The housing market in Switzerland is under some immense strain: the experts at banking giant UBS have published a drastic forecast, predicting that Switzerland will hit its 10 million population milestone by the mid-2030s and what this means.
Switzerland is now in a situation it has never experienced before, in terms of the housing market, according to UBS in a press release on Wednesday. Before now, strong growth in the population was always backed by a great deal of construction activity.
But this is not the case at present. This will have consequences for the housing market.
A New Situation
The population of permanent residents in Switzerland is to exceed the 9 million mark in the first half of 2024, according to the bank’s forecast in Wednesday’s press release (in german only). And then, as early as the mid-2030s, Switzerland will reach the magical 10 million milestone.
This growth by a further million may well bring about a new situation. In the history of the country, the resident population has never grown as rapidly before, and it has never been driven quite this much by international migration. At the same time, the development is accompanied by a low level of construction activity.
150,000 Homes Needed by 2034
Things were different in the past. Since Switzerland had a population of 5 million in 1955, the creation of more than enough housing and an extensive expansion of the transport infrastructure has ensured that rents have risen at a far lesser rate than salaries have increased. The era of living costs being proportionate to income, of greater area usage per person, and of more living comfort trends appears to be over, however.
UBS further stated that in order to keep area usage stable, the deficit in homes is anticipated to be at least 150,000 when we reach 2034, owing to the flagging construction activity.
A Bonanza?
This surplus demand may also be reflected in the prices. The experts anticipate that quoted rents could increase in real terms by 25 to 30 percent by the mid-2030s. The high level of migration may also mean that this development hits central locations much harder than the outskirts. The affluent suburbs around the city centers may well expand into the urban agglomeration.
In their scenario, this does not merely have an effect on the rents, but also on the real estate prices – in the study, UBS raised the question of a «bonanza». In the case of a moderate interest development, the prices for private houses and also apartment buildings may increase more sharply than incomes. «Residential real estate therefore has the potential to draw on past value increases, or even to exceed these,» concluded the bank.
Watch Out for Market Intervention
The bank warns, however, that this may turn out differently due to market intervention. Government policies could encumber the market with additional regulations. This would result in even less construction activity, the bank writes. Other aspects, such as a lack of incentives for energy-related renovations, would also be detrimental.
