Two-thirds of people currently renting a house or apartment in Switzerland should see their rent fall in the coming year, an analysis from the Zürcher Kantonalbank (ZKB) has predicted. The bank noted that with interest rates on Swiss mortgages continuing to fall, rental costs will soon follow suit.
Rental costs in Switzerland finally expected to fall
After rental costs on tenants rose twice in 2023, the ZKB noted that there are finally signs that those on pre-existing rental contracts will see their rent fall by the middle of 2025.
The reason is the continuing decline in interest rates on Swiss mortgages. In response to falling inflation, the Swiss National Bank has cut its policy rate three times in 2024, going from 1,75 percent in March to 1 percent in October. This has also been reflected in the homebuying market, with the average mortgage interest rate falling to a two-year low in August.
Swiss reference interest rate to fall by March 2025
With the cost of buying a house falling in Switzerland, the ZKB predicts that this will in turn lead to a drop in rents thanks to the reference interest rate. The metric, calculated by the Federal Housing Office (BWO), is used to determine how much landlords may raise rents on existing tenants. If the rate rises, landlords are permitted to raise the rent - as occurred twice last year, when it rose from 1,25 percent to 1,75 percent. If it falls, tenants are able to apply for a rent reduction.
The ZKB predicted that the reference rate will fall by March 2025 at the latest to help better align with real interest rates. The BWO announces the new rate four times a year, with the next publishing date expected on December 2, 2024. If the metric falls by 0,25 percentage points, tenants will be able to cut their rents by around 3 percent.
Which renters in Switzerland will see costs fall?
However, this rent cut will only apply to those whose landlords have applied both reference rate increases to their rental costs, those who began renting their home after December 2, 2023, and those who started renting their home before June 2, 2017, and have not applied for a rent reduction in the past. The ZKB predicts that this will total around two-thirds of tenants in the alpine nation.
Sadly, new arrivals and new tenants are out of luck, with the ZKB predicting that rental costs on new tenancies will continue to rise thanks to the ongoing shortage of new homes. With costs for new homes rising at their fastest rate for over 30 years, many are starting to question whether spending just a third of their income on housing is feasible, especially in the major cities.
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