Switzerland's Housing Market in 2023: A Deep Dive into the Challenges Ahead

As we look towards the future, Switzerland's housing market is poised to face significant challenges in 2023.

As we look towards the future, Switzerland's housing market is poised to face significant challenges in 2023. Rent prices are on the rise, availability is declining, and with population growth adding to the mix, the country is heading towards a potential crisis. In this article, we will explore the current state of Switzerland's accommodation market and delve into the reasons behind its predicament.

Balancing Housing Costs and Incomes

Over the years, housing costs in Switzerland have risen in parallel with income levels, providing a stable equilibrium. Rent and energy costs have consistently accounted for approximately 15% of income, while rent alone represents around 11.2%. The high rents in this country can be attributed to the equally high incomes, but it is essential to note that there are limited signs of a long-term national rise in rental prices. The market, at least for now, is still functioning adequately.

Zurich's Gentrification and Rent Discrepancies

Switzerland's largest city, Zurich, often makes headlines for its gentrification issues and exorbitant rent prices. A 3.5-room apartment can cost a staggering CHF 7,590 ($8,628) per month. However, Swiss law ties rents for existing tenancies to inflation and interest rates, resulting in moderate rent increases in recent years. In fact, many long-term tenants in Zurich have been fortunate enough to secure affordable rents, even after living in the same place for 20 or 30 years. This has allowed them to enjoy comparatively lower prices, with the average three-room flat renting for CHF 1,700 – CHF 500 less than the average for new tenancies.

Geneva's Rent Discrepancy and Availability Issues

Geneva faces even more significant discrepancies between existing and new rents, with a difference of around CHF 750. However, outside major urban centers, such as St Gallen, the gap is smaller, and moving into a new apartment may even save tenants a few francs per month. The dearth of available apartments in cities can be attributed to the lack of financial attractiveness in moving when one already enjoys relatively affordable rent. Naturally, this situation has made finding an affordable apartment increasingly challenging for those in need.

The Low Vacancy Rate and Housing Market Perspectives

With the vacancy rate plunging from 1.72% in 2020 to 1.31% last year, Switzerland is grappling with a shortage of available housing options. However, it is crucial to view this statistic in perspective. Official statistics only consider apartments registered as "vacant," failing to account for seamless transitions between tenants. Such transitions suggest a well-functioning housing market, but they are not officially counted. Unfortunately, this provides little consolation to those desperately seeking new accommodation.

Impending Hikes in Rent and Population Growth Concerns

In the coming months, tenants in Switzerland are bracing themselves for rent hikes due to inflation and the raising of the national reference interest rate. Additionally, real estate experts have recently sounded the alarm, indicating that the country is ill-prepared for faster-than-expected population growth. Predictions suggest that the population could increase by a record-breaking 148,000 people this year, far exceeding the 70,000 initially foreseen by authorities. To avert a crisis reminiscent of Monaco's scarcity and high housing prices, experts urge eased zoning laws and increased development.

Construction Challenges and Stifled Housing Market Growth

While immigration has had some impact on rising rents, it is not entirely responsible. In fact, immigration has also stimulated development in certain areas. However, the construction activity in Switzerland has been insufficient to keep pace with the growing demand for housing. The Avenir Suisse study reveals that approximately 10,000 additional housing units need to be built annually to maintain equilibrium in rent prices. Unfortunately, appeals and judicial obstacles hinder the completion of construction works, particularly in major cities like Zurich. These obstacles are primarily raised by homeowners who are unwilling to witness construction activities near their properties.

Searching for a Solution: The Role of Tenants' Associations

Amid this challenging landscape, tenants' associations like ASLOCA have shed light on other significant problems facing Switzerland's accommodation market. ASLOCA argues that tenants bear the burden of contesting exorbitant rents rather than landlords being compelled to justify them. The association estimates that landlords unjustifiably extract over CHF 10 billion in high rents annually. ASLOCA proposes a more effective solution that eschews subsidies and provides direct financial assistance to individuals struggling to meet their monthly rent obligations.

In conclusion, Switzerland's accommodation market in 2023 faces various challenges. Despite housing costs aligning with income levels, rising rent prices and declining availability are causing distress for many. The low vacancy rate, impending rent hikes, and unanticipated population growth further compound the situation. Switzerland must confront these problems head-on by promoting increased construction activity, reevaluating zoning laws, and addressing the burdensome task of challenging unjustifiable rents. By doing so, Switzerland can pave the way for a more sustainable and balanced housing market.