Housing Market: Rental Housing Construction Is on the Rise

Over the past four quarters, 52,000 apartments were approved—the highest number since late 2018. In an analysis of the Swiss residential real estate market, Wüest Partner notes that a turning point in supply has been reached, even though the scale and pace were not sufficient to offset the deficit that has accumulated since 2020.

The growth is attributable solely to the rental segment (+11 %); in the homeownership segment, the trends continue to point downward. A notable regional shift is toward Bern and Central Switzerland, while construction activity in Zurich and the Lake Geneva region is slowing. «High demand alone is therefore not enough; what matters is where projects are feasible from a planning and political standpoint,» the analysts conclude.

Renovation Instead of New Construction

For the first time, applications for renovations are on par with those for new construction; for single-family homes, there are even 2.3 renovation applications for every new construction application. This appears to be driven by a rush to act ahead of the abolition of the imputed rental value. While this renews the housing stock, it ties up planning and construction capacity without creating additional living space.

A Turning Point in Vacancy Rates

Wüest Partner’s model projection anticipates approximately 48,000 vacant apartments as of June 1; the vacancy rate thus remains at just under 1 %. After five years in which the number fell by up to 9,900 units annually, this marks a turning point, even though the stabilization varies by region.

The rent gap continues to widen

Existing rents have fallen measurably for the first time (−0.4 %), while asking rents rose by 1.0 % in the first half of the year. This difference reinforces the lock-in effect: tenants are not voluntarily moving, and the volume of rental listings remains low, although it is not shrinking any further.

Homeownership: The Slowdown Is Delayed

Transaction prices rose in the second quarter for both single-family homes and condominiums by about 4.3 %, more than forecast. For condominiums, a demand index of 126 points contrasts with a supply index of just 73 points. «Since the pipeline remains blocked, this is unlikely to change for the time being,» the experts conclude.

Prices Are Fundamentally Supported

In a study on home ownership published at the same time, Wüest Partner also concludes that price trends have not gotten out of hand. By the end of 2025, prices for single-family homes will be only 1.6 % above their fundamental value, while those for condominiums will be 8.2 % above. «While the valuation gap for the latter has widened over the past two decades, it has hardly increased at all in the past ten years,» the report states. The risk of overvaluation therefore remains low to moderate. In four out of five scenarios modeled by Wüest Partner, prices will continue to rise through 2028. This holds true even in the event of a moderate recession, as housing shortages and low interest rates support demand, as well as in a stagflationary environment, where homeownership acts as a partial hedge against inflation. Falling prices would only be expected in the event of an exceptionally unfavorable combination of a deep recession, deflation, and population decline.