Zürcher Kantonalbank (ZKB) does not expect property prices to rise further as a result of abolishing the imputed rental value. Several factors argue against such an effect, the bank writes. In its analysis, ZKB's real-estate experts note that current market prices are determined not by long-term property owners but by prospective buyers - buyers who, in most cases, rely heavily on mortgage financing.

According to the Swiss National Bank, 40 percent of new transactions for owner-occupied residential property have a loan-to-value ratio of over 74 percent. In addition, very few new buyers purchase a new building. The average age of Zurich condominiums sold is 20 years, while single-family homes comes onto the market at an average age of 50 years.

Stronger Differentiation

Before moving in, properties are generally extensively renovated. Renovation costs that are not tax-deductible would make buying a home even more expensive. This is likely to lead to stronger price differentiation between new-build projects and older properties, as potential renovation expenses will dampen price growth for older buildings.

The abolition of the imputed rental value does not remove the real stumbling blocks for many prospective homeowners — high prices and often insufficient financial resources, ZKB continues. Furthermore, buying a condominium in order to rent it out would become less attractive if renovation and modernisation costs are no longer deductible.

Immigration Drives Demand and Prices

According to ZKB, the main factors behind further rising prices remain high immigration. Although pressure has eased, the market remains in a tense state. Residential vacancy rates are at a record low, reaching the natural lower limit, ZKB writes. To ease the conflict between necessary immigration and limited housing supply, targeted measures are required: for example, promoting affordable housing through greater utilisation of building zones and strengthening additional regional centres to reduce the pressure on major cities.