Press release: Lomo Index: sharp increase in rents

Press release

Comparis Lomo Price Index

Lomo Index: sharp rise in rents

The Comparis Lomo price index measures the increase in the cost of housing and mobility, sectors on which the population spends the most. In May 2024, the prices of goods and services covered by the Lomo index increased by 2.6% compared to the same month of the previous year. By themselves, rent amounts have increased by 1%* over the last three months. Compared to the same month of the previous year, the increase is even 3.4%*. “Last year, the two-time adjustment of the benchmark interest rate pushed up rents on existing leases. But that’s not all: rents for new leases continue their rapid rise due to low vacancy rates. Currently there are no signs of improvement,” says Argent Comparis expert Dirk Renkert.

Zurich, June 27, 2024 – The Lomo price index from Comparis, published quarterly since March 2024 in collaboration with the Center for Economic Research (KOF) of the ETH Zurich, indicates the development of inflation in the housing and construction sectors. mobility (Lomo). According to this index, housing and mobility prices in Switzerland increased by 2.6% in May 2024 compared to the same month of the previous year. For comparison, the Swiss consumer price index (CPI) established by the Federal Statistical Office (FSO), which covers a basket of more than 1,000 goods and services, increased by 1.4%* . Compared to February 2024, the prices of the Comparis Lomo index increased, by precisely 0.8% (CPI: +0.6%*). Rents alone increased by 1%* during this period. Compared to the same month of the previous year, the increase is even 3.4%*.

Housing and mobility represent around 40% of the daily consumption budget of an average family in Switzerland, which is why their increase in cost is particularly painful for consumers. As for the housing sector, the Lomo index records the evolution of rents and the price of electricity, for example. For the area of ​​mobility, the prices of gasoline or diesel, automobile travel or even public transport tickets are considered.

Concretely, for a family having spent last year 2500 francs on rent, 1000 francs on car and 200 francs on public transport every month, an increase of 2.6% in the Lomo price index represents an increase costs of nearly 96 francs per month this year. Over the year, the additional cost amounts to 1,154 francs just for housing and mobility.

“The cost of housing has increased significantly over the last twelve months due to the increase in rents on existing leases, which itself results from the two increases in the benchmark mortgage rate last year. Furthermore, the growing shortage of rental housing, particularly in cities, is leading to a low vacancy rate, and therefore a continued increase in rents for newly rented apartments. Currently, there are no signs of improvement,” comments Dirk Renkert, Argent Comparis expert.

The benchmark mortgage rate should remain stable in 2024

Given that mortgage rates have risen significantly in recent years, the reference mortgage rate was raised for the first time in a long time in June 2023 from 1.25 to 1.50 percent. In December 2023, the reference mortgage rate was raised a second time to 1.75 percent. It currently stands at 1.75 percent. For the first time in March, against all expectations, the Swiss National Bank (SNB) decided to lower its key rate by 0.25 percentage points. It repeated the operation at its meeting last week. The price of Saron mortgages immediately fell, which is slowing the rise in average mortgage rates and the reference mortgage rate.

“With its two rate cuts, the SNB has largely broken the upward trend in the benchmark mortgage rate. Whether and to what extent the reference rate, and with it rents, will increase next year will depend on future price developments, upcoming decisions by the SNB on interest rates and loan conditions. mortgage rates,” explains D. Renkert.

It is important for tenants to know which reference rate their rental agreement is based on. If the reference interest rate increases by a quarter of a percent, the landlord is in principle entitled to increase the rent by 3%. In addition, 40% of the cumulative cost increase can be added as inflation compensation, as well as a flat-rate amount of 0.5% per year for the general cost increase.

Depending on their situation, a person who, two years earlier, paid 2,500 francs per month in rent must now pay 2,750 francs due to the two-fold increase in the reference interest rate and the general increase in prices, i.e. an increase of 10%. . In this example, the additional cost amounts to 3000 francs per year.

