As of 2024, Raiffeisen Bank indicates a inevitable housing crisis. This is due to the fact that the vacancy rate will fall below the symbolic 1% mark across the country. As a result, rents and real estate prices will increase significantly.
Housing shortage trend expected to continue
This is bad news for tenants, as the scarcity of housing due to the rising interest rates and rising construction costs provide little incentive to build new homes.
It should be remembered that the Switzerland’s population has been growing steadily in recent years (7.2 million inhabitants in 2000, compared to 8.7 million in 2021) and evolves in ever larger spaces. As a result, we are witnessing a increase in demand exceeds market supply.
In parallel to this and since the beginning of last year, the rate of vacant housing has decreased nationally. This record decrease concerns rental housing. For example, this rate has fallen below the 1% threshold in the cantons of Zug, Geneva and Zurich.
Will renter households experience a rent increase?
Economic forecasts predict that :
- Households facing a move will see an increase in the cost of the initial rent.
- The lease agreements will follow the same dynamic.
The increase in average mortgage rates, of which this one is estimated at +1.5% of the mortgage interest rate for the first quarter of 2023, will increase the cost of indexed rents to a level close to 3% by lessors.
Add to that, rising overhead costs and inflation, some renter households could be hit with a 10% increase by 2024.
The canton of Vaud is currently in a situation of shortage of vacant units. Seven out of 10 districts have a vacancy rate above 1.50 percent, indicating that the situation has not improved much since last year.
This is bad news for the 3 municipalities in the affected districts as they are unable to use their pre-emptive right. It should be remembered that this right allows them to acquire land to create public utility housing in building zones.
In addition, landlords are not required to provide the official form when entering into a lease agreement, which allows tenants to challenge an excessive initial rent.
However, the city of Yverdon-les-Bains asked to be removed from the State Council’s list of districts because it had a vacancy rate of 0.85%, which represented a very different housing market situation than the district.
What is the opinion of the Federal Councilor on this housing crisis?
According toGuy Parmelin, Federal Councillor, he fears social tensions. In particular, if people with low incomes can no longer find housing, but also if the lack of housing supply could limit economic development.
To corroborate his statements, he relies on the declining trend of the national vacancy rate (1.31%) and future projections of new housing (50,000) associated with immigration.
Since 2018, the number of housing units built has decreased significantly. This has prompted the Canton of Uri to promote real estate projects in the Alpine valleys to meet the needs of those who opted for the Home Office during the pandemic.
The Federal Councillor is now examining measures to reduce housing costs and to ensure that the housing built corresponds to society’s requirements.
Another point addressed by the latter is the improvement of the framework conditions. These aim to achieve three objectives :
- Increase the supply of housing,
- Create sufficient affordable housing,
- Build in areas where housing is sought and that the needs of the elderly in particular, and then society, are taken into account.
Why is housing construction in decline?
As of 2018, the housing construction in Switzerland has receded.
In that same year, 53,000 housing units were built, compared with 46,000 in 2021 and probably even fewer in 2022, according to theFederal Housing Office (OFL).
Mortgage rates are on the rise and construction has become more demanding, especially in already urbanized areas, with densification projects meeting resistance.
In addition, site delays due to supply disruptions as well as the delays in approving building permit applications, which have increased from 90 to 150 days, have considerably delayed construction projects.
If we add to this, all the people who fled the war in Ukraine to take refuge in Switzerland and whose longer stay is likely to put additional pressure on the rental housing market, it seems inevitable that the scarcity of housing continues and therefore that the shortage of housing on the Swiss real estate market does not know any respite.
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