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Rental costs in Switzerland rise at record-breaking speed, report finds

Rental costs in Switzerland rise at record-breaking speed, report finds

The latest analysis by bank and investment firm Raiffeisen has revealed that the cost of renting a house or apartment in Switzerland has risen at a breakneck pace in the last year, and is not expected to slow down anytime soon. At the same time, the report painted a more hopeful picture for those looking to buy property, with stable interest rates set to coincide with more homes on the market.

Rental costs skyrocket in Switzerland

In the report, Raiffeisen claimed that the cost of renting a new home in Switzerland increased by 2,75 percent on average in the third quarter of 2023 - this is the fastest quarterly rise in rents recorded in more than 30 years. Rental properties are now an average of 4 percent more expensive than this time last year, an annual rise unseen in nearly 15 years.

The bank explained that prices have been spurred on by significantly lower investments in new property across Swiss cities and cantons. The amount invested into new builds is expected to reach a 10-year low by the end of 2023.

Single-person households put strain on Swiss rental market

At the same time, demographic changes within the country are leading to increased demand for smaller homes. Raiffeisen branded the phenomenon a “mega-trend of individualisation”, with single-occupant households becoming increasingly common, leading to higher demand for a limited number of properties.

The bank warned that this move towards individual living has to stop if more houses are not built, predicting that if current trends continue, “People will be forced to live together.” For the future, the bank said that rental costs should continue to rise at roughly the same rate as before, concluding that there is “no sign” of a turning point when it comes to rental costs or the number of new homes built.

Complex picture emerging for homebuyers in Switzerland

By contrast, experts did predict that for those with Swiss mortgages, the situation is unlikely to get worse. They predicted that interest rates on mortgages are not set to rise further, mainly due to the “surprisingly rapid” fall in inflation in Switzerland and abroad. Experts told Watson that rates may even be cut by next summer.

On the wider housing market, Raiffeisen said that “signs of a slowdown are materialising” for homebuyers, finding that the number of properties listed for purchase has increased significantly in the last year. The number of home sales fell by 18 percent in the first three quarters of 2023 compared to the previous year, with the number of new mortgages issued also falling. Traditionally, this would point towards lower house prices in the future.

However, the bank found that the cost of single-family homes still rose by 2,1 percent in the third quarter of 2023, mainly due to higher demand in major cities. Therefore, they concluded that it remains to be seen whether buying a house will become more affordable in the future - a recent study by Wüest Partner found that currently, only two Swiss cantons have affordable homes to buy.

Jan de Boer

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Jan de Boer

Editor for Switzerland at IamExpat Media. Jan studied History at the University of York and Broadcast Journalism at the University of Sheffield. Though born in York, Jan has lived most...

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