ticino real estate market falling rent prices in the southern canton

Oversupply causing discomfort on the Ticino housing market

The development of the Ticino real estate market is cause for concern. The vacancy rate reached a new high in 2019, rental prices are falling, and there is no turning point in sight. However, real estate prices for residential property on the Ticino housing market have stabilized.

Rental apartment construction on the Ticino real estate market is booming

Ticino's housing market is facing major challenges. One the one hand, the population of Ticino has been shrinking since 2017, due to the fact that there are more deaths than births and the number of people who move to Ticino from abroad has suffered an outright slump. At the same time, the overall economy of this border canton is still suffering from the Swiss franc shock of 2015. The strong revaluation of the franc against the euro made conditions difficult in particular for Italian companies that wanted to do business in Switzerland. That slowed the momentum of the employment growth figures.

On the other hand, major rail projects, such as the construction of the Ceneri Base Tunnel, which is set to be operational at the end of 2020, have triggered hopes of revitalization for the rental market. As a result, the level of construction activity in this segment has risen enormously. While the construction of only an average of 300 rental apartments was approved each year between 2002 and 2014, that number has greatly increased since 2015 and currently sits at over 1,600 rental apartments approved for construction.

strong increase in rental apartments on the ticino real estate market

Rental apartment construction is booming on the Ticino real estate market

Last data point: July 2019

Source: Baublatt, Credit Suisse

Vacancy rates on the rise in the Ticino real estate market

In recent years, this combination has made for an extremely difficult situation on the Ticino housing market. Vacancy rates have risen sharply. As of June 1, 2019, 15 percent more apartments were vacant in the entire canton than in the previous year.

The situation in the rental market is particularly worrisome. Here, the vacancy rate curve has demonstrated a particularly steep upward trend since 2015 and is now at 4.44 percent, considerably above the current Swiss average of 2.64 percent. And this development is not at an end. Many new rental apartments will enter the market in 2020 and 2021. This will push the vacancy rate over the 5 percent mark in the coming years.

rental apartment vacancies on the ticino real estate market are through the roof

Rental apartment vacancies on the Ticino real estate market are through the roof 

Vacant properties as a percentage of respective supply, as of June 1

Last data point: 2019

Source: Swiss Federal Statistical Office, Credit Suisse

Oversupply is causing rental prices to tumble

That puts pressure on rental prices. According to data from Homegate, advertised rents in Ticino have fallen an average of 1.6 percent every year since the third quarter of 2016. During this period, rental prices in the southern canton fell more significantly than in all other parts of the country. Across Switzerland as a whole, decreases in rent prices have slowed down in the wake of a strong economic upturn. In Ticino, however, there are no signs of a turning point – due, among other things, to the discrepancy between negative population growth and the high level of construction activity.

Real estate prices for residential property have stabilized

The state of the Ticino market for residential property looks better. This situation in this segment is more stable. However, in Ticino, it is increasingly foreigners who are the sellers of residential property and German-speaking Swiss pensioners are moving out of the southern canton in increasing numbers. This has allowed the vacancy rate to increase for owner-occupied properties as well. However, thanks to a slowdown in construction activity, the current vacancy rate of approximately 0.64 percent is still unproblematic. This has allowed prices for residential property in Ticino to restabilize, after they had declined significantly over the last few years. Prices rose significantly in the second quarter of 2019 for the first time in a long while. However, growth will remain modest and stay significantly weaker than the Swiss average.

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