Real estate Study: Despite more applications for new builds, housing shortage remains acute

Housing remains a scarce commodity in Switzerland for the time being. The increased number of applications for new rental apartments in the second quarter provides a glimmer of hope. However, it is likely to be a while before these are realized.

There are signs that construction activity could gain momentum, according to the quarterly "Immo-Monitoring" report published by real estate consultancy firm Wüest Partner (WP).

The number of new building applications for rental apartments rose by 22 percent in the second quarter. In total, planning applications for a good 34,000 rental apartments were submitted. This increase was particularly noticeable in commuter communities, medium-sized centers and tourist communities.

However, the new momentum is not necessarily the result of more efficient and effective densification activities, but rather a consequence of the use of undeveloped building zones.

Patience is required

As many permits are still pending, it remains to be seen whether the increase in building applications will actually lead to an increase in construction activity. In addition, it takes several years from the planning application to the completion of a property.

Furthermore, the higher number of new building applications will not yet fully close the gap between supply and demand. According to the report, the shortage of housing is therefore likely to continue to characterize the Swiss rental market in the short term.

Prices continue to rise

Accordingly, there are still no signs of any easing on the price front. According to Wüest Partner, the classic asking rent index rose by 6.4 percent in the second quarter. As new construction activity is still stagnating for the time being and population growth remains dynamic, no trend reversal in rental price development is expected in the short term.

Thanks to the solid state of the real economy, the consulting firm expects employment to grow by 1.3% in 2024 as a whole, primarily thanks to public-related sectors such as healthcare, education and public administration. According to the forecast, the population is also likely to grow by a further 0.9%. Demand pressure therefore remains high.

Brisk demand for residential property

In view of the tense situation on the rental housing market and falling mortgage interest rates, it comes as no surprise that demand for home ownership will also remain brisk.

home ownership remains brisk. Prices have recently risen more dynamically in many places than at the end of 2023, with condominiums increasing by 3.5% in the second quarter, even more than single-family homes (+2.5%).

The real estate markets in the tourist regions of Valais and Graubünden are booming in particular. Both first and second homes became significantly more expensive.

Less office space on offer

According to Wüest Partner, around 3.75 million square meters of office space are currently being advertised for rent throughout Switzerland, a good 7 percent less than in the middle of the previous year. The real estate specialist attributes this to the strong growth in employment in recent years and the low level of construction activity. This has reduced the supply.

The shortage of supply is also having a corresponding impact on the development of asking rents. Although they have fallen slightly compared to the same quarter of the previous year, they have risen again compared to the first quarter of 2024.

As the current decline in employment growth and the low level of construction activity are having the opposite effect, rental prices in the office space market are expected to remain stable for the year as a whole.

SDA