Immospektive February 2025

Sebastian Zollinger

Director, Head Real Estate Advisory, PwC Switzerland

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In December 2024, the Swiss National Bank (SNB) lowered its policy rate by 0.5 percentage points to 0.5%. Further interest rate cuts are possible, partly due to the easing inflationary pressure and the persistently weak economic development, which is likely to continue to have a positive impact on the Swiss real estate market. Rents have stabilised in the rental housing market, although immigration and limited supply continue to drive up prices. A slight increase in construction activity is expected, although this remains below the long-term average. Residential investment properties continued their recovery, supported by more attractive financing conditions and rising demand. In the office space market, central locations showed a stable to positive trend, while peripheral locations remain under pressure. Residential property prices have continued to rise, particularly for single-family units, since falling financing costs are supporting demand.

The information on market developments, on which Immospektive is based, can be found in FPRE’s real estate meta-analysis. References to FPRE graphics in our text are marked [1] etc.

Focus on monetary policy: SNB continues its easing course

The Swiss National Bank (SNB) is continuing to ease its monetary policy by lowering its policy rate again by 0.5 percentage points to 0.5%.¹ The SNB has lowered its policy rate by a total of 1.25 percentage points since the beginning of 2024.² The SNB is thus following the ongoing decline in inflationary pressure in Switzerland. Inflation fell more sharply than expected – from 1.1% in August to 0.6% in November. This is due to falling prices for both goods and services. Rising prices for domestic services continue to drive inflation. The contingent inflation forecast has been adjusted accordingly.³ Average inflation of 1.1% is expected for 2024, 0.3% for 2025 and 0.8% for 2026 [9]. The current economic trend gives the SNB scope for further interest rate cuts, which will likely have a positive impact on the Swiss real estate market.

As expected, economic growth in Switzerland was subdued in the third quarter of 2024, with a slight increase in unemployment and average utilisation of production capacities. Among other things, industry suffered from a decline in value creation. By contrast, the services sector in particular gained some momentum. For 2024, the SNB continues to expect GDP growth of 1.0%.⁴ The average forecasts for Swiss GDP growth are 1.4% for 2025 and 1.7% for 2026 [6]. The economic outlook is characterised by the increased uncertainty with regard to the USA’s future economic policy. In particular, an increase in geopolitical tensions could lead to weaker development of the global economy.⁵ For Switzerland, the ongoing economic weakness in the eurozone, particularly in Germany, is having a dampening effect on its own growth.⁶ The KOF Economic Forecasts Report recently lowered its economic outlook and, in connection with the further fall in inflation, holds out the prospect of a further policy rate cut of 0.25 percentage points in March 2025.⁷ It can be expected that the lowered interest rates will continue to have a positive impact on the financing environment. As a result, the real estate market is once again becoming more attractive, which further reinforces the increasing momentum on the transaction market since the second half of 2024 in particular and points to a continuation of rising transaction volumes in 2025.⁸

^{1 SNB, Geldpolitische Lagebeurteilung vom 12. Dezember 2024

2 SNB, Geldpolitische Lagebeurteilung vom 21. März 2024

3 SNB, Geldpolitische Lagebeurteilung vom 12. Dezember 2024

4 SNB, Geldpolitische Lagebeurteilung vom 12. Dezember 2024

5 SNB, Geldpolitische Lagebeurteilung vom 12. Dezember 2024

6 Raiffeisen, Economic Research, Immobilien Schweiz, 4. Quartal 2024.

7 KOF, Konjunkturbericht Gedämpfte europäische Konjunktur belastet Schweizer Aussichten, Winter 2024

8 Julius Bär, Immobilienmarkt-Bericht Schweiz, 1. Quartal 2025}

Rental housing market: stabilisation of rents despite ongoing housing shortage

The rental housing market in Switzerland continued its stable development at the end of 2024. Compared to the previous quarter, average quoted rents fell slightly by −0.4%, with a significant year-on-year increase of +2.0% cementing the persistently high demand [23]. The high level of immigration continues to drive this persistently high demand. A halt in the trend of household downsizing could also be observed due to the ongoing housing shortage.⁹ A look at the supply side shows that construction activity has picked up, which should slightly reduce the pressure on the high demand. As the new construction rate for homes is still below the ten year average of 1.1% at 0.9%, the supply of housing in the urban centres of Zurich, Geneva and Basel remains limited and is currently insufficient to fully meet the rising demand.¹⁰ In addition, the sharp increase in regulations in recent years, particularly for urban residential construction, continues to hinder the creation of new living space. One ray of hope comes from the relaxation of noise protection regulations adopted by Parliament in autumn 2024.¹¹

Quoted rents fell in all regions in the fourth quarter of 2024, although there were some regional differences. While quoted rents fell by −0.4% in the Lake Geneva region, by −0.6% in central Switzerland and by −1.5% in southern Switzerland, the trend in the Basel and Zurich regions remained stable at −0.1%. Rents in the eastern Switzerland region also fell by −0.7%. In contrast, year-on-year growth was high, particularly in the Basel region (+5.7%), eastern Switzerland (+2.8%) and the Alpine region (+2.8%), whereas central Switzerland (+1.7%), the Zurich region (+1.4%), the Lake Geneva region (+1.1%) and southern Switzerland (+0.6%) were below average [23].

