Rents will rise again
Keystone-SDA
After a period of slowing growth, rents will rise again at a faster pace in Switzerland, Raiffeisen bank predicts in a study published on Thursday.
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As the dampening effects on rents from the fall in the key interest rate are about to wear off and the increase in energy prices due to the war in Iran drive up construction prices, the stabilisation of prices in the rental housing market is expected to come to an end soon, argue the bank’s experts.
“The very low vacancy rate and the increasing number of search subscriptions continue to indicate a strong excess demand in the market,” Fredy Hasenmaile, the institute’s chief economist, is quoted as saying in a statement. “Historically, such a low level of vacancies went hand in hand with significantly higher rent increases than currently experienced.”
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Switzerland’s housing shortage: how bad is it?
Despite the many signs of housing shortages, residential construction in Switzerland remains at historically low levels, the study said. A large part of the challenges in the housing market is related to the new spatial planning, which, although targeted, has been insufficiently implemented. In addition to densification efforts, which are proceeding slowly, one of the main factors behind this trend is the increasing regulatory complexity: in recent decades, requirements for new construction in areas such as energy efficiency, climate protection, noise pollution reduction, accessibility and historic heritage protection have tightened considerably.
However, regulation is also increasing outside spatial development laws: technical standards issued by private professional associations are becoming increasingly important, as they are often declared legally binding. The consequences are an increase in technical requirements, a lengthening of authorisation procedures, an increase in planning risks and an increase in construction costs, which ultimately curb building activity.
“The multitude of new social and technical expectations with regard to residential construction is mostly politically desired and widely supported: taken individually, certain regulations certainly seem appropriate,” Hasenmaile comments. ‘Taken together, however, they contribute to increasing the complexity, risks and costs of residential construction to such an extent that technical progress and efficiency gains can no longer offset these effects”.
Meanwhile, on the homeowners’ side some eight months after the abolition of the rental value there is still little reaction. “Neither from the renovation applications nor from the turnover of small businesses are there any signs so far of increased renovation activity, which still benefits from tax breaks in the transition phase,” the expert notes. Since the rental value will only be abolished as of the tax year 2029, homeowners have room for manoeuvre to carry out tax-deductible renovations or to optimise their future financing strategy.
“In order to be able to utilise the tax-saving potential in good time and avoid losses in the value of owner-occupied dwellings in need of renovation, work should be planned quickly, as many measures require long lead times. In addition, capacity bottlenecks for craftsmen can be expected as soon as the expected renovation boom begins,” Hasenmaile says.
Translated from German by AI/jdp
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