Housing shortage in Switzerland is very bad

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2022 was also a successful year for real estate investors in Switzerland. However, high interest rates began to take effect. Rising construction costs also slowed housing production. Now little is being built, which is noticed by people looking for a new apartment.

It has become more difficult for the population to find housing. According to the Swiss Property Benchmark published Tuesday by real estate consulting firm IAZI, it concluded that prospective buyers should be patient, particularly in the cities of Geneva, Zurich, Lucerne and Zug. The vacancy rates for rental apartments there are “well below 1 percent, so there is a real housing shortage”.

Large regional differences

IAZI boss Donato Scognamiglio (53) also presented the results of the study, saying, “According to the vacancy rate, there is a shortage of housing, especially in large centers.” “Because a lot of people want to go there.” Asked whether there was a housing shortage for Zurich and Geneva, he would say yes.

“But if you look at Switzerland as a whole, the answer is no,” says Scognamiglio. The situation across Switzerland was worse and varied greatly from region to region.

IAZI has set the vacancy rate at 1.3 percent across Switzerland at the end of 2022. IAZI CEO pointed out that this was 0.9 percent or 1.0 percent at the end of 2003 or 2014; In 1989 it was even 0.4 percent.

Still enough living space

Another important point he emphasized was the increase in single-person households. Compared to 1970, when it was still around 20 percent, that number nearly doubled to 37 percent by the end of 2021 (newer figures are not yet available). In the same period, the number of households with 5 people or more decreased from 16 percent to 5 percent.

In the last decade, the number of single-person households has increased by 18 percent, while the number of other households has increased by only 9 percent. Cities are especially popular with singles. According to Scognamiglio, 37 percent of apartments in Switzerland have only one occupant, while in Zurich, Bern, Basel, Lausanne and Geneva this rate is between 46 and 49 percent.

According to their statement, there is – still – enough living space in Switzerland as more housing units are built than new households between 2016 and 2021.

decline in housing construction

However, he also acknowledges that this may change in the future. Migration, the most important driver of housing demand, is still intact. The same applies to the still stable economy and dynamic labor market. According to IAZI, the number of flats under construction indicates a shortage of 5,000 to 10,000 flats per year in the coming years, according to figures from the Federal Housing Office.

There are economic explanations for the decline in residential construction: vacancies were constantly increasing until two years ago due to the rental housing boom that has led to a decline in construction activity over the last decade. Rising construction costs linked to the supply chain issue in the post-pandemic could have further cut housing production.

rent rob?

“Building flats doesn’t work that well anymore,” says Scognamiglio. According to the Swiss Property Benchmark, residential properties still did well at 5.9 percent last year, but below 7.1 percent in 2021. 3.0 percent of the 5.9 percent total return is also attributable to valuation gains.

In view of the political debate and outrage at the so-called “rent robbery,” the real return from the rental, the rental income minus the rental costs, was just 2.9 percent, Scognamiglio explained. But similar returns can now be obtained risk-free with safe investments such as government bonds. (nim/SDA)

Source :Blick