The case

Experts claim that once baby boomers start selling their houses, the Swiss real estate market could be faced with a serious shake-up. The so-called “silver tsunami” is expected to have far-reaching consequences. Does this mean the younger generation can hope for a drop in house prices in Switzerland?

Source: swissinfo

The commentary

“The prices we see today are misleading,” experts explain, suggesting that property prices will continue to rise, and they expect the market to balance itself out in the near future.

The experts’ forecast is based on two assumptions. Firstly, they consider the federal government’s population-growth prediction, the so-called reference scenario, overly optimistic. The Federal Statistical Office’s (FSO) more conservative prognosis is the more likely scenario, i.e. one expects the Swiss population to start shrinking in 2043. Secondly, experts assume that a shift in the age structure will result in there being many more sellers than buyers. Even under the government’s reference scenario, the share of people aged over 65 is set to increase from 20 % to 25 % by 2055.

“People over 60 tend to sell their homes,” experts state, adding that this is why we will soon see more people putting their properties on the market. The 60-year-olds also belong to the generation with the highest rate of home ownership, wheras the younger generation tends to live in smaller households. In 2024, Switzerland’s birthrate dropped to a record low of 1.28 children per woman. Experts predict that sooner rather than later we will have too many single-family homes but not enough families to buy them.

The first signs indicating a shift in the market are already looming on the horizon. Experts presume this trend to accelerate as of 2030 as many homeowners will be so heavily indebted that their pensions will not be enough to have their mortgage renewed.

The impact is said to vary widely by region with the major urban areas being the last to feel the shift.

UBS experts believe that this trend only affects certain regions, and they do not see a “silver tsunami” sweeping across central Switzerland in the near future, also believing that economic factors are more likely to determine price trends and trigger a market correction. They also expect a prolonged recession, especially in combination with high interest rates, to be the real risk.

Experts at Zürcher Kantonalbank (ZKB) do not agree with the idea of a “silver tsunami” either. “As more people retire, we will need to bring in more workers,” they say. They point at the real issue, which is a shortage of new housing, especially in high-demand areas where construction cannot keep up with the influx, claiming that we are still a long way from a wave of ageing homeowners flooding the market. They also believe that here is a strong trend towards densification, with many single-family homes being replaced by apartment buildings, which could lead to a slight easing of prices though they don’t expect prices to fall as housing in Switzerland is likely to remain a limited resource for years to come.

What are the prospects for the next 20 years? According to the FSO, the Swiss population will continue to grow until 2043 before gradually declining, even under the lowest-growth scenario, which means that demand for housing is likely to continue to rise for close to the next two decades. At around CHF 1.3 trillion (USD 1.58 trillion), Switzerland’s mortgage volume is only one-third lower than the one of Germany, a country nine times the size of Switzerland. From a demographic point of view, experts consider this to be a massive risk. As for now, their warning remains a lone voice crying out in Switzerland.

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