Swiss rental housing crisis

The shortage of rental housing in Switzerland reaches an unprecedented intensity in 2025-2026 not seen in twenty years. The national vacancy rate fell to 1.00% on June 1, 2025, or 48,455 empty homes out of a stock of 4.84 million units, marking a fifth consecutive annual decline since the peak of 1.72% in 2020. For investors, this structural shortage guarantees exceptional occupancy rates and lasting rent-setting power. For tenants, it means a continuous erosion of housing affordability, in a country where 58% of the population rents.

48,455 empty homes: a figure that masks extreme local realities

National statistics, however striking, underestimate the severity of the situation in urban centres. Geneva has a vacancy rate of 0.34%, the lowest in the country and the lowest since 2012. Zug stands at 0.42%, Zurich at 0.48%. In the city of Zurich itself, the rate reaches 0.07%, fewer than 250 available homes for 450,000 inhabitants — probably the lowest figure in the Western world. In Schlieren, in the Zurich agglomeration, it falls to 0.03%.

Fifteen cantons now show rates below 1%, and 54.8% of Swiss municipalities are below this critical threshold (versus 32.3% in 2020). Only Jura (3.03%) and Solothurn (2.05%) exceed the 2% threshold below which the Federal Housing Office (FHO) classifies the market as being in shortage.

Construction can’t keep up: a structural deficit of 10,000 homes per year

Switzerland needs to build a minimum of 50,000 homes per year to absorb demand generated by immigration, new household formation and replacement of existing stock. In 2024, only 40,750 units were delivered, a 12.8% drop from the previous year and the lowest stock growth rate in over 20 years (0.95%).

Forecasts point to a gradual recovery: around 43,200 units in 2025, then 48,500 in 2026 — a level that would remain below structural need. Between 2020 and 2024, the cumulative deficit is estimated at around 23,000 homes. The obstacles are structural: the 2014 Spatial Planning Act virtually prohibits any new building zones, opposition procedures extend timelines, construction costs are among the highest in Europe, and new Basel III requirements (effective since January 1, 2025) increase development financing costs.

Rental dynamics: surface deceleration, persistent underlying tensions

The rise in offered rents has slowed considerably after a cycle of sharp increases. Between late 2021 and late 2024, asking rents rose by +15% cumulatively. Then, between late 2024 and late 2025, the increase was only +1.3%. Wüest Partner forecasts a moderate increase of +0.7% in 2026.

This deceleration partly reflects the decline in the reference mortgage rate, from 1.75% (December 2023) to 1.25% (September 2025). The real underlying phenomenon is the growing gap between existing rents and market rents. Sitting tenants benefit from protected, below-market rents, which discourages them from moving — a phenomenon of ‘rental immobility’ that further reduces available supply on the reletting market.

Politically, the Asloca initiative launched in May 2025, proposing a cost-based rent-setting system, had collected over 50% of required signatures by October 2025. Its potential adoption represents a risk to monitor for investors.

What this means for investors

For owners of income-producing buildings, the current context is exceptionally favourable. Occupancy rates approach 100% in most agglomerations, turnover is minimal, and vacancy risk is virtually non-existent in tight zones. Total direct returns reached 6.1% in 2025, with residential income property values advancing +5.2% over the year.

The EY 2026 survey reveals that 98% of institutional investors consider Switzerland an attractive or very attractive real estate market, versus 93% a year earlier. Capital flows into indirect real estate vehicles reached over CHF 9 billion in 2025, a record. In our view, the housing shortage will remain an issue for at least the next five years.

Risks do exist, however. Yield compression — prime net yields in Zurich have fallen to 1.80% — leaves little safety margin. Listed real estate fund premiums average 37% (versus 19% historically), signalling stretched valuations. And political initiatives (rent caps, immigration limits) could change the equation in the medium term.

By the Meotis Real Estate team.