Are rent increases now a threat?: Landlords can pass on additional costs to rented households

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As can be seen from the updated private transactions analysis published by real estate service provider Iazi on Wednesday, prices increased by 1.5 percent compared to the previous quarter. According to the “SWX Iazi Private Real Estate Price Index”, prices of detached houses (+1.5 percent) and apartments (+1.6 percent) increased at approximately the same rate. There is an impressive 4.9 percent increase in house prices over the year.

Slightly higher transaction prices were also recorded for investment properties. According to the real estate consultancy company’s index, residential investment property prices increased by 0.6 percent in the third quarter of 2023 and 4.3 percent in the twelve-month period.

Iazi stated that prices have increased despite the news about increasing financing costs, suspension of real estate transactions and price reductions, and that many potential buyers and sellers are currently waiting due to different price expectations. This is evident from the number of transactions reported, which is currently significantly below the level of previous years.

Rent increases could reduce additional costs

However, ownership changes that occurred and were therefore included in the calculation of price indices resulted in higher prices and caused the index to rise. Conversely, all trades that have not yet been completed will not be shown due to different price expectations.

Additionally, in the multi-family housing segment financed with debt capital, interest-related additional costs can be reduced through rent increases. This applies to both new leases, namely proposed rents, and existing contracts, called existing leases.

In addition, demand for rental apartments continues and therefore rental potential remains high. As of June 1, 2023, only 1.2 percent of apartments were vacant across Switzerland, and in many densely populated areas the rate was significantly less. This situation is unlikely to change much, thanks to continued strong immigration.

In addition, the temporary interruption of interest rate increases (the Swiss National Bank (SNB) did not increase interest rates further in September) has a positive impact on the real estate market. This means interest rates on fixed-rate mortgages will likely settle between 2.5 and 3 percent, Iazi explained. Saron mortgages also approached this range. (SDA/sak)

Source :Blick