Sunday, March 26, 2023

The shortage of rental apartments is getting worse

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Housing cost burden increases

The shortage of rental apartments is getting worse

There is still a housing shortage in Switzerland. This is likely to get worse, writes the consulting firm Wüest Partner in its “Winter Update 2022”. In addition, rents are likely to rise, as well as the costs of buying a property.

Published: 13 minutes ago

Housing shortage is becoming more acute, rents are rising (symbol image)

According to the study published on Tuesday, the supply of apartments continued to decrease in 2022. The offer rate is now only 4.7 percent after 5.8 percent in the previous year. According to the experts, such illiquidity has not been observed since 2013.

This is due, among other things, to a decline in construction activity. The tourism communities in particular would feel the long-term consequences of the second home initiative with full force. But even in big cities like Zurich or Geneva, the supply of rental apartments is very limited. There is also strong population growth. In addition, construction activity is unlikely to become more dynamic before 2024.

This lack of rental apartments and inflation caused rents to rise as early as 2022. This trend is likely to continue in 2023 – Wüest Partner expects an increase in asking rents of 2 percent. Since the mortgage reference interest rate is also likely to be raised, the rents in existing contracts would also increase.

The purchase of a residential property has also become more expensive again in the past year. Due to higher mortgage interest rates and prices, the annual costs for buying a medium-sized single-family home have risen from 31,400 to 53,600 francs. This development has depressed demand, while the number of properties advertised is on an upward trend. And this is not due to higher construction activity, but because, according to Wüest Partner, the owners want to sell their property as quickly as possible. A slight price increase of 1.7 percent for single-family houses and 0.5 percent for condominiums is expected for 2023.

Thanks to the booming job market, there was strong demand for office space last year, especially in the big cities. Together with the low level of construction activity, this has led to historically low market liquidity and higher rents. For 2023, however, a return to normality on the labor market and thus a falling additional need for offices can be expected. The environment for retail space was meanwhile particularly challenging.

In a special study, Wüest partners are investigating the development of the housing cost burden. After a few stable years, this has recently risen again. The relative housing cost burden in the big cities is even lower than outside the city limits when commuting costs are included. However, households outside the centers usually have significantly more living space.

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