A three-part special on housing and the international population in the Lake Geneva region: part 1

(Also see part 2: Myth and reality: how housing in the Lake Geneva region adds up)

Geneva, Lausanne, Switzerland (GenevaLunch) - Switzerland’s population grew by 1.6 percent in 2007, the highest rate since 1963, thanks to immigration fueled by a healthy economy and the country progressively opening up to the Schengen Area free movement of labour, starting in 2002. One result was to put more pressure on the demand for housing, especially in the Lake Geneva region where demand has long been greater than supply.

A new peak in housing demand in 2008 in canton Geneva coincided with new construction falling off, leaving Geneva with an apartment vacancy rate of 0.25 percent on 1 June 2008, the date when national figures are compiled.

In the area between Geneva and Vevey there is not a single area that has a vacancy rate above .50 percent, according to “Swiss Issues Real Estate 2009,” a report on Swiss housing published by bank Credit Suisse (CS) 10 March 2009.

Today’s immigrants are young, well educated

Many of today’s immigrants are well-educated young adults at the start of their careers, and they generally search for rental apartments in or near city centres. Federal statistics show that a relatively high percentage of the Lake Geneva region population is 25-50 years old, and more than a quarter of the adult population has at least a university level education. This group tends to work in management or academic professions, which allows them to pay the high price of housing in the region but they also put pressure on the middle to high end of the market.

The CS report shows that there were only 191 vacant apartments in Geneva 1 June 2008. One  young professional foreigner living in Geneva, Nathalie St Leger,  says she struggled to find an apartment. “Getting to viewings was always extremely difficult because you first have to go the rental agency to pick up the key, find your way to the apartment, and then return the key to the rental agency,” she says. “This obviously conflicted with work because of the sheer number of times I had to view apartments before someone accepted my application.

“The most frustrating thing is that often enough, by the time you get to the rental agency to pick up the key, the apartment has already been rented out,”  she adds.

Changing size needs, as population in Lake Geneva area changes

Young professionals are feeding a growing demand for apartments with fewer rooms, but not necessarily less space. “Space required varies at different stages in life. The majority of people in the 20-30-year age range normally want two to three-room apartments, whereas those aged between 50 and 65 mainly live in larger apartments. After retirement, by contrast, many people downsize to two to three-room apartments again. The question now is to what extent high immigration has altered the age structure of the population and thus age-related demand for living space and housing types in individual regions,” the CS housing report notes.

Caroline Dunst, a housing assessor at Acanthe in Geneva, which publishes regular studies of regional housing, agrees there could be a growing need for apartments with fewer rooms.

“There are more young people and older people, but also divorced couples, although at least one of them will need housing large enough for their children. But as to whether or not these are actually being built, it’s very difficult to stay, to quantity, for now,” says Dunst.

Young professionals, as they become part of the Swiss system and build savings, tend to invest in mortgages for small homes or apartments, says Credit Suisse.

Most foreigners pay – a little bit – more

An enduring popular notion among foreigners is that they unfairly pay more for housing. A study published in November 2008 in the Swiss Journal of Economics and Statistics shows there is some truth to this. The difference between rent charged well-educated Swiss and well-educated foreigners is minimal, however, with foreigners paying 2 percent more on average. Foreigners with a lower level of education can expect to pay up to 7 percent more in rent than Swiss people with the same level of education, for similar accommodations.

An article published 1 April in Swiss news magazine l’Hebdo (GenevaLunch, a partner, offers the English version) argues that relocation agencies and foreigners who don’t speak French are partly responsible for this situation because they too easily accept higher prices and don’t read the fine print.

Francois Enzler of Network Relocation points out that the real issue is the very tight housing market. Foreigners, particularly expats who work for multinationals and who must find a place quickly during a brief pre-move visit, are often at a disadvantage. “To some extent it’s a question of luck.” It’s a market that moves fast, he says, and people have to be prepared – have their answer ready quickly and papers in order.

Geneva housing demand pushes up prices

The rise in housing demand in 2008 continues to push up rent for all apartment seekers. However, rent increases should be more moderate in 2009, says Credit Suisse. Residential property prices, too, have risen steadily, reducing the number of potential buyers. At the same time mortgage rates are becoming more attractive, and that may boost demand, says Credit Suisse.

Real estate prices rose 30 percent faster than incomes in the Lake Geneva Region from 1996-2008, the more stable Morges-Rolle area excepted. But in Geneva the difference was even more pronounced, with property prices going up 67.5 percent faster than incomes in the canton. Price corrections can be expected in the next few years, says Credit Suisse.

There are a number of reasons for the lack of housing supply in the Lake Geneva region, one of which is land hoarding, says Credit Suisse, although cities, with less property zoned for residential building, suffer from this less than rural areas. Investors buy land in prime locations and wait for market prices to rise. ”Swiss municipalities are considering measures that promote the rapid development of land in the future,” the bank reports.

Much of the land directly surrounding Geneva is zoned for agriculture and is not currently available for development.

Geneva doesn’t love highrises

Another reason appears to be a cultural reluctance to build high. Building  up instead of  out could reduce urban sprawl and commuter traffic, says Credit Suisse. Simply adding floors is not always possible or desirable but demolishing structures and rebuilding is an option. The number of planning permissions granted for apartment buildings has risen since mid-2008, however, and more apartments should be completed in 2009 and 2010.

Meanwhile, in the city of Geneva, 245 buildings do have permission to add two stories, and the planning commission is reviewing other buildings. Twenty percent of the city could be affected by Geneva’s determination to add 10,000 more apartments by building up, says Acanthe.

The magic word if you’re looking for an apartment: turnover

Network  Relocation’s Enzler says the situation is less dire than numbers make it appear. “We are regularly called on by companies to look for housing, and what people have to realize is that there’s a regular turnover, and a kind of pool of people looking. If you look at the rate of empty apartments you’ll think there is nothing, but that’s not true. There’s always turnover. It’s all based on movement – it’s not a question of taking a snapshot [of the housing market] at any one moment”.

“It’s harder than it was maybe three or four years ago. If more companies are coming in, it’s not easier to find housing. We used to say that 70 percent of people, coming for a day before they moved, could find something. And then as it changed we started to monitor it more closely and now we’re saying it’s 50 percent. That’s still not that bad: it means that half the people are finding an apartment in that day, half will have to extend their search time. But companies need to be aware of this and build in that cost. And it might happen that more people will need temporary housing for a couple of months before they get a place that’s right,” Enzler adds.

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