On the one hand, the Federal Statistical Office published the vacancy rate as at 30 June 2024. At 1.08%, this was, as expected, below the already low prior-year figure of 1.15%. While the number of apartments for sale has risen, the decline in the supply of vacant rental apartments that has been ongoing since 2021 has continued, leading to a further fall in the vacancy rate. The current low volume of new construction compared to the sustained demand is likely to keep the pressure on asking rents and vacancy rates in the rental apartment market high.

On the other hand, the Federal Office for Housing published the reference interest rate as at 30 June 2024. This showed a sideways trend, i.e. the reference interest rate remained unchanged at 1.75% after rising twice in 2023 by 25 basis points each time to 1.75%. However, the volume-weighted average interest rate of all domestic mortgages on which the reference interest rate is based has fallen further from 1.72% to 1.67% compared to the previous quarter. Should this average interest rate fall below the 1.63% mark in the next calculation, the last increase in the reference interest rate would be reversed, i.e. the reference interest rate would fall by 25 basis points to 1.50%. This would theoretically imply a reduction in existing rents of 3 percent without taking into account other relevant factors such as the pro rata inflation adjustment.

What can be expected for the further development of existing rents? The calculations of various financial institutions paint a mixed picture. Most banks expect the SNB policy interest rate to fall again by 25 basis points to 1.0% as of 26 September 2024, which would make SARON mortgages correspondingly cheaper. While certain financial institutions are therefore also assuming a corresponding fall in the reference interest rate to 1.50 percent at the end of 2024, other institutions do not expect such a fall due to the more expensive refinancing of expiring fixed-rate mortgages from the low-interest phase. In any case, the good news for existing tenants is that the reference interest rate is currently unlikely to rise any further, which will limit further upward pressure on existing rents. This is particularly due to inflation, which is now also falling and last stood at 1.1 percent (August 2024). On the other hand, landlords should be able to benefit from further increases in asking rents and more attractive SARON mortgage interest rates. In our opinion, investments in multi-family houses therefore remain an interesting investment opportunity.