Why many Swiss tenants face higher rent costs from March
New rental contracts in Switzerland are usually most affected by price increases. But starting in March, many existing tenants in Switzerland could face having to pay more. Here's why.
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While in the past months rents have tended to rise when new tenants entered apartments with fresh rental agreements, that could be shaken up March.
The reason: the expected increase in the mortgage reference rate — a benchmark used to set other interest rates as well.
It plays a role in determining rents in Switzerland, because when this rate is climbing, mortgages become more expensive for landlords, who then pass the additional cost on to their tenants.
Right now the reference rate is 1.25 percent, and currently 54 percent of rental contracts in Switzerland are based on that rate, as shown in the Immo-Monitoring report from Wüest Partner.
Regionally, however, even a larger number of rentals are based on that rate.
In the Zurich area, as well as in central Switzerland, for instance, more than 60 percent of rental contracts are based on a 1.25-percent reference rate, according to Moneyland consumer platform.
In the Bern region, as well as in northwestern parts of the country, that percentage is just over 53 percent, while in the western and southern cantons (which include Geneva and Vaud), less than half of rental contracts are tied to the reference rate.
What does this mean in terms of rent hikes?
It depends on whether your rent is based on the reference rate; if not, you may not see price hikes.
If it is based on the reference rate, the raise will depend on the actual increase.
If the interest rate were to climb by 0.25 percentage points, landlords will be able to charge 3 percent more rent,” Moneyland said.” An increase of 0.5 percentage points would allow them to raise rents by 6 percent.”
This means, for instance, that if your rental agreement is based on a 1.25-percent reference rate and you pay 2,000 francs a month, your landlord could raise it to 2,060 francs if the reference rate were to climb to 1.5 percent.
Of course, if the hike is even steeper – say to 1.75 percent — then you can expect the rents to go up by 6 percent.
When will we know exactly?
The Federal Housing Authority (BWO) will announce at the beginning of March whether, and by how much, the reference rate will rise.
Hikes could also take place in June, September, and December.
"So, the earliest point at which your rent could go up would be on the first regular notice interval following March 1st, 2023 – if an increase in the mortgage reference rate is announced,” Moneyland said.
READ MORE: Top ten tips for finding an apartment to rent in Switzerland
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While in the past months rents have tended to rise when new tenants entered apartments with fresh rental agreements, that could be shaken up March.
The reason: the expected increase in the mortgage reference rate — a benchmark used to set other interest rates as well.
It plays a role in determining rents in Switzerland, because when this rate is climbing, mortgages become more expensive for landlords, who then pass the additional cost on to their tenants.
Right now the reference rate is 1.25 percent, and currently 54 percent of rental contracts in Switzerland are based on that rate, as shown in the Immo-Monitoring report from Wüest Partner.
Regionally, however, even a larger number of rentals are based on that rate.
In the Zurich area, as well as in central Switzerland, for instance, more than 60 percent of rental contracts are based on a 1.25-percent reference rate, according to Moneyland consumer platform.
In the Bern region, as well as in northwestern parts of the country, that percentage is just over 53 percent, while in the western and southern cantons (which include Geneva and Vaud), less than half of rental contracts are tied to the reference rate.
What does this mean in terms of rent hikes?
It depends on whether your rent is based on the reference rate; if not, you may not see price hikes.
If it is based on the reference rate, the raise will depend on the actual increase.
If the interest rate were to climb by 0.25 percentage points, landlords will be able to charge 3 percent more rent,” Moneyland said.” An increase of 0.5 percentage points would allow them to raise rents by 6 percent.”
This means, for instance, that if your rental agreement is based on a 1.25-percent reference rate and you pay 2,000 francs a month, your landlord could raise it to 2,060 francs if the reference rate were to climb to 1.5 percent.
Of course, if the hike is even steeper – say to 1.75 percent — then you can expect the rents to go up by 6 percent.
When will we know exactly?
The Federal Housing Authority (BWO) will announce at the beginning of March whether, and by how much, the reference rate will rise.
Hikes could also take place in June, September, and December.
"So, the earliest point at which your rent could go up would be on the first regular notice interval following March 1st, 2023 – if an increase in the mortgage reference rate is announced,” Moneyland said.
READ MORE: Top ten tips for finding an apartment to rent in Switzerland
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