Working from home boosts appeal of owner-occupied homes on urban periphery.
During the COVID-19 crisis, people realized the importance of owning their own home. Demand for residential property on the urban periphery – where real estate prices are lower – is being boosted by the increase in remote working. Homeowners are therefore willing to accept a longer commute in return for an affordable home of their own.
Homes on urban periphery boosted by crisis
The significance of owning your own home has increased during the COVID-19 pandemic. Due to the restrictions and increase in working from home, the Swiss have spent an unusually large amount of time within their own four walls since last spring. For households, this has highlighted the importance of having a home in which they feel comfortable and that meets their own (changing) aspirations – a trend that is having a noticeable impact on the real estate market. According to the 2021 Credit Suisse real estate study, residential property outside of the major urban centers and their conurbations has become increasingly sought after.
Strong interest in owner-occupied homes is surprising
The fact that demand for residential property collapsed for only a brief period of time during the lockdown last spring was unexpected, as deep recessions and rising unemployment normally dampen the demand for owner-occupied homes.
However, rapid political intervention and the knowledge that the pandemic would not last forever triggered the opposite reaction on this occasion. The outcome was record demand for condominiums and single family dwellings in the second half of 2020.
Financing costs for your own home expected to remain low
In addition, the financial outlook remains very attractive. Without low mortgage interest rates, the demand for residential property last year would probably not have been as strong. Low mortgage interest rates translate into low actual affordability costs for new homebuyers. These currently stand at 15.1% of average household income for a new condominium and 21.8% for a new single family home. In addition, the COVID-19 crisis has further prolonged the period of negative interest rates. The Swiss National Bank is unlikely to raise key interest rates until the end of 2022 at the earliest, so the actual costs of financing property ownership will therefore remain low.
Rise in working from home and low real estate prices are boosting demand on urban periphery
Since real estate prices in fairly central locations are too high for an increasing number of households, the search radius is expanding to include more peripheral regions with lower real estate prices.
This trend has been amplified by the possibility to work from home. Although there are limits to the distance people are willing to commute, the increase in working from home will see them extend their horizons. The less frequently a worker has to commute, the greater the distance they regard as tolerable. The following example illustrates precisely what this means for commuters:
Same total commuting time despite a longer commute
If a homeowner who works in Zurich has a 48-minute commute each way, he could increase this commute to 60 minutes if he worked from home one day a week and still spend the same amount of time commuting each week as he would if he were going into the office five times a week. If he were able to work from home two days a week, his total weekly travel time would remain the same with an 80-minute one-way commute. And even if he was prepared to spend only half the time he saved commuting, he could extend his commute to 54 or 64 minutes respectively.
Increased interest in owner-occupied homes in tourist regions
It is not only on the urban periphery that demand for residential property has increased. Vacation apartments have also seen a resurgence in demand. This is because flexible working increases the amount of time a vacation home can be used. In addition, the current restrictions on international travel have added to the appeal of a vacation apartment in Switzerland.