Financing your own home: Buyers of single-family dwellings are willing to commute further

Homeowners accept longer commuting distances

Today, young households, families, and senior citizens can barely afford to buy a home in the urban centers. To afford a home of their own, they are fanning out to more reasonably priced regions and accepting a longer commute.

Financing your own home is becoming more difficult

High prices and strict financing rules are making it more difficult to finance real estate. The situation is particularly acute for young households. They have barely had enough time to accumulate assets; in addition, their incomes are lower because they are still at the beginning of their careers. For families with children, the situation is often exacerbated by a reduction in income if the parents reduce their level of employment.

The average annual gross household income for 35- to 44-year-olds is CHF 137,508, while for 45- to 54-year-olds the figure is CHF 149,450. This has implications for the financing of real estate: Assuming a maximum loan-to-value ratio of 80%, the price of a property for a 35- to 44-year-old should not exceed CHF 780,000. Otherwise it is unaffordable.

Pension recipients face restrictions when financing their own home

Retirees likewise face challenges when seeking to finance home ownership. Fact is, their income drops significantly when they retire. Gross household income for 65- to 74-year-olds averages just CHF 83,862. With a loan-to-value ratio of 66% for retirees, the maximum price of a house or apartment would be CHF 645,000.

Financing of home ownership becoming more difficult for young people and senior citizens

Young and old must seek cheaper housing

Average gross income 2012–2014 in CHF; *max. loan-to-value ratio 66% from age

Source: Swiss Federal Statistical Office, Credit Suisse

Financing home ownership with more equity

Real estate financing is easier if you can make a larger down payment. Most homeowners accumulate assets with increasing age, thus reducing the affordability
problem. For example, the minimum down payment on a property priced at CHF 800,000 would be CHF 160,000. For the mortgage of CHF 640,000 to be affordable, the annual income would have to be at least CHF 141,440.

If the down payment can be increased to CHF 200,000, the required income falls to CHF 127,440. The down payment can be accumulated through saving or it can come from alternative sources. The authors of the Credit Suisse Real Estate Study estimate that a quarter to a third of all first-time home buyers rely on advancements or loans from family members. This enables them to come up with the required cash to finance their new home.

Buying a home is cheaper outside of the urban centers

The affordability of home ownership depends not only on income and capital but also on real estate prices. These vary greatly from region to region. Prices are especially high in the urban centers and surrounding regions. Here an above-average income is required in order to afford a single-family home or apartment.

But it is not only in the urban centers where the situation is challenging. The Credit Suisse real estate experts estimate that, for a household on average income, a new 4.5 room condominium is unaffordable in 63 of the 106 Swiss regions. To purchase a home of their own, buyers must increasingly be prepared to make concessions in terms of the region. Thus prices for residential property are significantly lower in medium-sized centers than in major cities, as the example of the situation along the A1 highway shows.

Property prices along the A1

Wide price gap between centers and surrounding areas

Price per square meter of advertised condominiums along the A1, 2018. Prices for cities and municipalities in a radius of five kilometers along the highway were analyzed.

Source: Meta-Sys AG, Credit Suisse 

Owners of single-family homes commute further

In order to realize the dream of homeownership, first-time buyers are frequently prepared to move to cheaper locations and accept a longer commute. Although renters also pay less with increasing distance from the urban centers, the price gap is more pronounced in the case of homeownership.

The longest commutes are accepted by owners of single-family dwellings. Of those who work in Zurich, only 32% can reach their place of employment in 30 minutes or less. Meanwhile, 38% of commuters who live in a condominium reach their workplace in the same amount of time; this compares with over half of all renters. The same is true in other centers. However, commuting distances tend to be shorter for employees outside the centers. Here, development land and single-family dwellings are usually more affordable and available in sufficient quantities.

Lengthy commuting times for single-family homes

Homeowners accept longer commuting distances

Commuting time for workers in Zurich in minutes, by housing segment, 2016

Source: Swiss Federal Statistical Office, Credit Suisse 

More on the Swiss real estate market in 2019

Download the 2019 Real Estate Study This link target opens in a new window
Do you have any questions about the financing of home ownership? Please call us at 0844 100 114 or arrange a personal consultation.