Strongest increase in asking rents since the start of the index

In 2023, the rental housing market was characterised by low construction activity and increased demand for rental housing. On the one hand, there was additional demand for housing due to high net immigration. On the other hand, many prospective homeowners postponed the purchase of residential property last year due to the rise in mortgage interest rates. They continued to hold on to their rented flat. Rental flat vacancy rates were therefore reduced again in 2023. The increasing shortage in the rental flat market led to a significant increase in asking rents. According to the Homegate Rent Index, these rose by 4.7 per cent across Switzerland compared to December 2022. This is the strongest annual growth in rents since the index began in 2009. Compared to the previous month, the index increased by 1 point in December and now stands at 125.2 points (plus 0.8 per cent).

Change in the cantons: Rents on offer rising without exception
In all cantons, asking rents increased significantly in 2023. The highest growth was recorded in the canton of Schwyz, with an increase of 11.1 per cent, followed by the canton of Zurich (up 8.4 per cent). With its economic centres, the canton of Zurich is particularly attractive to immigrants. Zurich’s vacancy rates are also very low, which is why the rise in rents there is not surprising. The high increase in the low-tax neighbouring canton of Schwyz is likely to be due, among other things, to the effects of people moving from the canton of Zurich. The cost increase in the neighbouring northern canton of Schaffhausen (plus 6.3 per cent) can also be explained by its proximity to the economic centres of Zurich. There was also an above-average increase in the canton of Graubünden (plus 7.2 per cent), where the persistently high demand for second homes is also having an impact on the rental market.

Change in the cities: Zurich asking rents rise by double digits
In the city of Zurich, asking rents rose by a significant 13.3 per cent in 2023, including 2.2 per cent in the past month alone. High population growth and the challenges of high-density construction have led to a further increase in the shortage on the rental flat market. In comparison with the other cities surveyed, it is noticeable that asking rents in the other population centres have risen to a lesser extent than in Zurich. Although Geneva also showed a significant cost increase of 5.1 per cent, the gap to the city on the river Limmat remains considerable. The same also applies to rental trends in Berne (up 4.6 per cent), St. Gallen (up 4.5 per cent), Lugano and Lausanne (both up 4.2 per cent), Lucerne (up 4 per cent) and Basel (up 2.9 per cent).

A look ahead to 2024
Asking rents are likely to continue to rise in 2024. Swiss construction activity will lag behind previous years as there are only a few construction projects in the pipeline. At the same time, construction costs remain high, making new projects more expensive. Due to the rise in interest rates last year, institutional investors are increasingly focussing on other investment opportunities. Finally, immigration is also likely to remain high in 2024, which will further increase the demand for rental flats.

Method of quality adjustment
The development of asking rents in Switzerland is adjusted for the different quality, location and size of the flats. The advantage of this so-called hedonic method is that the real rental price development for new and re-let flats is reflected on Homegate. The Homegate Rent Index is the oldest quality-adjusted rent index in Switzerland and is considered a reference source for real estate professionals to determine the price of rental properties.