Photographer: Michele Limina/Bloomberg

Why Stratospheric Rents in Switzerland May Return to Earth

Updated on

Switzerland’s sky-rocketing rents may become a thing of the past.

That’s the view of real estate experts, including consultancy Wueest Partner, which expects advertised rental prices to decline 1 percent on a country-wide basis next year.

While in days past would-be tenants mobbed apartment viewings to fight over the most coveted residences in Zurich and Geneva, brisk construction spurred by yield-seeking institutional investors and a tapering off of net immigration have helped to push up the national vacancy rate. According to a Credit Suisse Group AG report last month, some 5,000 to 6,000 surplus flats are being constructed annually, the equivalent of just over 10 percent of new building.

The following charts show the state of play:

The supply of uninhabited apartments for rent has increased faster than the Swiss population has grown. Additionally, applications for the construction of 30,700 rental apartments were submitted in the last 12 months, according to Credit Suisse.

With the market beginning to shift in renters’ favor, landlords would do well to take their societal characteristics into account, Wueest said.

While Germans were the dominant group of newcomers a decade ago, in net terms their numbers have thinned considerably. Now, French and Italians top the arrivals.

That change in the composition of net immigration affects spending patterns because professional qualifications and incomes vary considerably among groups.

While more than 30 percent of Dutch, Britons, Germans, Americans and French living in Switzerland are well-educated managers and professionals -- commanding higher pay and choosing bigger dwellings -- the rate for the population as a whole is just 11.2 percent, Wueest said. Switzerland has offered a large number of refugees from Sri Lanka and Eritrea safe harbor, and many people from former Yugoslavia also live in the country.

— With assistance by Samuel Dodge

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