After years of oversupply in the housing market, Raiffeisen has predicted that there will be an “extremely strong decline” in the number of new houses and apartments to rent in Switzerland. The bank said that rental costs will rise, as properties become more scarce.

Housing shortage grips Switzerland

In their latest real estate study submitted to the Tages-Anzeiger, Raiffeisen found that as of June 1, 2022, less than 1 percent of properties in Switzerland were listed as available to rent or buy. There are now fewer properties available to rent today than there were 10 years ago.

"After years of oversupply, all signs point to a shortage in the rental housing market," Raiffeisen chief economist Martin Neff said in a statement. He predicted that there will be a “further significant decline” in the official “vacancy rate” in Switzerland, from 1,54 percent a year ago to 1,25 percent today. The bank noted that in certain Swiss cities, the official vacancy rate has already fallen below the 1 percent mark.

Rents in Switzerland set to rise amid housing shortage

Over the last two quarters, the prices quoted in rental contracts have also begun to increase, with Neff noting the current situation is “just the beginning” of significant rent rises in the coming months. Currently, there are 5,6 rent-seekers for every property available on the market, a rise of 2 people since 2021. The number of listings has also declined by an average of 40 percent in the last six months.

According to real estate experts Wüest Partner, the reason for the declining vacancy rate is a combination of population growth and a decline in the number of new properties being built. They noted that the current rental market is under great strain because of expats moving to Switzerland for jobs and the arrival of Ukrainian refugees.

Swiss rental cost rise to hit new tenants first

Another reason for the rise, according to the Tages-Anzeiger, is that Swiss families are getting smaller. The newspaper noted that the number of one and two-person households have increased significantly over the years, putting higher demand on a limited supply of smaller properties.

In all, Raiffeisen predicted that rental costs for new tenants will rise significantly in the next year due to the shortage of housing. Current tenants will only have to worry about higher rental costs when the reference interest rate, set by the government, rises, which is only expected in 2023.