Rising rents are pushing people from Swiss cities

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A new study by the Raiffeisenbank shows: Rising rents lead to the emigration of long-established residents.

A living idyll: But moving out can be expensive.

A living idyll: But moving out can be expensive.

Image: Switzerland Tourism

Are rents rising or falling? The question was highly controversial in the struggle for the initiative of the tenant association for “more affordable housing”. Federal Councilor Guy Parmelin said they would sink. The tenants association said they would go up.

The Raiffeisenbank economists investigated the rent issue. In a study, they wrote: “On a Swiss average, rents actually increase over the years.” This primarily affects those who have to move. Newly rented apartments are expensive. This is especially true for the cities. “In the five largest Swiss cities, city dwellers pay an average of 35 percent more for a new city apartment.”

What are the consequences? The economists say: The cities would only grow thanks to the influx of immigrants:

“If you only look at the domestic population, more people move out of the city than into the city.”

The long-established population would be pushed out of the cities if they were forced to move.

So didn’t Parmelin tell the truth? But he has, but not the whole. Probably also because the whole truth was too bulky for concise slogans. As the economists explain, there are two rents: asking and existing rents. Their interaction explains many phenomena in the rental apartment market.

Parmelin spoke of asking rents. These are the rents of the apartments that are advertised. They show what landlords would like. And these rents have dropped. From 2015 to 2019 by 6 percent. Anyone who has to look for a new apartment will at least be relieved by this trend.

Offer rents are not the whole truth. Only a small part of all buildings that are rented in Switzerland are always advertised for rent. The rents that are paid on the entire inventory are called existing rents. They are recorded by the Federal Statistical Office and published in the rental price index. This shows an increase of 9 percent in ten years.

Why haven’t existing rents dropped? It would have been expected. With the interest, the costs of the landlords have finally decreased. One reason is reluctance, which is difficult to explain. The tenants do not demand cuts, although in principle they are entitled to them.

As of 2011, the reference interest rate was reduced five times. Only 20 percent of all apartments became cheaper each time. Many tenants waived. Otherwise, existing rents would have come under more pressure.


Poorly informed immigrants pay more

Why are existing rents increasing? Because tenants switch between the two parts of the rental market. In the first part, the tenants live in existing tenancies for many years. You pay low rents, the existing rents. In the second part, anyone who needs a new apartment ends up. The apartments are advertised on the market for the high asking rents. Although these have recently dropped, they are still much higher than the current rent.

Now 10 percent of tenants have to move annually. A large part then pays a asking rent. You switch from cheap apartments in the existing tenancy to more expensive apartments at asking rents. The new, expensive apartments will later be recorded in the inventory. Thus, they push up the rents in the entire portfolio. That is why existing rents are increasing.

There is a big difference between asking rents and existing rents. Across Switzerland, it is about 10 percent for typical apartments. In the largest cities, it can be 30 percent more. And the difference depends on how long you have been in an apartment. If it was five years, you pay about 12 percent more after moving. At 20 years old, the new apartments are 29 percent more expensive.

The high asking rents have consequences. City dwellers who have to move do not want or cannot afford new apartments. You move away, to the agglomeration or to the country. Most of the twenty largest cities have a net emigration of the domestic population: more people move away than new ones arrive. It is different only in Chur, KOniz, Schaffhausen and Winterthur.

The gaps are filled by immigrants. However, these can not necessarily afford the expensive apartments. They are only poorly informed than the domestic population – and do not know that the construction boom has meanwhile created many cheap new apartments in the agglomerations.



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https://www.luzernerzeitung.ch/wirtschaft/steigende-mieten-draengen-menschen-aus-schweizer-staedten-ld.1195131

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