What foreign residents should know about rent hikes in Switzerland
With two consecutive increases in the mortgage reference rates in 2023, many tenants in Switzerland were hit with higher rents. What does this all mean and what can we expect in future?
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Faced with higher rents, many tenants — especially foreign residents unfamiliar with how the housing costs are determined in Switzerland — may be wondering why they have gone up twice in one year, and what lies ahead.
To answer these queries, the Federal Statistical Office (FSO) has compiled a list of most frequently asked questions relating to rents, as well as the answers to explain what is going on in Switzerland, and what tenants can expect in the near future.
We've translated some of them and added some extra information to help people navigate renting in Switzerland.
What is the current mortgage rate?
SinceJune 2023, it has been 1.75 percent — up from 1.50 percent that was in effect previously.
The rate is determined by the Swiss National Bank (SNB) based on various factors, including the current inflation rate.
What impact does a change in the mortgage reference rate have on rents?
To put it simply, when landlords’ mortgage rates go up, they have the right to pass on additional costs to their tenants.
(On the other hand, if the reference rate drops, renters are entitled to a corresponding rent reduction).
How much of a rent hike does an increase in a mortgage rate entail?
A 0.25-percent increase, as is currently the case, allows your landlord to raise your rent by 3 percent.
So it follows that a 0.5-percent increase (if it should ever be implemented) would entitle the landlord to raise rents by 6 percent... and so on.
READ ALSO: Why rents in some parts of Switzerland are now set to increase sharply
What other factors can impact your rent?
Apart from the change in mortgage interest rate, the increase in the consumer price index could also play a role in setting rents.
In other words, when prices go up, so does rent.
For instance, if the landlord has to pay higher maintenance, operating, insurance, and energy costs, they can raise your rent correspondingly as well.
What proportion of your income should you spend on rent?
Many variables determine how high your rent will be or its impact on your household budget.
On average, according to FSO, just over one-eighth of a gross income is spent on housing, excluding energy costs.
Generally speaking, rent, together with health insurance premiums, constitutes the biggest expenditures for private households.
What can you expect, in terms of rents, in the near future?
One answer to this question comes from the experts at Moneyland consumer platform.
“It is possible that the interest rate will go up again in 2024, resulting in further rent hikes," it said.
Interestingly, this can happen even if the SNB lowers its key interest rate or leaves it unchanged.
Why? “The reason is that some mortgage contracts that were signed many years ago will expire in 2024. Their replacement with new contracts at today’s higher interest rates can drive up the average interest being paid for mortgages,” according to Moneyland, which, in turn, will enable landlords to raise rents (as explained above).
Can you challenge your rent if it is too high?
First you would have to determine if your rent is, in fact, too high.
If it is, then there are some ways to have it reduced.
In Switzerland, when you sign a lease contract, you have the possibility to contest the initial rent if you consider it to be 'abusive'.
Your rights are listed on the official form that the landlord (or the real estate agency representing your landlord) gives you when you sign the lease.
This article explains how to do this:
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Faced with higher rents, many tenants — especially foreign residents unfamiliar with how the housing costs are determined in Switzerland — may be wondering why they have gone up twice in one year, and what lies ahead.
To answer these queries, the Federal Statistical Office (FSO) has compiled a list of most frequently asked questions relating to rents, as well as the answers to explain what is going on in Switzerland, and what tenants can expect in the near future.
We've translated some of them and added some extra information to help people navigate renting in Switzerland.
What is the current mortgage rate?
SinceJune 2023, it has been 1.75 percent — up from 1.50 percent that was in effect previously.
The rate is determined by the Swiss National Bank (SNB) based on various factors, including the current inflation rate.
What impact does a change in the mortgage reference rate have on rents?
To put it simply, when landlords’ mortgage rates go up, they have the right to pass on additional costs to their tenants.
(On the other hand, if the reference rate drops, renters are entitled to a corresponding rent reduction).
How much of a rent hike does an increase in a mortgage rate entail?
A 0.25-percent increase, as is currently the case, allows your landlord to raise your rent by 3 percent.
So it follows that a 0.5-percent increase (if it should ever be implemented) would entitle the landlord to raise rents by 6 percent... and so on.
READ ALSO: Why rents in some parts of Switzerland are now set to increase sharply
What other factors can impact your rent?
Apart from the change in mortgage interest rate, the increase in the consumer price index could also play a role in setting rents.
In other words, when prices go up, so does rent.
For instance, if the landlord has to pay higher maintenance, operating, insurance, and energy costs, they can raise your rent correspondingly as well.
What proportion of your income should you spend on rent?
Many variables determine how high your rent will be or its impact on your household budget.
On average, according to FSO, just over one-eighth of a gross income is spent on housing, excluding energy costs.
Generally speaking, rent, together with health insurance premiums, constitutes the biggest expenditures for private households.
What can you expect, in terms of rents, in the near future?
One answer to this question comes from the experts at Moneyland consumer platform.
“It is possible that the interest rate will go up again in 2024, resulting in further rent hikes," it said.
Interestingly, this can happen even if the SNB lowers its key interest rate or leaves it unchanged.
Why? “The reason is that some mortgage contracts that were signed many years ago will expire in 2024. Their replacement with new contracts at today’s higher interest rates can drive up the average interest being paid for mortgages,” according to Moneyland, which, in turn, will enable landlords to raise rents (as explained above).
Can you challenge your rent if it is too high?
First you would have to determine if your rent is, in fact, too high.
If it is, then there are some ways to have it reduced.
In Switzerland, when you sign a lease contract, you have the possibility to contest the initial rent if you consider it to be 'abusive'.
Your rights are listed on the official form that the landlord (or the real estate agency representing your landlord) gives you when you sign the lease.
This article explains how to do this:
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