Across Europe, particularly in France and Switzerland, rental costs are witnessing significant increases, raising concerns among tenants and property owners alike. Recent regulatory changes and economic factors play pivotal roles in this rising trend.
On January 15, 2025, L’INSEE announced the index of reference for rents (IRL) had reached 144.64, indicating a 1.82% increase for the fourth quarter of 2024. This is particularly relevant as it dictates how much landlords can raise rents annually. For tenants whose leases come up for renewal within the first quarter of 2025, this translates to about 13 € more per month, or roughly 109.20 € annually. Nevertheless, this surge is still more subdued compared to the previous year's increase potential of 2.47% due to cooling inflation rates.
Meanwhile, French lawmakers have set new measures affecting short-term rentals, such as those listed on Airbnb, mandatorily requiring property owners to charge value-added tax (VAT) starting from 2025. This shift aims to level the playing field between these rentals and traditional hotels, which have long been subject to such taxes. The intent is to curb the competitive edge enjoyed by short-term rentals due to favorable tax exemptions, as supported by the hotel industry.
"The objective is to create fair competition between all actors of tourism," remarked French lawmakers, emphasizing the importance of aligning regulations across the board. Such measures are likely to increase rental costs for tourists, as owners may pass the VAT onto consumers, driving them back toward hotels, which often provide more services.
The impact of these changes is expected to be multifaceted. Some hosts might reconsider continuing their listings due to the added administrative burden of dealing with VAT compliance. This could lead to reduced availability of tourist accommodations and potentially push travelers to seek traditional lodging options.
Simultaneously, Switzerland is experiencing its own rental price dynamics. According to Homegate, rental prices have surged significantly across various Swiss cantons, particularly Nidwald (+11.4%) and Zoug (+10.1%). The trend suggests strong economic growth influencing high demand for properties, especially close to urban centers like Zurich, where the rental increase was recorded at 4.5% for 2024. Yet, this is noticeably lower than previous years, possibly due to reduced immigration rates impacting demand.
The economic development, especially noted in central Switzerland, plays a major role here. “This strong increase is certainly due to the dynamic development of the economy,” Homegate reported, painting a picture of vibrant growth alongside rising housing costs. Such conditions indicate not just immediate concerns but long-term challenges for residents and new entrants to the market.
Looking forward, analysts predict rental prices will continue to rise as Switzerland's population increases and economic activity remains buoyant. This could amplify affordability issues, raising questions about housing availability and quality. Property owners might face difficult choices; those with energy-inefficient homes may struggle under increasing regulations, as they cannot raise prices for properties classified as low-performance.
With housing becoming more expensive and regulations tightening, both countries' rental markets face transformative changes. From increasing operational costs due to VAT to the pressures of maintaining compliance with energy regulations, property owners may have to navigate uncharted waters.
For tenants, the scenario is similarly challenging. Rising costs could compel renters to shift their expectations or even reevaluate their living situations. With vacation rentals becoming pricier and less appealing due to new tax policies, the desire for long-term rentals could rise.
Given the new VAT challenges alongside the fluctuated rental indexes, the rental market's future is fraught with uncertainties. Both tourists and residents will need to adapt to changing prices and regulations.
Overall, the interplay between regulatory changes, economic movements, and consumer behavior will dictate the new narrative of housing—a narrative centered on affordability, competition, and sustainability within Europe’s housing market. Navigators of this new terrain will need to be vigilant and adaptable to thrive amid rising rental costs.