UBS bank predicts big drop in rental prices

Construction has led to vacant lots and competition in many parts of Switzerland. Keystone

In its annual real estate report, Switzerland’s largest bank predicts that new apartment rental prices in the country will fall by almost 10% over the coming three years. The drop will be driven by stabilising interest rates and rising competition, it says.

Rents on newly offered apartments fell by 1.3% in 2016 (the first time this century), followed by a further 1% drop last year, the bank reported on Thursday in its annual housing studyExternal link. It expects the trend to continue with a 2.5% drop in 2018.

The main reason is competition, it explained: as construction continues, the number of apartments remaining vacant has risen to record levels, driving down prices and forcing landlords to provide added incentives to prospective renters.

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If new tenants have not yet noticed, this is because the serious adjustment is still to come, UBS said.

As things stand, the level of existing rents is quite normal, and is not expected to change. However, the prices of apartments coming onto the market is still exaggeratedly high, 20% higher than those already rented. The drop in coming years, driven by vacancy rates, should go some way toward evening out the imbalance.

“Without a net reduction of construction activities or the arrival of a new wave of immigration, rent offers should drop by 10% between now and 2020,” said UBS real estate head Claudio Saputelli in a press release.

“In this context, and given the expected slight rise in interest rates in 2018, the price of rented apartments should have by now reached its peak,” he said.

swissinfo.ch and agencies/dos