Real Estate Outlook – Switzerland, Edition 1H24

The increase in interest rates by a total of 250 basis points between September 2022 and June 2023 has greatly changed the environment for real estate investment. The rise in interest rates led to corrections in the Swiss real estate market in 2023. Compared to many foreign real estate markets, however, the corrections in Switzerland have been moderate due to the lower rise in interest rates and the solid fundamentals of the user markets.

Due to rising demand and declining construction activity, the Swiss rental housing market is characterized by falling vacancies and rising rents. In addition, the mortgage reference interest rate was raised twice, which further supported the values of residential real estate in the changed interest rate environment. The situation for commercial real estate differs depending on the location and quality of the properties.

Both the current economic slowdown and structural changes are contributing to this, although Swiss companies experience a significantly higher office presence than companies in other countries and the effects of the economic slowdown remain limited due to the stability of the labor market. Nevertheless, the demand for office space decreased, but quality standards of the space increased at the same time. A similar pattern applies to the retail space market.

With risk premiums rising again, the interest rate turnaround that has now been initiated and decreasing denominator effects, the momentum of the transaction market is likely to pick up again in 2024.