Home rent could rise 15% in Switzerland by 2026, according to Martin Tschirren, the head of Switzerland’s federal housing office, reported RTS this week.
Tschirren thinks the rental reference rate could rise again over the coming year or two – the rental reference rate is an officially computed figure that reflects average mortgage rates. It is used to set rent levels in many rental contracts in Switzerland. It is reviewed quarterly and the latest rate was announced on 1 September 2023, when it was left unchanged at 1.5%.
If the rental reference rate rises 0.25 percentage points it lifts rent by 3%, said Tschirren, and some of the recent rise has not yet worked its way through the system. According to the director, 40% of the eventual impact of the last rental reference rate rise is yet to be felt.
In addition, higher mortgage rates take time to work their way through to the rental reference rate. Changes to the mortgage rates only immediately hit those with floating rate loans. Those on fixed rate deals are not affected until their fixed rate mortgages expire and they need to refinance, so the time lag can be significant.
The rental reference rate was launched in 2008. Since then it fell to a low of 1.25% before rising in June 2023 to 1.5%. According to several experts, it could rise again to 1.75% and then 2.0% during 2024.
On top of a rising rental reference rate, future renters will need to factor in the effects falling home construction in the face of rising demand. Switzerland’s population continues to climb and 2023 could be a record year for new arrivals.
In addition, the construction of new homes has been slowed by the rising costs of financing and rising material and labour costs.
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