Strongest price increase over twelve months

For electricity in particular, the Swiss have had to spend considerably more than a year ago: its price is up 17.8%*. “According to Comparis analysis, no other product has experienced such a strong increase over twelve months. High electricity prices continue to weigh on the budget. Already last year they increased by more than a quarter. In other words, consumers are paying almost 50% more for their electricity than two years ago,” explains D. Renkert.

Motor vehicle insurance prices increased by 4.7%*. They thus climb onto the second step of the inflation podium. The prices of other household utensils recorded the third largest increase (+4.2%*). The 4th and 5th places are occupied by laundry and cleaning products and fuel, up 3.6%*.

Biggest price drop over twelve months

Twelve months earlier, consumers paid more for small household appliances (in first position on the list of declining products) than in May 2024. According to Comparis analysis, these prices fell by 6 .9%* over one year. Used car prices recorded the second largest drop (-4.3%* compared to May 2023).

The prices of equipment items (-3.4%*), furnishings (bedroom, garden, kitchen and dining room furniture) (-3.3%) as well as household items household textiles, linen and accessories (-2.4%*) also fell.

Heating energy prices also fell, by 2.2% compared to the same month of the previous year. While the prices of gas and firewood fell by 9.5%* and 2.5%* respectively, those of fuel oil increased by 5.7%* and those of district heating by 6.8%. %*. “The price of gas has fallen significantly due to the relatively mild winter and improved supply, but is still at a high level. Conversely, the scarcity of the supply of crude oil by OPEC led to a significant increase in fuel oil prices,” comments D. Renkert.

Highest inflation for people aged 65 or older living alone

Households with one person aged 65 or over have experienced the highest increases in housing and mobility costs over the last twelve months. The rate of inflation as they feel it compared to last year amounts to 3.0%.

If we stick to the figures, among all households, it is couples under 65 without children who feel the increase in costs the least. With an index set at 111.1 points, the inflation felt by people in this category amounts to 2.4% over the last twelve months.

The lowest incomes are also the most impacted by inflation

Based on income, it is for the category that earns the least that the cost of living has increased the most compared to last year. Its Lomo Price Index rose 3.1%.

The highest income class was the least affected by the increase in prices. For her, prices have increased by 2.3% since last year.

Highest inflation in Italian Switzerland

A comparison of linguistic regions reveals that Italian Switzerland recorded the highest increase in prices compared to last year, namely 3.0%.

The lowest increase in prices compared to the previous year was recorded in German-speaking Switzerland and Romansh-speaking Switzerland, where it amounted to 2.6%.

* Comparis Lomo Price Index

The Swiss Consumer Price Index (CPI) measures price developments based on a representative basket of around 1,050 goods and services. Inflation is characterized by a persistent decline in monetary value or an increase in the average price level. The CPI has 12 main categories, including long-term investments and rents. On the other hand, major expenditure items, such as social insurance premiums or direct taxes, are not taken into account. The CPI therefore does not reflect inflation as it is actually felt by consumers.

The Comparis Lomo price index, compiled in collaboration with the Swiss Federal Institute for Economic Research (KOF), reflects inflation in the areas of housing and mobility exclusively. Comparis also explicitly takes into account factors such as household type, income category and language region. In addition, a smoothed price comparison over 20 years is carried out and separate calculations are performed for some product groups. Important note: figures marked with an asterisk

are included in the price index.

were calculated directly by the Federal Statistical Office (IPC/OFS) or are based on figures from the IPC/OFS.

Dirk Renkert Expert Argent Téléphone: 044 360 53 91 E-mail:  [email protected]  comparis.ch/hypoPlus

The data underlying the Comparis Lomo index come from the Swiss Consumer Price Index (CPI) as well as the Household Budget Survey (HBS). The weights for the new price indices are established based on the EBM. The chained Laspeyres indices are then calculated with the CPI price series. The base index is that of December 2017 (corresponds to 100%).

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