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The housing market in Switzerland is facing significant stress, according to experts at UBS. They have made a drastic prediction about what a population of 10 million by the mid-2030s would mean for the country. The current situation is unprecedented, as strong population growth has not been accompanied by high levels of construction activity. This will have consequences for the housing market.
By the first half of 2024, Switzerland’s permanent resident population is expected to exceed 9 million, and by the mid-2030s, it is projected to reach the “magical” 10 million mark. This rapid growth, driven by international migration, is occurring alongside low levels of construction activity.
In the past, the creation of an abundance of housing and significant expansion of infrastructure kept rental prices from rising as much as wages. However, this era of decreasing housing costs relative to income and increased living space per person is over. Due to the sluggish construction activity, it is estimated that at least 150,000 homes will be needed by 2034 just to maintain the current level of living space consumption.
This housing shortage is expected to impact prices as well. The experts predict that rental prices could increase by 25 to 30 percent by the mid-2030s. The effects are likely to be more pronounced in central locations due to strong migration, with the “suburban belts” expanding into the surrounding areas. In this scenario, property prices for both single-family homes and multi-family buildings are expected to rise more than incomes, assuming moderate interest rate developments.