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More and more people in Switzerland are unintentionally living in very small spaces. In families, children share the same room. People set up shared flats and use all available rooms, except the kitchen, as bedrooms. Shared living room? None! Apartments are too expensive for that. The working-age urban population is turning to battery-powered housing when it comes to housing.
The situation is completely different for retirees, who need more than 55 square meters of living space on average shortly after retirement. For comparison: for those aged 25 to 50, it is only 39 to 45 square meters per person, as Raiffeisen shows in its current research on the Swiss real estate market.
Deterrent in rental law
Raiffeisen therefore speaks of a “grotesque misallocation”. The bank’s real estate experts state that the reason for this is Swiss tenancy law. Accordingly, apartment rents increase only to a very limited extent after the contract is signed. For example, an increase in the reference interest rate, adjustments in inflation or value-enhancing investments. The so-called current rents diverge significantly from the asking rents over the years.
The differences are huge: In the five largest cities, Basel, Bern, Geneva, Lausanne and Zurich, tenants for a 20-year-old, 4-room, 100 square meter apartment pay an average of 1,900 francs per month at the current rent. Anyone who has to buy such an apartment on the market will have to pay almost 2,300 francs.
On average across Switzerland, the current rent for the above-mentioned 4-room apartment is 160 francs cheaper than the current rent after 10 to 14 years. After 25 years, the difference increases to 30 percent or 350 francs.
Moving to a smaller apartment isn’t worth it
This means that after a few years moving to smaller apartments will hardly be financially profitable. This is the situation in a 4-room apartment in the five largest cities, after just five years. During this period, the requested rents have increased so much that the cost of a 3-room apartment is almost the same.
The difference increases significantly over the years: anyone who has lived in a 4-room apartment for 20 or 30 years can be happy to find a 2-room apartment for the same price.
It is therefore not surprising that 35 percent of rental houses in Swiss centers have been occupied in their own apartments for more than 10 years. Rates of such long-term tenancies are significantly lower in rural areas.
Especially older people rarely move
For people over 45, the space needed often decreases as children move out at some point. However, they change their apartments much less often. Although this age category makes up 46 percent of the population, it accounts for only 23 percent of moves.
Elderly households often live in apartments where the number of rooms exceeds the number of residents by two or more. The authors of the study take a harsh stance against the current practice: “Given the ongoing significant shortage of supply in the housing market, this distribution of living space is a complete waste.” These apartments are not available to young households who urgently need more living space.
Room for 450,000 more people
Raiffeisen has great potential in terms of living space: if the older generation adjusts space consumption to the average, 17 million square meters of space will be freed. This corresponds to living space for approximately 450,000 people, or approximately 170,000 additional apartments of 100 square metres.
According to the authors, this lack of living space leads to another problem: “Apart from fundamental questions of intergenerational fairness, this creates rather dubious market distortions.” This undermines the sensible strategy of densifying interior space and further reduces the already scarce supply of living space. “This further increases market rents and thus worsens the announced incentive problem,” the authors say.
Reduce rental rights?
Their solution: Even in existing flats, an appropriate price would have to be paid for the space used to ensure true costs. In principle, this means that the protection of existing tenancies in tenancy law is weakened. However, realistically, such far-reaching interventions in the hotly debated tenancy law are unlikely, the authors note.
The proposal still raises questions: How realistic is it that asking rents will drop noticeably? Or will practically only existing rents change upward?
“Current rents in daily practice”
While the authors discuss market rent several times, representatives of the Swiss Tenants Union are likely to curl their toenails while reading the study. At one point he says, “In practice, the desired rents are determined by supply and demand.”
However, the rental law wants to prevent exactly this and mentions that the maximum net return on rental apartments is currently 3.75 percent. However, if the apartments are over 30 years old, local and neighborhood traditions come into play. In a study conducted in 2017, Raiffeisen concluded that current rents should be 40 percent lower.
Let’s return to the current study: given the high level of migration and low construction activity, the problem of a more equitable distribution of living space is likely to become even more explosive.
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.
