More building applications, and yet the number of vacant apartments is falling

Living space in Switzerland is becoming scarcer. On June 1, 2024, 51,974 apartments were vacant nationwide, which corresponds to a low vacancy rate of 1.08 percent. Compared to the previous year, the number of vacant apartments has decreased by 5.1 percent, the Federal Statistical Office (BfS) announced on Tuesday.

The main reason for this decline is the strong population growth last year. In 2023, the permanent resident population in Switzerland increased by around 145,000 people. This indicates a considerable need for housing. With a net immigration of 90,000 people, for example, there is a need for around 45,000 apartments.

In addition, refugees from Ukraine with protection status S are now part of the permanent resident population. There are also other factors such as demographic change. More and more older people live in single-person households and also need additional living space.

Market rents continue to rise

The consequences are well known: Housing costs are rising, especially in cities, large economic centers and popular tourist communities. Asking rents have risen by more than 6 percent throughout Switzerland over the course of the year, according to the latest real estate monitoring by Wüest Partner. Due to the high demand, a turnaround is not in sight for the time being.

The decline in the number of vacant apartments in Switzerland is almost nationwide. In six of the seven major regions, fewer vacancies were recorded on June 1, 2024 than in the previous year.

The biggest decline was in northwestern Switzerland. One obvious explanation is that when housing in downtown Basel is scarce and expensive, people move to the Baselbiet region, the Fricktal and the canton of Solothurn. Whatever was still available on the market here could be rented out within a short period of time.

From the city to the countryside

Throughout northwestern Switzerland, the local housing market offers more attractive and affordable options than in the city. This shift to the agglomerations and suburbs largely explains the sharp decline in vacancy rates in northwestern Switzerland.

The canton of Zurich is the only major region with a slight increase in the vacancy rate. The canton justifies this by saying that more new buildings were built than apartments were demolished.

The vacancy rate is above average in the canton of Jura, in the Solothurn area and in Neuchâtel. The canton of Ticino, with a vacancy rate of 2.17 percent, is also badly affected, as many municipalities are experiencing a population decline.

Ups and downs in new housing construction

Will investors be able to build more new buildings in the centers in the future to meet the increasing demand?

Between 2014 and 2018, over 50,000 new apartments were built each year in Switzerland, but after the end of negative interest rates, construction activity declined sharply. New construction activity is insufficient to meet the strong demand, particularly in cities.

The number of planning applications has increased slightly throughout Switzerland this year, but the implementation of new buildings and densification is taking far too long. In the already densely built-up urban environment, more and more projects are failing due to objections from neighbors and strict requirements for the appearance of the town and noise protection.

Stefan Fahrländer from Fahrländer Partner predicts that vacancy rates in Switzerland will remain low. “If we base our population forecasts on the Federal Statistical Office’s scenario, we expect a very high demand for additional housing by 2040,” says the expert. He calculates a total demand of around 522,000 apartments.

However, regional demand varies greatly. A closer look at the current vacancy figures shows that not only cities such as Zurich and Geneva are affected by very low vacancy rates, but also tourist communities in the canton of Graubünden and the Bernese Oberland.

Changing demand for apartment sizes

An analysis by the Basel-based company Demografik also shows contradictory trends in apartment sizes: Vacancy rates for 5- and 6-room apartments rose by 2 percent and 8 percent respectively last year in almost all cantons in Switzerland. At the same time, falling vacancy rates for small apartments indicate a change in demand. Demographic change will increase the differences between regions and apartment types, writes the institute specializing in demography.

The increasing number of pensioners is increasing the demand for small apartment types. But young people in training also have a clear preference for living in small, affordable spaces.

Even if there are still sufficient building land reserves outside the economic centers, the supply in the areas with the highest demand must be improved, especially in urban centers and well-connected agglomerations. It is also important to adapt the size of the apartments to social changes.