A Swiss real estate market under tension.

Overall, the population is growing, rents are rising, but vacancies and new construction are falling.

From a demographic point of view, between 2015 and 2021, Switzerland welcomed an average of 64,000 new residents every year. At the same time, the average household size is falling, which naturally leads to an increase in demand for housing.

Today, there are around 1.4 million single-person households in Switzerland, representing more than a third of the 4.0 million private households. Since 1970, the number of single-person households has almost quadrupled, reflecting a continuing trend towards smaller households.

Despite rising demand for housing for several years, the number of building permits issued has fallen by more than 30% since 2016, a rate that is the lowest it has been in 20 years.

On top of this, some cities are experiencing a particularly acute shortage of housing, with extremely low vacancy rates. In the last year, just under 55,000 homes, or 1.15% of the housing stock, were vacant throughout Switzerland. The lowest vacancy rates were recorded in the cantons of Zug (0.42%), Geneva (0.42%), Schwytz (0.50%), and Zurich (0.53%).

In 2023, only Jura, Solothurn and Ticino still had vacancy rates above 2.

At the same time, rents are soaring a little higher every year. Since June 2023, rents have risen by almost 6% in one year, affecting almost all Swiss cantons. With a mechanical impact on rents, the Swiss National Bank (BNS) has recently increased the interbanking interest rate, which is currently (January 2025) set at 0.5%, marking a significant shift in monetary policy. Before the COVID-19 pandemic, the BNS maintained a negative interest rate of -0.75%, one of the lowest globally, to counter deflationary pressures and stimulate economic activity. However, in response to rising inflation and changing economic conditions, the BNS gradually increased the rate over the past few years, reversing its long-standing negative policy. This adjustment has had a direct impact on the rental market in Switzerland, as many rental agreements are linked to the reference mortgage rate, which is influenced by interbank rates. The rise in interest rates has allowed landlords to raise rents, reflecting higher financing costs for property owners. This has particularly strained tenants in high-demand areas like Zurich and Geneva, where rents were already steep, further exacerbating affordability issues in the housing market.

In short, the Swiss property market is facing growing demand that is outstripping available supply, exacerbated by a fall in the number of new builds and an inadequate vacancy rate in the major cities and their surrounding areas.

In major Swiss cities like Geneva and Zurich, the real estate market is facing significant challenges due to the controversial practices of certain intermediaries, particularly apartment hunters. These individuals or agencies often demand fees of 200 to 250 Swiss francs just to visit available properties, adding a financial burden to those already struggling to secure housing in an overly competitive market. Furthermore, they often ask for a commission equivalent to one month’s rent if they manage to secure a property for the client through an estate agency. However, many of these intermediaries operate without any formal affiliation with the agencies they claim to represent, exploiting the tense housing market for personal gain. Their unregulated activities not only create additional costs for renters but also contribute to further market instability, highlighting the urgent need for stricter oversight and comprehensive reforms to protect consumers and ensure fairness in the housing sector.

And what about furnished accommodation?

The market for furnished accommodation in Switzerland is also under increasing pressure, as a result of rising demand and limited supply.

In Switzerland, the rental market is predominantly composed of unfurnished accommodations, with over 60% of residents living in rented properties, especially in major cities like Zurich, Geneva, and Basel. Furnished rentals are relatively scarce, particularly for long-term leases, as most properties are offered unfurnished.

In urban centers, there is a noticeable increase in furnished options, including individual units, residential buildings, and co-living solutions. Despite this growth, the supply remains limited compared to the demand (below 5% of the overall offer). Additionally, furnished accommodations often come with a significant price premium, making them less affordable for many. This premium is further elevated by additional costs such as final cleaning and administrative fees.

Moreover, the majority of furnished properties are available primarily for short-term durations, typically requiring a minimum stay of one month.

In summary, while there is a growing presence of furnished accommodations in Switzerland’s major cities, the market remains limited. The combination of high costs and short-term availability continues to make furnished rentals less accessible compared to their unfurnished counterparts.

What can be done to limit the crisis?

Faced with the housing crisis in Switzerland, the federal government is studying various scenarios to improve the situation.

Last year, politicians associated with the real estate sector also set up the « Union pour le logement » (Housing Union).

Their aim? To find pragmatic solutions to simplify building procedures and reduce standards in order to facilitate an increase in the supply of housing.

Among the solutions envisaged are the densification of existing residential areas and better use of building space. This includes the renovation of old apartment blocks to transform large under-occupied flats into several smaller units, and the conversion of offices into housing, encouraged by the development of teleworking.

Other measures include making it easier to raise the height of existing buildings, by making building and zoning regulations more flexible, so that more can be built higher up or between existing buildings.

Finally, a reduction in construction times and administrative procedures is considered essential to speed up the provision of new housing.

A slight easing in the rental market in 2025

After several years of tension in the Swiss property market, 2025 will finally bring some signs of calm for tenants. Thanks to a dynamic upturn in construction (with 24% more rental units authorised in 2024 than in 2023), supply should gradually increase, particularly in the Geneva conurbation.

In addition, the expected fall in interest rates and the stabilisation of construction costs will encourage the construction of new homes, making it easier for some households to become homeowners and reducing pressure on the rental market. While supply-side rents will continue to rise, this increase should be more moderate in 2025 (+1.9% nationally, +1.7% for the Lake Geneva region), marking a clear break with the dizzying increases of recent years. In addition, the expected fall in the benchmark mortgage rate in the spring should enable many tenants to request a reduction in their rent, estimated at 2% on average.

However, this easing will not affect all market segments: three- to five-room flats remain rare and highly sought-after, particularly in the canton of Geneva and on the Lake Geneva region, making the situation still complex for families.

Our advice until the situation stabilizes