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Differing developments in residential rents

August 18, 2021

Office Building, Building, High Rise

Housing costs are the largest expenditure item in the household budget for most Swiss households. The average burden for single-person households is 35 percent, for couple households, 25 percent, and for households with children, only slightly lower at 24 percent. Accordingly, it is important to know how the respective housing rents are developing.

However, there is no clear answer to this question. Forecasts come with uncertainty. Even in retrospect, the answer to the question of whether rents have risen or fallen depends strongly on what is measured and which method is used. Moreover, in relation to the individual case, not only market developments must be taken into account, but also and in particular, living circumstances – i.e. what location and what type of property is occupied and how long an occupant stays in the same property.

The following (purely fictitious) example shows how differently the rental costs for one and the same person in the same residential municipality could have developed over the last few years: Anna rented a 2.5-room flat in a typical agglomeration municipality for 1,300 francs per month (without ancillary costs) at the beginning of 2015. At that time, she was 23 years old and single. Now that almost seven years have passed, the question arises: does Anna pay more or less rent today?

Living situation 1 

In 2021, Anna is still single and lives in the same flat. During this time, there have been no value-enhancing renovations that would have been passed on to the rent. The ancillary costs have also remained unchanged.

In this case, Anna now pays about 110 francs less, or 1190 francs per month. This is because the reference interest rate for existing tenancy agreements has fallen from 2 percent in March 2015 to the current 1.25percentt, and Anna has asserted her claims for a rent reduction in each case*. This enabled her to reduce her monthly rent by a good 8 percent.

Living situation 2

In 2021, Anna moved into another existing flat with 2.5 rooms in the same municipality. The flat has the same standard of furnishings and fittings, the same size, and a comparable quality of location as the previous flat. What is the monthly burden now?

In the market for 2.5-room flats, the quoting rents are approximately the same as in 2015, so Anna would have to pay about the same rent as she did back then. However, if the quality characteristics of the two flats are taken into account, a different picture emerges. Based on the data for actual rental agreements, it shows that today, on average, around 4 percent more must be paid for a rental flat of the same size, with comparable furnishings and in the same location in Switzerland than at the beginning of 2015. In the region where Anna’s flat is located, the increase in final rents is as much as 6 percent. From this perspective, it can be assumed that Anna has a higher burden of around 1400 francs rent per month today than she did then. This increase corresponds roughly to the average wage increase in Switzerland.

Living situation 3

Anna is happily married in 2021 and has just moved into a 3.5-room flat with her partner. What does the couple pay and what half share does Anna now pay?

In the area of medium-sized flats, the Wüest Partner asking rent index shows that rents for advertised properties in Switzerland have fallen by 9 percent on average since the beginning of 2015. This is primarily due to the large additional supply brought about by the brisk new construction activity in recent years. Anna and her partner, therefore, have a good chance of getting hold of a new flat that is significantly cheaper than it was six years ago. In the municipality where Anna lived before, the typical rent for a new 3.5-room flat is around 2000 francs. In this case, it can be assumed that Anna’s proportional burden is 1000 francs per month. If the couple had been looking for such a flat five or six years ago, the rent offered on the market at that time would probably have been higher.

There are very different rent trends in the rental housing market. For this reason, it is not easy to say whether rents are falling or rising. What is clear is that the developments of recent years have been particularly advantageous for tenants who have lived in the same flat for a long time. Interest rate developments and current tenancy law have caused rents in current contracts to fall on average since 2011. However, not only have rents in existing tenancy agreements declined in the last decade, but the advertised supply has also shown a downward trend in some cases in recent years. This situation should be particularly pleasing for those who are looking for a new flat of medium size and have a certain degree of flexibility with regard to location and flat characteristics.

* For a decrease in the reference interest rate of 0.25 percentage points, there is a rent reduction claim of 2.91 percent.

You will find further detailed analyses around rent developments in the spring edition of the Immo-Monitoring 2021

The quarterly updated data on the asking rent indices can be found here.

The rental price index of the Federal Statistical Office is also updated quarterly.