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Why Do Swiss Rent?

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  • Steven Bourassa
  • Martin Hoesli

Abstract

At 34%, Switzerland has the lowest home ownership rate in Western Europe. This is a puzzle given the economic strength of the country. We use 1998 household survey data for five Swiss cantons to explore some possible reasons for this. We estimate a tenure choice equation that allows us to analyze the impacts of a number of key variables on the ownership rate. We pay particular attention to the relative cost of owning and renting, which is a function of house prices, rents, and the user cost of owning. The latter is a function of income tax policy and expected house price inflation, among other things. We also measure mortgage underwriting criteria and consider rent control and other policies affecting rental housing. By simulating a number of hypothetical changes to taxation and other policies, underwriting criteria, and price levels, we assess the importance of these variables in explaining the ownership rate. We conclude that high house pricesórelative to rents and to household incomes and wealthóare by far the most important cause of Switzerlandís low ownership rate.

Suggested Citation

  • Steven Bourassa & Martin Hoesli, 2007. "Why Do Swiss Rent?," ERES eres2007_166, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2007_166
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    1. Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402, December.
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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