bern, Switzerland.Credit: Clara Tuma/The New York Times
When Andreas Fuhrer, 43, a particle physicist who works at a bank in risk management, decided to look for a home in Bern, the Swiss capital, he realised he would have to ask his family for help with the deposit. He and his partner, Siwat Chuencharoen, 37, a piano teacher, set out to find a place where Siwat could practise without bothering neighbours. They visited 15 places and made offers on five. But they were consistently outbid.
“You get depressed,” Fuhrer said. “You walk through the door, and you say, ‘This is our dream,’ and then you don’t get it.”
When they found a place they wanted to buy, they went all-out. The 200-square-metre house, just over the Bern city limits and across the street from railway tracks, was advertised at 1.25 million francs, but after several rounds of bidding, the couple bought it for 1.52 million francs. In addition to the deposit of 300,000 francs, which their families helped pay for, they financed the purchase with three separate loans of eight, 10 and 12-year durations. The debt is structured so that most of what they pay back is interest, not principal. They plan to be paying the mortgages for decades and decades.
“Buying a house is not for everyone in this country,” said Siwat, who moved to Switzerland from Thailand as a music student in 2010. “Even though you earn quite well, and you have a good life, everything is expensive here.”
For Skiba, owning a home in Switzerland is still a far-off prospect. He is paying 6000 francs a month to rent his apartment on a hill above the Gold Coast, the lakeside mansions blessed with evening sun. Tina Turner rented a château nearby until her death earlier this year.
Most people in Skiba’s 30-person office earn annual salaries of at least 100,000 francs, he said, but only two own their homes. He could afford a house in the countryside outside Zurich. There are places 60 kilometres away that sell for 1.5 million. But he doesn’t want to live that far from his office and friends in the city.
“I think owning property is programmed into people’s DNA,” he said. “But renting right now is the only option if you want to live in urban Switzerland.”
This article originally appeared in The New York Times.