Demand in the residential real estate market in Switzerland is primarily driven by net migration to Switzerland, which in turn depends on the economic situation in Switzerland, but also abroad.

The current and foreseeable economic development in Switzerland is a key issue for the housing market, as the employment situation is controlled by the economy. As far as immigration is concerned, it does not take place outside refugee migration, unless an economy in which the migrant immigrates offers appropriate jobs, i. E. attracts foreign workers to gainful employment. As a result, economic development controls labor migration and thus the immigration of workers and their families, which in turn has a direct impact on the vacancy rate of rental housing. In our opinion, immigration is a major driver in the context of rental demand and construction activity, and ultimately the vacancy rate of rental housing.  

Simplified, one could come to the following statement: "The price of rented accommodation in Switzerland depends on whether the vacancy rate of the existing and under construction apartments changes due to immigration."

Current immigration  

The solid economy supported demand for rental housing in 2018 and ended the decline in immigration to Switzerland since 2014. The latter was due to continued growth in many EU countries, which led to a strong recovery of the labor markets there. In 2016 and 2017, the eurozone outperformed Switzerland in terms of employment growth, with the unemployment rate falling from 12.0% to 8.2% between 2013 and 2018. Taking into account the immigration and emigration of Swiss citizens, the Swiss migration balance of 2018 was approximately equal to the previous year's figure, with an estimated 50,000 persons.  

Current rental demand  

Overall, a similar demand for additional rental apartments in Switzerland in 2019 is expected, as in the previous year. The somewhat recovering immigration faces a normalization of the economy and a continued decline in asylum applications. The latter have provided some support to rental demand in recent years, but are only included in the migration figures if the asylum decision is positive. As a result, the recovery in rental demand that began in 2018 should continue. For the time being, however, German-speaking Switzerland and above all the urban areas should benefit from this stabilization.

For years, a construction boom has been observed in multi-family homes in Switzerland. The housing supply is now exceeding demand. According to calculations by the ZKB, vacant rental apartments are currently causing rent losses of around CHF 1 billion per year. Even if new rental apartments were no longer available on the market in Switzerland, according to ZKB it would take more than two years for all empty apartments to be re-let.  

As a result, returns on real estate investments will decline, which will affect all investors. Pension funds are investing heavily in this segment, largely independent of the realistically achievable return, as they face the problem of negative interest rates and therefore accept low margins. However, this can not be a serious approach for companies that need to fund conventionally.   The higher vacancy rates, however, have also led to a turnaround from landlord to tenant market.

As a consequence, rental prices tend to decline. On average, rents should be 1 percent cheaper next year according to a current ZKB forecast. However, the extent to which and the fact that rents will decline in the first place can be assessed very differently in different regions.

"The main problem is not that in the last few years too many rented apartments have arisen in Switzerland, but rather in places where too few tenants want to live," said a ZKB exponent in a research report. Of the vacancies, especially smaller agglomeration communities and rural centers are affected, while cities have little vacancy problem.