An analysis of new tenancies for new-build and older apartments illustrates the stabilisation of quoted rents, which fell by −0.6% for new-build apartments compared to the previous quarter and remained stable at −0.1% for older apartments. A year-on-year comparison shows a clear increase, with rents for new-build apartments rising less sharply (+1.4%) than those for older apartments (+2.7%).¹² In urban regions such as Zurich, Geneva and Basel in particular, the high level of immigration is increasing the pressure on the already strained rental housing market. The net immigration figure of 9,800 people in November 2024 was, as in previous months, above the annual average for 2023 (8,200) and 2022 (6,800) [11].

The forecast of a rise in construction activity brings hope for the housing market. The recent negative trend in construction activity, as measured by the SBC Residential Construction Index – which has been declining since the start of 2024 (−5.4% in the fourth quarter of 2024 vs. the third quarter of 2023) – appears to have improved. The forecast for residential construction has thus increased from 3.4% to 3.8% for 2025, from 2.7% to 3.0% for 2026 and from 2.6% to 2.9% for 2027. This development indicates that construction activity is likely to follow a somewhat more dynamic trend in the coming years than expected in the previous forecast. However, the supply created is still unlikely to be sufficient to meet the persistently high demand [14,15].

The expected reduction in the policy interest rate in March and possible further reductions over the course of the year should provide relief for existing rents.¹³ For quoted rents not affected by this, however, it can be assumed that the increase will be paused only briefly, as price expectations for the fourth quarter of 2024 are still based on rising residential rents [28].

^{9 Raiffeisen, Economic Research, Immobilien Schweiz, 4. Quartal 2024.

10 Julius Bär, Immobilienmarkt-Bericht Schweiz, 1. Quartal 2025

11 NZZ, Real Estate, Ausgabe Februar 2025

12 FPRE, Metaanalyse Immobilien Schweiz Februar 2025

13 ZKB, Real Estate Funds: The Market Outlook for 2025, 7. Januar 2025}

Office space market: recovery evident, challenges remain in peripheral areas

The Swiss office property market continues to show a mixed performance. While quoted rents for office space increased by +0.7% at national level in the fourth quarter and by +1.2% year on year, the trend continues to vary from region to region [35]. Demand is particularly high in the prime locations of Zurich and Geneva, leading to stable or rising quoted rents. In peripheral locations, on the other hand, many office spaces lie vacant, which continues to put pressure on rents.¹⁴ This is also reflected in the price expectations for the next 12 months, which suggest that office rents will continue to fall across Switzerland [46]. The cooling of the labour market is unlikely to help this situation. The KOF recently lowered its economic forecast and speaks of a deterioration in numerous leading indicators of the labour market.¹⁴

The Swiss office market continues to show clear regional differences. For example, quoted rents in the Lake Geneva region rose by +2.8% quarter on quarter and recorded the largest year-on-year increase of +6.3%. In contrast, quoted rents in central Switzerland, which grew strongly in the first three quarters, fell by −2.1% but were still up +1% year on year. In Basel, quoted rents did not change quarter on quarter and increased by +2.3% year on year [35].

A look at the office market in the Zurich region shows that quoted rents managed to recover in the fourth quarter. With growth of +1.2% in the fourth quarter, they remained stable year on year (−0.1%) and thus lagged behind the other regions. Office rents in eastern Switzerland also continued to grow in the fourth quarter (+1.2%) and also increased by +3.4% year on year. The southern Switzerland region again recorded a decline of −5.0% quarter on quarter and an extremely negative year-on-year fall of −15.1%. No figures are available for the Jura and Alpine regions.¹⁶

The available office space in the major Swiss cities of Zurich, Geneva, Bern, Basel and Lausanne also increased by +9.0% year on year as at the end of 2024, reaching a vacant office space figure of just under one million square metres for the first time, which corresponds to an availability rate of 5.0%. However, there is no sign of a collapse in demand for office space in Switzerland as a whole. Centrally located and high quality office space continues to show good growth, while peripheral and older office space is clearly under pressure.¹⁷

