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Nyon, Vaud

Carouge, Geneva

Switzerland (GenevaLunch) – Good news for Swiss tenants: a majority should be able to ask for a rent reduction as of today, 3 June, according to the Federal Housing Office (FHO) in Bern. The FHO every three months sets the “reference” interest rate to which rents have been indexed since autumn 2008. It has remained at 3.5 percent despite sliding mortgage rents but 2 June for the first time the lower average pushed the reference rate down to 3.25 percent. If a lease is based on a reference rate of 3.50 0r higher, tenants can now ask for a reduction.

Some 90 percent of Swiss rents are linked to the reference rate, although the rate of inflation is generally also factored into the lease and landlords can build in the shifting costs of building maintenance.

As a result, landlords are not obliged to cut rents and in any event tenants have to ask them to do so, citing the current official interest rate.

The Swiss tenants’ association, Asloca, reacted to the news by suggesting that tenants write to their landlords, while the building owners’ association, HEV (Ger), suggests that in fact few tenants will see their rent drop.

Swiss mortgage interest rates have fallen steadily since September 2008 (click on image to view larger)

The reference rate is an average of Swiss banks’ mortgage rates and provides a common rate for all of Switzerland. Before September 2008 leases fixed rents in relation to variable mortgage interest rates.

Rates have been falling steadily since the new system went into effect, from an average of 3.43 percent in September 2008 to 3.07 percent today. The reference rate is determined using a calculation (pdf, in French) that takes into account the number of loans of banks which hold more than CHF300 million in mortgages and 15 interest rates. The data was gathered 31 March 2009 for the reference rate that goes into effect 2 June.