Real estate market 65,000 apartments sit empty

As a consequence, quoted rents have fallen for the second year in a row.

by Maciej Skoczek and Elias Hafner 17 Nov 2017

The vacancy rate in Switzerland increased for the fourth year in a row and has since reached a total of 1.5% (rental apartments and homes). According to the Federal Statistical Office, just under 65,000 apartments sat vacant on June 1, 2017, whereas in 2013 the number was still around 40,000 apartments.

Primarily rental apartments are suffering from higher vacancy rates. After an increase of just under 8,000 units within a year, more than 53,000 rental apartments were empty on June 1, 2017 – which yields a vacancy rate of around 2.4% (2016: 2%). The number of empty residential properties in the owner-occupied home segment also climbed to over 11,000 units (vacancy rate of around 0.5%).

Almost every sixth vacant apartment is located in new buildings that were completed in the last two years. This number climbed by just under 15% to more than 10,000 units – and the vacancy rate by an estimated 10%.

Rents fall, vacancies rise

The climbing vacancy rates put pressure on rents. The average rent level is more than 2% below the peak value of 2015; rental prices in new buildings may well have fallen 10% below those at the end of 2014. Landlords are trying to avoid reducing rents by giving out gift cards, smartphones, rent-free months, etc. But despite such incentives, we anticipate rents will continue to decline over the coming quarters. Whereas the average Swiss rent should fall by roughly 1% this year, we expect a reduction of around 2.5% for new buildings.

Construction activity should be slightly more modest this year than in previous years. Nevertheless, because of the slowdown in population growth, oversupply on the market could intensify again. In 2018, we expect to see an increase in the vacancy rate of 1.6%. Having said that, rates do vary sharply across regions.

German-Swiss vacancy rate: 1.5% (2016: 1.4%)

In the Swiss Plateau (Burgdorf, Oberaargau and Olten) and Central Switzerland (Einsiedeln, Innerschwyz and Uri) the number of empty apartments rose substantially compared to mid-2016. In the central Swiss regions, the increase was firstly due to high levels of construction over the last few quarters. On the other hand, a decline in vacancy rates was registered in and north of Zurich (Glattal-Furttal and the Zurich Unterland), in the canton of St. Gallen (St. Gallen, Werdenberg and Wil SG), and in Fricktal and Sarneraatal. The vacancy rate in Appenzell Innerrhoden declined the most, which qualified the substantial increase in the previous year. Mid-2017, Zurich (0.2%) and Zug (0.4%) boasted the lowest vacancy rates, Oberaargau (5.2%) and Olten (3.8%) the highest.

Western Switzerland vacancy rate: 1.3% (2016: 1.1%)

In Lower Valais and along the Jura Arc, vacancy rates climbed consistently. The increase was greatest in Sierre and in the Bernese Jura, the regions with the largest parts in the Romandy. In general, the slowed immigration rate was felt more than the average in Western Switzerland. Even larger cities like Sion, Biel and Fribourg registered a substantial rise. The rate only fell in Gruyère, Pays-d'Enhaut and Vevey. With a vacancy rate of 0.5%, housing markets in the central regions Geneva and Lausanne remain tight.

Ticino vacancy rate: 1.6% (2016: 1.2%)

The vacancy rate in Ticino grew the most out of all three regions. In addition to the accelerated construction activity, the rise is due to the sharp reduction in immigration. The share of empty apartments increased above all in Locarno and Mendrisio.