Housing Market Equilibrium (Almost) without Vacancies.

The Swiss housing market is characterised by an extraordinarily low vacancy rate, generally in the vicinity of 1 per cent. Is the Swiss housing market permanently in a condition of severe shortage? This paper of Prof. Philippe Thalmann (REME - Economics and Environmental Management Laboratory) uses both a standard non-accelerating rent inflation rate of vacancy approach and a new perception-based approach to answer this question. The available evidence confirms that a vacancy rate of 1–1.5 per cent is indeed sufficient for the Swiss housing market to be in equilibrium, provided only dwellings that are not only unoccupied but also actually offered for rent or purchase are counted (which makes this rate not easily comparable with other countries). The standard equilibrium vacancy rate approach suggests that even lower rates are sufficient in more densely built places whereas the approach based on perceptions makes no difference. This suggests that the dwellings listed by people who wish to move reduce the pressure on rents but not the feeling of housing shortage.

Philippe Thalmann, Urban Stud., DOI: 10.1177/0042098011417902 (2011)