The Swiss electorate has voted by a clear majority to abolish the owner-occupied value and a large proportion of the associated deductions. The change in the system is likely to provide slight support for price developments and slow down the rise in mortgage debt.
On September 28, 2025, Swiss voters decided to abolish the owner-occupied housing allowance and at the same time gave the cantons the power to introduce a property tax on second homes. The verdict was clear: 57.7% of voters approved the proposal, and the majority of cantons clearly supported it.
These are the key points of the new tax system, as summarized by economists at UBS Switzerland AG:
• The imputed rental value was abolished for primary and secondary residences.
• Maintenance costs: The deduction no longer applies to owner-occupied residential property (primary and secondary residences). It remains in place for rented and leased properties.
• Private debt interest: Debt interest for mortgages, Lombard loans, and consumer loans is no longer tax-deductible. An exception is made for debt interest on properties not used by the owner – however, this is only deductible to the extent of the ratio of the affected property values to the total assets.
• Other deductions: At the federal level, deductions for energy-saving and environmental protection measures as well as demolition costs can no longer be claimed. A deduction for the preservation of historical monuments is still possible at the federal and cantonal levels.
• First-time buyers: A limited and temporary debt interest deduction is being introduced for first-time buyers of owner-occupied residential property. In the first year after purchase, a maximum of CHF 10,000 is deductible (for married couples, otherwise CHF 5,000). In subsequent years, the maximum deductible amount is reduced annually by 10% of the maximum amount.
• At the same time, a property tax on second homes will be introduced as a new constitutional power for the cantons. This is intended to enable the tourist cantons in particular to compensate for the loss of tax revenue resulting from the abolition of the imputed rental value.
Timing of the system change still unclear
The Federal Council has not announced when the system change will take place. Tax adjustments usually involve a transition period of two to three years. In addition, the mountain cantons must first draft a possible second home tax and have it approved by the electorate. It cannot therefore be ruled out that the transition phase will take some time. According to estimates by UBS economists, the system change is unlikely to take place before 2027 at the earliest.
Consequences for owners
The impact of the abolition of imputed rental value on a household depends primarily on location, mortgage interest rate, loan-to-value ratio, and renovation requirements.
Given the current low mortgage interest rates, owners of new apartments in particular are likely to be among the winners of the tax reform. First-time buyers also benefit from the first-time buyer deduction on interest expenses. On the other hand, owners of older buildings in need of renovation – roughly one-third of all owner-occupied homes – will be less favored. Second home owners are also likely to be among the groups worse off as a result of the reform.
Unclear consequences for second home owners
According to information from the Federal Tax Administration, the abolition of the imputed rental value for second homes will lead to a reduction in revenue of around CHF 300 million per year at the current mortgage interest rate. However, this figure is subject to considerable uncertainty. To compensate for the tax shortfall, the cantons may levy a property tax on second homes that are predominantly owner-occupied and decide autonomously on its introduction and amount.
According to estimates by UBS economists, based on the previous taxation of imputed rental value, the tax burden in tourist destinations currently averages around 0.4% of the asking price, although there are significant differences between individual destinations. For financial reasons, the mountain cantons can hardly do without this revenue. However, the actual tax burden for owners will only become clear once the cantonal legislation has been drafted.
Lower interest rates – more winners
The lower the mortgage interest rates and loan-to-value ratios, the more households will benefit from the abolition of the imputed rental value. Only with mortgage interest rates above 2% and a high loan-to-value ratio was the old system more advantageous for owners of new properties.
Consequences for the economy
Given current mortgage rates, the change in the system is likely to lead to slightly higher real estate prices in the short term. According to the Federal Department of Finance (FDF), the abolition of the imputed rental value will result in annual tax losses of around CHF 2 billion for the federal government, cantons, and municipalities. UBS economists expect additional price increases of between 2% and 3% overall in the coming years. However, if interest rates rise, the price gains would quickly be offset.
The value of older buildings is expected to appreciate at a slower rate, as maintenance costs are no longer tax-deductible.
Less mortgage growth
The change in the system could slow the growth of mortgage debt. Until now, the debt interest deduction on the rental value of owner-occupied property has reduced interest costs via income tax by around a quarter. The elimination of this deduction is likely to cause the overall amortization rate to rise slightly. From a macroprudential perspective, however, the effect is not clear, as the previous system dampened the impact of interest rate changes on the owner-occupied housing market.
Lower tax revenues
At current interest rates, the estimated tax shortfall at all levels of government corresponds to around 1% to 1.5% of total tax revenue. Around three-quarters of this shortfall is attributable to cantons and municipalities. The most likely compensatory measure is the introduction of property taxes on second homes. In the medium to long term, tax rate increases or benefit cuts are also conceivable. If mortgage interest rates rise again to 2.5% to 3% in the future, however, the public sector would be among the winners of the reform.
Extensive energy-efficient renovations hardly advantageous
Without tax deductions for repairs and without energy deductions at the federal level, the financial incentive for ecological renovations will decrease significantly. Until now, comprehensive renovations, such as facade insulation in conjunction with the replacement of a fossil fuel heating system with a heat pump, could be amortized (just) within the lifetime of the investment in single-family homes thanks to tax deductions and subsidies. Under the new system, such projects without tax deductions are more likely to be a losing proposition in financial terms.
Net-zero target probably not additionally jeopardized
The abolition of tax deductions does not fundamentally jeopardize the goal of CO2 neutrality, but it does slow down the pace of energy-efficient renovations. A simple renovation, such as replacing a fossil fuel heating system with a heat pump in single-family homes, remains financially attractive at current energy prices even without tax deductions. There is no clear correlation between the level of subsidies and the replacement rate for heating systems, meaning that tax deductions play a minor role in investment decisions. However, additional investments in energy efficiency are likely to be postponed more often for cost reasons.
Recommendations for action from UBS economists
After the system change, it will no longer be possible to use mortgages for tax optimization. This creates an incentive for amortization in order to reduce the interest burden. However, owning a home ties up a lot of equity in the long term and poses a cluster risk for asset development. A constant, moderate loan-to-value ratio promotes diversification and creates scope for higher-yield investments. Investments in financial assets often generate higher returns in the long term than the cost of mortgage interest. However, there are also risks involved: interest rate rises can make financing more expensive and reduce property values, while investment portfolios are subject to value fluctuations. A fixed-rate mortgage increases planning security.