- According to a Raiffeisenstudy getting tighter.
- The reasons for this are therefore the high building land prices and the declining construction activity due to rigid regulations.
- In addition, more living space is needed than is currently available on the market.
Immigration remains high and empty apartments are becoming scarce. As a result, it is becoming increasingly difficult for residents of Switzerland to find an empty apartment on the market.
Up until two years ago, vacancies were rising sharply. But then construction activity slowed and the vacancy rate began to fall. Since the beginning of the year, the vacancy rate across Switzerland has fallen to 1.31 from 1.54 percent in the previous year.
In many regional rental housing markets there is already a housing shortage, in some even housing shortages, writes Raiffeisen. The cantons of Geneva, Zurich and Zug have vacancy rates of well under one percent for rental apartments. By 2024, the number should fall below the 1 percent mark throughout Switzerland.
In addition to the high prices for building land, higher interest rates and rising building prices also reduce the incentives for building activities. But the population is demanding more and more living space. The acute shortage of skilled workers and the war in Ukraine are fueling the already high level of immigration.
Not only will home prices go up, but so will rents. “Anyone who moves will soon be confronted with significantly higher initial rents,” says Raiffeisen chief economist Martin Neff.
Rent increase by up to ten percent
Existing rents are also likely to rise noticeably in the foreseeable future. Because in the first quarter of 2023, the mortgage reference interest rate is likely to be increased by 0.25 percentage points to 1.5 percent for the first time.
This means that rents based on the current reference interest rate can be increased by around three percent by the landlord. In addition, there is the legally permitted cost-of-living adjustment and the general cost increases. For example, some existing tenants are threatened with rent increases of up to ten percent by 2024, adds Neff.
Home ownership remains very scarce in Switzerland
In the meantime, however, there are signs of easing on the home ownership market: the number of active search subscriptions for home ownership on online portals has fallen by around six percent compared to the previous quarter and sellers seem more willing to compromise.
Asking prices for single-family homes fell slightly in the third quarter for the first time in a long time. According to Raiffeisen, this is a sign of weaker price dynamics. However, the price trend should continue to point upwards in the future. “Because home ownership remains very scarce in Switzerland,” says Neff.
reluctance on the part of investors
Darker clouds have also gathered on the market for investment properties. There is much to be said for a clear drop in demand for investment properties. Due to the increased financing costs, many outside-financed investments were no longer worthwhile.
Greater restraint must also be expected from institutional investors. Fixed-interest securities are again an alternative, writes Raiffeisen.
This could put pressure on the transaction prices and thus also the valuations in the real estate portfolios. Exchange-traded real estate funds have already corrected drastically.