Why Condominiums in Switzerland Are Becoming Dramatically More Expensive: Interest Rates, Regulation, Scarcity

Why Condominiums in Switzerland Are Becoming Dramatically More Expensive

Condominiums (condominium ownership) are becoming noticeably more expensive in Switzerland. Several drivers act simultaneously: a special interest rate environment, higher refinancing costs for banks, structural supply shortages and a shift in demand away from the expensive rental market towards ownership. This article puts the factors into context, explains what they mean for SARON and fixed-rate mortgages, and gives concrete recommendations regarding affordability and loan-to-value.

Source note: The interest rate and market mechanics are based, among others, on reports by Blick and cash.ch. Cash.ch cites assessments by Zürcher Kantonalbank (ZKB) and Raiffeisen Switzerland on the interest rate outlook and refinancing via mortgage bonds; Blick addresses the declining attractiveness of renting and price trends for condominiums (Sources: Blick, cash.ch from 06.01.2026).

Interest Rates Remain Nominally Low – But Financing Costs Still Increase

• Since the SNB cut key rates to 0 percent (June 19, 2025), SARON rates have hovered near zero in the short term. According to cash.ch, SARON is expected to be around -0.02 percent by the end of 2026, but will rise in the medium term toward 0.42 percent by the end of 2028.
• Fixed-rate mortgages have not benefited as much from lower government bond yields. 10-year swap rates increased from 0.39 to 0.66 percent in 2025, even though government bond yields fell. One reason: mortgage bond yields remained stable or ticked up, making long-term refinancing more expensive (ZKB assessment via cash.ch).
• Additional cost drivers: Basel III regulation since early 2025, higher bank margins, more required equity depending on the institution, as well as the SNB’s increased minimum reserve ratio (from 2.5 to 4 percent), which creates refinancing needs in the system. International effects (winding down of bond purchases by Fed/ECB, rising funding needs of European states) also affect Switzerland.

Conclusion: In the short term, SARON mortgages appear cheap. In the medium term, however, a normalization upwards can be expected. According to scenarios cited by cash.ch, a SARON mortgage with a typical markup could become more expensive in a few years than a 10-year fixed-rate mortgage taken out today – depending on margin and timing.

Renting Becomes More Expensive – Demand Shifts Toward Ownership

The rental housing market in many regions is tight: immigration, limited housing stock, and few vacant apartments are driving up rents. According to Blick, renting is thus becoming less attractive – households are increasingly considering buying property. This supports demand for condominiums, not least as these often represent the available (and affordable) supply compared with single-family homes in urban areas.

Added to this: For owner-occupiers, mortgage rates remain moderate by historical standards, while rents in metropolitan areas are largely rising. This relative movement shifts demand towards buying – even if banks demand higher margins due to Basel III and refinancing costs.

Supply Shortage: Construction, Land, Permits

• Limited building land and restrictive zoning regulations dampen new construction volume.
• Densification is politically desirable but complex to implement (objection procedures, infrastructure, neighborhood compatibility).
• Increased construction and renovation costs (materials, energy, wages) raise project margin requirements.
• Energy standards and decarbonization (heating system replacement, building envelope) increase the cost of existing property transactions or are priced in.

The result is a structural supply deficit. Where demand remains high, condominium prices increase disproportionately – especially in well-connected centers and suburban areas.

Affordability and Loan-to-Value: Regulation as Price Driver – and Obstacle

• Loan-to-value: Usually max. 80 percent; at least 20 percent equity, with at least 10 percent hard equity (not from the 2nd pillar). This limits the number of potential buyers – but at the same time increases competition among those with sufficient equity.
• Affordability: Banks calculate using an imputed interest rate (e.g. 4.5–5 percent) plus 1 percent for upkeep/ancillary costs. Rising property prices make affordability tougher – even with currently low SARON rates.
• Amortization: Second mortgages must be amortized within a maximum of 15 years or before retirement; higher purchase prices often mean faster amortization requirements in CHF.

These criteria can squeeze buyers out of the market – but also support price levels, as the few viable offers meet limited supply.

What Does This Mean for SARON vs. Fixed-Rate Mortgages?

• SARON mortgage: Cheap and flexible in the short term. In the medium term, market expectations indicate gradually higher costs. Suitable for those with high interest rate risk tolerance, ample financial buffer and the option to switch to fixed tranches if needed.
• Fixed-rate mortgage: Predictable interest costs, at present sometimes historically low offers for several years according to market observations. However, banks do not always pass on low market rates fully (mortgage bond/margin effects). Worth considering for security-oriented households.
• Mixed strategy: Splitting the mortgage (e.g. part SARON, part 5–10 years fixed) reduces timing risk and spreads the interest adjustments over time.

Note: Cash.ch refers to market expectations that SARON rates will rise by 2028 and that 10-year financing rates are also priced in higher. The currently best fixed-rate mortgage offers mentioned there are around 1.44 percent (at time of article). Actual terms depend on the institution.

Practical Tips for Buyers of Condominiums

• Check affordability realistically: Calculate with the imputed rate (4.5–5 percent), incidental costs of around 1 percent of property value p.a., and reserves for the condominium owners' association (renovation fund).
• Structure equity: At least 10 percent hard equity (cash/3a), an additional 10 percent can come from the 2nd pillar (be careful: early withdrawal means loss of pension benefits and check tax consequences).
• Stagger financing: Combination of SARON and fixed tranches, laddering maturities (e.g. 3/5/8/10 years) to smooth refixing peaks.
• Build in protection: Consider a SARON cap mortgage if rate increases are a concern, or a partial forward fixed-rate mortgage for future tranches.
• Assess object quality: Carefully check GEAK class, heating, facade, roof and planned investments by the community (minutes/renovation fund) – future renovations will impact incidental costs and resale value.
• Regional alternatives: In highly overheated micro-locations it’s worth looking at well-connected suburban areas, where price levels and affordability are often more favorable.
• Negotiation & timing: Secure financing approval (pre-check), compare offers (including margin, mortgage bond markup, fees), and watch out for payment plans in new build projects.

Outlook 2026–2028: Sideways With Upward Drift

• Long-term interest rates: Raiffeisen Switzerland expects a mostly sideways movement over the year, depending on inflation and the economy.
• SARON: Market expectations signal a gradual normalization upwards.
• Condominium prices: Persistent scarcity and demand shifts support the price level. The dynamics will likely remain regionally differentiated – strong centers and well-connected locations remain in demand.

Those buying today should consider not just the current mortgage rate, but the overall calculation: affordability with a stress rate, cost of living, renewal needs of the property, and a robust financial buffer. With a thoughtful financing structure and realistic assumptions, interest and price risks can be controlled even in a challenging market environment.

Sources:

• Blick: Renting becomes less attractive – why condominiums in Switzerland are becoming dramatically more expensive (reference: topic and core message)
• cash.ch, Top News from 06.01.2026: When will interest rates for SARON mortgages rise? (incl. ZKB and Raiffeisen assessments, mortgage bonds, Basel III, minimum reserves, interest rate outlook)