Switzerland's real estate market has remained resilient despite global turbulence caused by factors such as the pandemic, inflation, and geopolitical tensions. The country's economy has shown solid performance, with a projected growth rate of 1.4% for 2024.
The chemical and pharmaceutical sector has played a significant role in driving this growth, although the labor market has experienced some strain with a rise in the unemployment rate. The Purchasing Manager Index (PMI) reflects mixed sentiment, particularly in manufacturing, while the services sector has shown more stability.
These economic conditions have led to increased interest in the Swiss real estate market as investors seek opportunities.
The Swiss National Bank (SNB) has contributed to the current real estate climate by lowering interest rates in response to low inflation. This has created a more favorable investment environment and restored confidence among investors. The risk premium for direct real estate investments has returned to just above the long-term average. Yields on Swiss Confederation bonds have declined, making the Swiss property market more attractive.
Prime yields in the residential segment have increased, while the retail segment has seen a more modest rise. The office property sector has faced challenges due to structural shifts and changing market dynamics. However, the overall sentiment in the capital markets has improved, with total transactions in 2024 exceeding the previous year.
The Swiss housing market remains robust due to population growth and high demand for rental apartments. Net immigration has slightly decreased, but it continues to drive rental demand. The construction of new residential units has not kept pace, leading to a decline in the vacancy rate and an increase in asking rents.
The rental market has also been influenced by changes in the mortgage reference interest rate, but no further increases are anticipated. The high proportion of fixed-rate mortgages provides some stability in the rental market.
The commercial real estate market faces challenges due to evolving work patterns and consumer behavior. Hybrid working models and online shopping have impacted demand for office and retail spaces. However, positive employment growth has stabilized the office space market.
Swiss companies maintain an above-average office presence, which provides a buffer against the challenges faced by the sector. The commercial real estate landscape is likely to evolve as the market adapts to these changes, presenting both challenges and opportunities for investors.
In summary, Switzerland's real estate market is navigating a complex landscape, but the outlook remains promising. The housing market is driven by population growth and high demand for rental apartments, while the commercial sector faces challenges due to changing work patterns and consumer behavior. Despite these challenges, investor sentiment is improving, and the fundamentals of the housing market remain strong.