Swiss rental market set to become even more expensive

The rental problem is set to become even more acute as very few new construction properties are currently planned © Keystone / Christian Beutler

Rents in Switzerland have risen sharply in the past 18 months. Rental properties are becoming scarce. There are no satisfactory solutions in sight. 

Anyone who can currently find a free rental flat in Switzerland can count themselves lucky. According to a property study by Raiffeisen Switzerland, the rental housing market is tighter than it has been for a long time. 

According to Raiffeisen chief economist Fredy Hasenmaile, this problem will become even more acute as very few new construction properties are currently planned. “We will see a further shortage of living space in the next two or three years,” he says.

Inflexible existing rents 

Rental properties are also being affected by the shortage. According to the study, rental prices rose by 4.7% last year. This figure is significantly higher than inflation and existing rental costs. 

+ Read more about the situation on the Swiss rental market

The gap between asking and existing rents is therefore widening, while at the same time the incentive for individuals to change rental property is shrinking. Hasenmaile sees one reason for this in tenancy law, as this means that existing rents can only be increased under limited conditions, such as when reference interest rates are adjusted. 

Existing rents are too rigid and can hardly be increased, he says. One consequence is that tenants stay longer in their flats, which are usually too large, because smaller, new flats would be significantly more expensive. This is despite the fact that they could, for example, move to a smaller flat when their children move out. 

Moving into a small flat is usually more expensive for older Swiss people. Keystone / Martin Ruetschi

As the study shows, there is an age effect in terms of living space: while people aged 18 to 25 live in an average home of 34 square metres, people over 66 live in much larger homes with 58 square metres of living space. 

Buying soon cheaper than renting 

This effect would result in a clear waste of living space. Hasenmaile has a suggestion for this: “If you could raise existing rents a little, then you could reduce the rents on offer.” The idea is a zero-sum game in which all tenants would be better off at the end of the day. 

The Swiss Tenants’ Association is unhappy with this solution. Vice President Michael Töngi explains that the market is difficult enough as it is. “This solution would mean that rents would rise without additional benefits and that would be extremely explosive,” he says. 

The Swiss market for rental flats therefore remains hot. According to the study, a slowdown is not in sight. However, if the trend continues, buying could soon become cheaper than renting. 

Translated from German by DeepL/ts