In 2025, Switzerland will remain a nation of tenants. While rents may decline, urban housing shortages will continue to impact demand and prices.
In the year 2025, Switzerland is poised to maintain its status as a nation predominantly inhabited by tenants. While a modest decline in rental prices is anticipated for the upcoming year, this trend will not be uniform across the country. Urban centers continue to grapple with a significant shortage of new rental properties, which exerts persistent pressure on both demand and pricing structures.
According to a recent study conducted by the Lucerne University of Applied Sciences and Arts, as reported in today’s “SonntagsZeitung,” a notable 40% of the Swiss populace harbors aspirations of homeownership. Yet, for many, this aspiration remains an elusive dream, hindered by exorbitant property prices and stringent financing conditions. The recent reduction of the Swiss National Bank’s (SNB) key interest rate from 1.0% to 0.5% has done little to alleviate these challenges.
In 2024, property values experienced a resurgence, with single-family homes appreciating by 3% and condominiums by 3.4% compared to the previous year. This upward trajectory is expected to persist into 2025, fueled by low interest rates and heightened demand. Some analysts even project an increase of approximately 4% for condominiums and 4.5% for single-family homes. “Confidence has returned,” asserts Fredy Hasenmaile, chief economist at Raiffeisen Switzerland.
For tenants, the recent reduction in the key interest rate heralds a glimmer of hope. The current reference rate, which dictates rental prices, stands at 1.75% and is slated for a reduction in March 2025 by the Federal Office for Housing. Consequently, tenants may be eligible to apply for a rent reduction of around 2%, contingent upon their lease being tied to the prevailing rate, as noted by the real estate consultancy Wüest Partner. Raiffeisen Bank is even contemplating a subsequent adjustment to this reference rate in December 2025. However, caution is warranted: for those relocating in 2025, particularly in urban areas, rent hikes are anticipated, driven by the persistent demand stemming from a dearth of new rental constructions. According to Hasenmaile, these increases are expected to be contained within a range of 3% to 4%.
Interestingly, the period during which renting was more economical than purchasing a home has proven to be a fleeting phenomenon, lasting merely from mid-2022 to mid-2024. With the recent decline in interest rates, homeownership has once again become a more financially viable option—by an estimated 10% to 20%, depending on the mortgage term—when juxtaposed with the ongoing costs associated with renting a comparable dwelling. This favorable trend is projected to endure into 2025. Nevertheless, securing the requisite financing remains a formidable hurdle for many.
Beginning January 1, 2025, new regulations will govern the issuance of mortgage loans by banks, necessitating that financial institutions maintain a greater equity capital reserve for loans exceeding 60% of the property value. This regulatory shift will inevitably influence the equity requirements imposed on prospective borrowers. While this change predominantly affects the financing of commercial properties rather than private residential real estate, banks will be compelled to reassess their mortgage portfolios and implement adjustments tailored to individual customer profiles, as noted by industry experts.
