General Information

Correctly Assessing Residential Property

Whether you already own your own home or are considering buying in light of the current attractive conditions, you expect the value of your property to increase. There are, however, a few points that you should bear in mind.

It is recommended to consider buildings and land separately. A building attains its maximum value when it is new and loses value annually, whereas the value of the land depends on the development and attractiveness of a location, as well as economic and market factors. For the overall value of the property to appreciate, the increase in the land's value must exceed the building depreciation and write-downs. The higher the land-to-value ratio (proportion of the land in the overall property value), the lower the impact of building depreciation. In this regard, it is also necessary to consider the long-term outlook for land prices and the appreciation potential (future inflow of affluent inhabitants or expanded zoning).

Significant Regional Disparities

The average land prices for single family dwellings in Switzerland rose by 74 percent between 2000 and 2014 (source: IAZI), or an annual rate of 4 percent, which in most cases will have overcompensated for the loss of value of the property. As a result, the average land-to-value ratio in Switzerland rose from 36 percent to 42 percent. There are strong regional disparities in how attractive a specific municipality is to live in (see figure): Today, the average land-to-value ratio is very high in Lausanne at 74 percent and in Meilen at 76 percent; but in most of Switzerland, it makes up less than half of the total value, e.g. 47 percent in Solothurn and even less than 20 percent in very rural areas, such as the canton of Jura.

High Land-to-Value Ratio Also Carries Risks

Since the price of residential property fluctuates mainly due to changes in land prices, a high land-to-value ratio also carries risks. Attractive locations hold promise of long-term value increases, but short- and medium-term losses are also possible, as in the city of Zurich, where land prices fell by 13 percent between 1992 and 2004, according to estimates from the Statistical Office of the Canton of Zurich. These losses were not offset until 2008. Another factor is the location-specific risk. A persistent deterioration in local conditions (e.g. higher taxes, construction of a major road or other source of emissions) can cause the land to lose value.

Land-to-Value Ratio in the Swiss Municipalities in 2014

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