Rents in the Canton of Zurich: Analysis shows steady growth, but with major differences in new and long-term agreements

The analysis in the current economic monitoring of the Office for Economic Affairs and Labor (AWA) shows that rents in the canton of Zurich have increased by an average of 12% since 2005. This value includes all existing rental agreements in the canton. At the same time, average incomes grew by 18%. This means that Zurich residents do not have to spend a higher proportion of their income on rent today than they did in 2005.

However, a closer look reveals major differences: new rental agreements are now around 25% more expensive than in 2005. Long-term rental agreements, on the other hand, have become 7% cheaper. The place of residence also plays an important role: In the city of Zurich, rents – but also incomes – have risen more sharply since 2005 (+39% for new rents, +15% for existing rents) than in the agglomeration. “In the discussion about rent prices and housing shortages, you can’t just lump everything together,” says Economics Director Carmen Walker Späh. “Anyone who moves into an apartment in the canton of Zurich today pays, on average, a quarter more than in 2005. On the other hand, those who have lived in the same apartment for almost 20 years now have even lower rent than before.”

Stable rental expenses in relation to income

In relation to income, the proportion budgeted for rent has remained constant across all income classes (around 22% of the household budget). The satisfaction of Zurich residents with their living situation is just as constant. On the scale from 1 to 10, the value of 8.4 is high and stable over the last 15 years, which reflects the consistently high quality of life in the canton of Zurich.

Nevertheless, the situation on the housing market is tense. Because the demand for living space is increasing faster than the supply. The vacancy rate is around 0.5%. The main drivers for the increase in demand are population growth and the trend towards fewer people per household. Immigration has become less important as a driver of housing demand in recent years – while it still accounted for 61% in 2018, this figure is still at 45% today.

In contrast, supply is growing less quickly than demand because residential construction activity has declined in recent years. The growth in new households (+11% in the canton) has exceeded that in new apartments (+9.5%) since 2013. This is particularly true for the city of Zurich (+10% more households compared to housing growth of 7%).

Sustained household growth, subdued construction activity

Since the trend towards smaller households is likely to continue, as is population and income growth, the shortage in the rental housing market is likely to become even worse. To counteract this, an expansion of the housing supply is necessary. But dense building is often complicated – especially in cities. Construction projects are being delayed or even prevented by increasing levels of regulation and objections. The duration of the approval process in the canton of Zurich has almost doubled since 2010 (from around 100 to around 180 days).

Accelerating the construction and approval process as well as improving the regulatory framework, such as noise protection, would help to increase supply and alleviate the housing shortage. Government Councilor Carmen Walker Späh: “The best way to build additional housing is to stop depriving the market of its desire to invest.”

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2023-09-19 10:35:55
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