Swiss Rent Prices May Drop by 3% Amid Mortgage Benchmark Cut

Switzerland’s national benchmark for mortgage rates has dropped to levels seen before the global inflation surge. This shift could potentially allow tenants to request a 3% rent reduction, easing costs in one of Europe’s most expensive housing markets, writes Bloomberg.

The Federal Housing Office announced on March 3, 2025, that the reference interest rate for rent calculation has been set at 1.5%, down from its previous level of 1.75%. According to Swiss law, a 0.25 percentage point reduction in this benchmark grants tenants the right to demand a 3% rent decrease. However, not all renters will be able to take advantage of this adjustment, as it largely depends on the reference rate specified in their lease agreements.

Impact of Mortgage Rate Reduction on the Swiss Economy

The rent decrease, effective from March 4, 2025, follows the Swiss National Bank’s (SNB) move to lower borrowing costs amid low inflation levels. Economists remain uncertain about how this rental price drop will affect overall consumer price levels. The impact is likely to be visible in the second half of the year and could act as another inflation-moderating factor in Switzerland.

Swiss Property Prices Remain High Despite Rent Adjustments

According to Real Advisor, Swiss house prices have risen by 1.4% over the past 12 months, while apartment prices increased by 2.2%.

Current Average Property Prices in Switzerland:
Houses: CHF 1,376,736 (€1.4 million)
80% of properties range between CHF 592,595 – CHF 3,471,769 (€629,500 – €3.68 million).
Average price per square meter: CHF 8,344 (€8,870).
Apartments: CHF 942,967 (€1 million)
80% of properties range between CHF 463,284 – CHF 2,302,753 (€491,800 – €2.3 million).
Average price per square meter: CHF 9,155 (€9,726).

Despite the mortgage rate drop, Swiss rental prices remain significantly high:
House Rentals: CHF 3,560 (€3,781) per month
80% of rental properties range between CHF 1,532 – CHF 8,977 (€1,628 – €9,533).
Average annual rent per square meter: CHF 259 (€276).
Apartment Rentals: CHF 2,599 (€2,758) per month
80% of rental properties range between CHF 1,277 – CHF 6,348 (€1,354 – €6,735).
Average annual rent per square meter: CHF 303 (€332).

Rental Yield & Investment Perspective

According to Global Property Guide, rental yields in Switzerland are among the lowest in Europe:
Zurich: 2.76%, ranking among the lowest in Europe.
Geneva: 2.53%, with three-bedroom apartments generating slightly more (2.80%) when valued at over €1.5 million with an average rent of €3,597.
Bern: 2.79%, with one-bedroom apartments priced at €541,000 generating 3.31% if rented for €1,490.
Fribourg: 3.40%, offering the highest potential yield, with one-bedroom apartments valued at €500,000 reaching 3.83% in returns.
In Q4 2024, Switzerland’s average gross rental yield was 3.04%, with similar figures reported in Zurich (2.76%). The highest yield in major cities comes from one-bedroom apartments valued at €1 million, which could generate €2,543 per month in rental income.

Investment Outlook for Swiss Real Estate

Switzerland is renowned for its stable economy and well-developed financial institutions, making it an attractive destination for wealth preservation rather than high-yield investment.

However, high taxes, maintenance costs, utility fees, and other expenses significantly reduce potential profitability for investors. The latest mortgage rate reduction may ease rent burdens for tenants, but the overall impact on property values and rental yields remains to be seen.