SKN | ZKB Sees No Property Price Surge After Abolition of Imputed Rental Value

Bank Expects Limited Price Impact and a Short-Term Renovation Wave

As Switzerland moves toward the abolition of the imputed rental value, Zürcher Kantonalbank (ZKB) concludes that the change will not trigger an additional surge in residential property prices. The bank’s latest analysis argues that today’s market dynamics are driven largely by new buyers whose purchasing power remains heavily constrained by mortgage requirements, regardless of the tax reform.

According to the Swiss National Bank, around 40 percent of new mortgage-financed home purchases involve a loan-to-value ratio exceeding 74 percent. Such buyers are already operating at the upper limit of what they can afford. For this reason, ZKB believes the tax adjustment will not meaningfully increase demand, as affordability — not taxation — remains the decisive factor for most prospective homeowners.

Older Properties Dominate Transactions and Renovations Will Become Costlier

ZKB highlights that few people entering the market buy brand-new homes. In Zurich, the average condominium sold is roughly 20 years old, while the typical single-family home on the market has an average age of 50 years. These properties generally require substantial renovation before move-in, and with renovation expenses no longer tax-deductible after the abolition of the imputed rental value, buyers will face higher real costs.

The bank expects this shift to create a clearer differentiation between new-build projects and older properties. Newer homes are likely to maintain stronger price momentum, while older buildings may see slower price growth due to the increased financial burden placed on buyers who must fund non-deductible renovation work.

Affordability, Not Taxation, Remains the Primary Barrier

ZKB emphasizes that the reform does not address the core obstacles preventing many households from buying property. High real estate prices, limited personal equity and strict mortgage affordability rules remain the central barriers to homeownership. The bank also notes that purchasing a condominium for rental purposes becomes less attractive if renovation and modernization costs can no longer be deducted, reducing incentives for investor-driven acquisitions.

Immigration Continues to Drive Market Tightness

While the abolition of the imputed rental value has attracted political attention, ZKB stresses that the true pressure on housing prices comes from population growth. Although immigration has moderated slightly, Switzerland still faces an extremely tight market. Vacancy rates have fallen to record lows, nearing what ZKB describes as the natural lower limit of available housing. The imbalance between needed immigration and limited housing supply remains the dominant factor affecting prices.

According to ZKB, addressing these structural issues requires long-term urban planning solutions. The bank points toward the need for better utilization of existing building zones, more support for affordable housing projects and strategic strengthening of regional centers to ease demand in major urban areas.

Closing Insight

ZKB’s assessment indicates that the abolition of the imputed rental value is unlikely to trigger a price boom. Instead, the reform may accelerate renovations in the short term and reinforce differences between modern and aging housing stock. Market fundamentals such as immigration, supply shortages and affordability constraints will continue to shape Switzerland’s real estate landscape far more than tax policy changes.

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