Rents are becoming even more expensive – the market for rental apartments continues to heat up – News

Rental prices rose by 4.7 percent in the last year and a half. There is also a shortage of rental properties.

Anyone who currently finds a free rental apartment can count themselves lucky. According to a real estate study by Raiffeisen Switzerland, the rental housing market is more tense than it has been for a long time.

At the end of 2023, 35,000 rental properties were advertised – a low in the last ten years. According to the study, the supply has halved in one and a half years. There is currently high demand and little new construction activity.

In the next two or three years we will see a further shortage of living space.

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

Tenancy law creates false incentives

Rental prices are also responding to the shortage. According to the study, asking rents rose by 4.7 percent last year. This value is significantly higher than inflation and existing rents.

The gap between asking rents and existing rents is increasing again, while at the same time the incentive to change the rental property is shrinking. Fredy Hasenmaile sees one reason in tenancy law, as this means that existing rents can only be increased under limited conditions, such as reference interest rate adjustments.

The existing rents are too rigid and can hardly be increased, he says. One consequence: Tenants stay longer in their apartments, which are usually too large, because smaller, new rental agreements would be significantly more expensive. This is despite the fact that they could, for example, move to a smaller apartment after the children move out.

As the study shows, there is an age effect when it comes to living space: While people aged 18 to 25 live on average 34 square meters, people over 66 live in a significantly larger area with a living space of 58 square meters.

Not everyone might like the solution

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

This solution would mean that rents would rise without additional services and that would be extremely explosive.

The Swiss Tenants Association would be anything but satisfied with this solution. Vice President Michael Töngi explains that the market is already difficult enough. “This solution would mean that rents would rise without additional services and that would be extremely explosive,” he says.

The market for rental apartments remains hot. According to the study, there is no slowdown in sight for the time being. But if developments continue like this, it could be that buying will soon become cheaper than renting.