The property sector in Switzerland: challenges and opportunities in the age of the 10 million population
Switzerland is facing an enormous increase in population, which could reach the 10 million mark by the mid-2030s. This rapid increase presents the property sector with major challenges and opportunities. Despite the potential for solid increases in value, stricter rental regulations could put the brakes on the price bonanza.
Switzerland’s permanent resident population is expected to pass the 9 million mark in the first half of 2024 and could reach the magical 10 million mark by the mid-2030s. This rapid increase is historically unprecedented and is mainly driven by international migration, while construction activity cannot keep pace.
Since the rise from Switzerland’s 5 million in 1955, more housing has been created and transport infrastructure has been massively expanded, helping to keep rents rising only moderately in relation to wages. However, this era of falling housing costs, greater consumption of space per person and more comfortable living seems to be over. Due to the decline in construction activity, there could be a shortfall of at least 150,000 flats by 2034 in order to keep space consumption stable.
This is likely to result in rents rising faster than incomes. Rents on offer could rise by a total of 25 to 30 per cent in real terms by the mid-2030s, similar to the situation between 2002 and 2012. Rents in central locations in particular will rise even more sharply than in the periphery due to high immigration.
Residential property prices, whether for owner-occupied homes or multi-family houses, are also expected to rise faster than incomes at moderate interest rates. Prime locations will continue to be in high demand due to growth, and the agglomerations around the major centres will also gain in importance, which will increase the willingness to pay in these areas. Residential property could therefore build on or even exceed past increases in value.
However, there are also risks. If the housing situation deteriorates for many households, politicians could introduce additional regulations, which would exacerbate the situation. In such a scenario, construction activity could decline further and the building fabric and sustainability could suffer, as there are no incentives for comprehensive and energy-efficient renovations. The future of the property sector in Switzerland therefore depends on a balanced political and economic development.