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Condominium rents published in advertisements increased by 0.5 percent in May. This is the result of the Swiss Real Estate Proposal Index, compiled monthly by SMG Swiss Marketplace Group and real estate consulting firm Iazi, and released on Monday.
Rental flat prices also rose in May, although not as sharply as condominium prices. Increases were particularly low in the Lake Geneva region (+0.2%) and Zurich (+0.1%) on average. In Ticino, there was even a 0.6 percent decrease in rental prices.
The largest increases were in central and northwestern Switzerland and eastern Switzerland (+1.0%), with 0.5 percent each. According to the report, apartments for rent across Switzerland were on average 0.2 percent more expensive on May 31 than on May 1.
Further increase expected due to reference rate hike
However, within a year there was a stronger increase: If you compare the rental prices of the apartments in the advertisements from May 2023 from May 2022, the desired rental prices showed a significant increase of 3.9 percent.
According to the authors, the increase in the reference rate last week will also result in rent increases for many existing tenancies that are legally bound to this rate. Almost half of tenants should expect a 3 percent increase by the next contract termination date, October 31, according to Iazi’s data.
1. What is the mortgage reference interest rate?
The reference interest rate is one of the criteria for apartment rentals. It can be used to pass on changes in the mortgage interest rate to tenants. So the reference interest rate reflects the costs incurred by the homeowner to finance a property.
2. Why is a reference interest rate necessary?
It is decisive for the rents of most rental apartments – excluding, for example, cooperative apartments whose rents are subject to government control.
3. When was the reference interest rate introduced?
The reference interest rate was introduced in 2008. The aim was to harmonize the rental structure across the country. It has dropped from 3.5 percent to 1.25 percent since its inception. In June 2023, there was an increase to the first 1.5 percent since introduction.
4. Can a change in the reference interest rate cause an increase in rent?
Yes, if interest rates rise, landlords can use it to increase rents by 3 percent. However, only if the lease is based on the current reference interest rate of 1.25%.
5. Can tenants charge lower rent because of the reference interest rate?
Yes, they can if the reference interest rate drops. Anyone who has lived in the same apartment building for several years and has never applied for a reduction in rent may even argue that the reference interest rate has fallen several times over time. A 0.25 percentage point reduction in the reference interest rate corresponds to a 2.9 percent reduction in rent. However, landlords have the option to offset the rent deductions from mortgage interest with increased operating and maintenance costs for the property. Some landlords automatically voluntarily offer a rent reduction.
6. How is the interest rate actually calculated?
The reference interest rate corresponds to the volume-weighted average interest rate of all mortgage loans from Swiss banks. The rate is calculated by the Swiss National Bank on behalf of the Federal Housing Office. Banks must provide the necessary data to the Central Bank for this. The average rate from the calculations is then rounded up or down to the quarter percent. Dorothea Vollenweider
1. What is the mortgage reference interest rate?
The reference interest rate is one of the criteria for apartment rentals. It can be used to pass on changes in the mortgage interest rate to tenants. So the reference interest rate reflects the costs incurred by the homeowner to finance a property.
2. Why is a reference interest rate necessary?
It is decisive for the rents of most rental apartments – excluding, for example, cooperative apartments whose rents are subject to government control.
3. When was the reference interest rate introduced?
The reference interest rate was introduced in 2008. The aim was to harmonize the rental structure across the country. It has dropped from 3.5 percent to 1.25 percent since its inception. In June 2023, there was an increase to the first 1.5 percent since introduction.
4. Can a change in the reference interest rate cause an increase in rent?
Yes, if interest rates rise, landlords can use it to increase rents by 3 percent. However, only if the lease is based on the current reference interest rate of 1.25%.
5. Can tenants charge lower rent because of the reference interest rate?
Yes, they can if the reference interest rate drops. Anyone who has lived in the same apartment building for several years and has never applied for a reduction in rent may even argue that the reference interest rate has fallen several times over time. A 0.25 percentage point reduction in the reference interest rate corresponds to a 2.9 percent reduction in rent. However, landlords have the option to offset the rent deductions from mortgage interest with increased operating and maintenance costs for the property. Some landlords automatically voluntarily offer a rent reduction.
6. How is the interest rate actually calculated?
The reference interest rate corresponds to the volume-weighted average interest rate of all mortgage loans from Swiss banks. The rate is calculated by the Swiss National Bank on behalf of the Federal Housing Office. Banks must provide the necessary data to the Central Bank for this. The average rate from the calculations is then rounded up or down to the quarter percent. Dorothea Vollenweider
But this is not the end of the matter, according to the authors. Because under the rent law, landlords have the right to at least partially pass on general cost increases and inflation to tenants. “This could result in effective rent increases of up to 6 percent or even 7 percent,” said Martin Waeber, Managing Director of Real Estate at SMG Swiss Marketplace Group. (SDA)
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
