Zurich’s notoriously tight housing market is presenting a peculiar paradox: apartments are sitting vacant even as affordability reaches crisis levels. Insurance company Helvetia Baloise is currently offering a month of free rent on two unoccupied apartments in the Seefeld district, a move that underscores the complexities of the city’s rental landscape.
The situation highlights a growing disconnect between supply and demand in Zurich. Despite a median local wage of approximately CHF 8,000 per month, and a robust financial sector employing over 5,000 people at Google alone, finding suitable housing remains a significant challenge. New 3.5-room apartments in Zurich-West are currently listed for as much as CHF 8,100 per month, according to recent data, while average rent for a 4-room apartment in 2022 was CHF 1,787.
The Helvetia Baloise properties, both 3.5-room apartments measuring 99 square meters and renovated in 2018, are listed for around CHF 4,465. The offer of a month’s free rent, however, hasn’t attracted tenants. A current tenant in the building reports that the apartments have been vacant since last autumn. This isn’t an isolated case; three other apartments in the same complex are also reportedly unoccupied.
The reluctance to rent, despite the free month, appears to stem from pricing. Former tenants reportedly paid around CHF 1,000 less per month, and current residents cite issues with insulation and noise as factors diminishing the value proposition. The insurance company’s strategy, however, isn’t necessarily about maximizing immediate rental income, but rather maintaining property value.
According to Francisco Amaral, Professor of Real Estate Finance at the University of Zurich, the market price of a property is determined by a combination of factors including location, condition, demand, and rental income. Higher rental rates directly contribute to a higher property valuation. Offering incentives like free rent can be a tactic to maintain a desired price positioning and avoid downward pressure on comparable rents.
Robert Weinert of the real estate consultancy Wüest Partner suggests the pricing isn’t entirely out of line for the Seefeld district, but the type of property may be less in demand. He notes a recent surge in new, higher-priced developments, creating more competition in that segment of the market. The demand for this type of property has cooled as job growth in the financial and tech sectors, which previously fueled demand from high-earning renters, has slowed or even reversed.
This shift in demand is creating a more competitive landscape for landlords of high-end properties. Incentives like free rent are becoming more common as a way to attract tenants. Helvetia Baloise previously offered a “Winter Special” – a 50% discount on rent for six months – on other properties, according to reports.
The company maintains that such offers are part of a broader marketing strategy designed to incentivize potential renters to consider a move, acknowledging that relocation costs are a significant factor. The company did not comment on whether the strategy is specifically aimed at maintaining or increasing property values.
Helvetia Baloise’s extensive property portfolio – encompassing 8,450 properties with around 30,000 apartments across Switzerland, including 2,000 in Zurich – gives it considerable influence in the market. The situation underscores the broader challenges facing Zurich’s housing market, where vacancy rates are exceptionally low and affordability is a growing concern.
The paradox of vacant apartments amidst a housing crisis isn’t unique to Helvetia Baloise. The Salvation Army recently faced a similar situation in Geroldswil, where four apartment blocks with 30 units remain empty despite a shortage of affordable housing. Tenants were given notice to vacate in late October 2024, with plans for replacement buildings delayed due to regulatory adjustments. The new apartments, while below market price, will be more expensive than the existing units, and current tenants are not guaranteed re-housing. , the Salvation Army did not have a building permit for the replacement buildings.
Zurich’s housing crisis is deepening, with rental offers increasing by 6.4% in the second quarter of the year. The situation is further complicated by reports of evictions and demolitions, exacerbating the already limited supply. The city is grappling with finding solutions to address the affordability crisis while navigating the complexities of property values and investment strategies.