^{14 UBS, Switzerland Real Estate Outlook – Edition December 2024

15 KOF, Konjunkturbericht Gedämpfte europäische Konjunktur belastet Schweizer Aussichten, Winter 2024

16 FPRE, Marktmieten- und Baulandindizes von Renditeimmobilien Schweiz, 4. Quartal 2024

17 JLL, Büromarkt Schweiz, 2025}

Growth in returns: negative total returns are a thing of the past

The negative total returns seen in 2023 are a thing of the past, with the Swiss retail estate market showing a clear recovery in 2024. Mixed-use properties and multi-family homes in particular recorded a significant improvement in total returns, which rose considerably compared to the previous year. The office space market also showed a positive trend, at least in part, with a sharp rise in returns from changes in value – particularly in central locations. However, regional differences are still recognisable: while regions such as central Switzerland and Basel recorded significant increases, the Lake Geneva region lagged behind this progress. Cash flow returns rose slightly in all areas, indicating stable demand in central locations.¹⁸

The total return on mixed-use properties was 8.5% in 2024. This is a significant increase compared to the negative total return of −6.6% in the previous year. With a return from changes in value of 4.9% compared to a negative return from changes in value of −9.6% in the previous year, there are clear signs of a recovery in the Swiss real estate market. The cash flow returns increased slightly from 3.1% in 2023 to 3.5% in 2024.¹⁹ In regional terms, central Switzerland had the highest total return at 11.4% (−5.6% in 2023). The Basel region also had a total return of over 10% (10.3%) at the end of 2024 compared to −6.2% in the previous year. The Zurich region (7.9%) and Lake Geneva region (6.1%) also recorded a total return in the single-digit, mid-range percentage range compared to the previous year’s negative total returns of −6.5% (Zurich region) and −6.6% (Lake Geneva region) [50].

At 8.7%, the total return on multi-family units also increased significantly in 2024 compared to the previous year (−7.7%). After a return from changes in value in the negative, double-digit percentage range (−10.6%), this figure had clearly recovered to 5.3% by the end of 2024. The cash flow return rose from 2.9% in the previous year to 3.4%. The average minimum discount rate (net, real) for multi-family units was 1.88% in mid-January, which corresponds to a further reduction compared to the last two quarters (2.03% in August 2024 and 1.98% in November 2024) [32].

In a regional comparison, a uniform picture continues to emerge for returns from changes in value for multi-family units. In 2024, these ranged from 4.4% (Geneva region) to 7.3% (Alpine region). The Zurich region recorded a return from changes in value of 4.6%, while the figure for the Basel region was slightly higher at 5.7%. The cash flow return also increased in all regions by +0.5% to +0.6%, with the Zurich region traditionally having the lowest cash flow return at 3.0% and the Alpine region the highest at 4.4%.²⁰

As with the office space market, the trend in total returns for office properties in 2024 presents a varied picture. Compared to the negative total return in the previous year, they rose from −4.8% to 8.1% across Switzerland. The return from changes in value increased from −8.1% in 2023 to 4.4% in 2024, while the cash flow yield rose by 0.4 percentage points to 3.7%. There were clear differences in the growth of returns at regional level. In the Lake Geneva region, the cash flow return rose from 3.4% in 2023 to 3.7% in 2024. The return from changes in value improved year on year from −8.5% to −0.3%, resulting in an overall return of +3.3% after a figure of −5% in the previous year. In the central Switzerland region, the cash flow return increased from 3.8% in 2023 to 4.4% in 2024. The increase in the return from changes in value was particularly strong, rising from −7% to 9.3%. This positive development contributed to a total return of 13.8%, compared to −3.1% in the previous year. In the Basel region, the cash flow return rose from 3.2% to 3.6%, while the return from changes in value increased from −6.7% to +8.8%. This resulted in a total return of 12.3% in 2024, compared with −3.5% in 2023. In the Zurich region, the cash flow return rose from 3.1% to 3.4%, while the return from changes in value increased from −6.8% to 4.9%. The total return was 8.4%, which represents a significant improvement compared to the −3.8% of the previous year.²¹

The previous growth in returns seen in the first three quarters of 2024 continued in the fourth quarter, with attractive office space in central locations performing significantly better than the less attractive peripheral locations in 2024. In particular, the return from changes in value varies greatly from a regional perspective.

^{18 FPRE, Marktindizes für Renditeimmobilien, 4. Quartal 2024

19 FPRE, Marktindizes für Renditeimmobilien, 4. Quartal 2024

20 FPRE, Marktindizes für Renditeimmobilien, 4. Quartal 2024

21 FPRE, Marktindizes für Renditeimmobilien, 4. Quartal 2024}

Owner-occupied property: prices for residential property continue to rise

The price of residential property in Switzerland continued to rise in 2024, with an increase of +3.4%. The trend of rising transaction prices for single-family units and owner-occupied apartments continued in the last quarter of 2024. The stronger growth in prices for single-family units was particularly remarkable, with a price increase of +4.8%.²² The SARON interest rate, which influences mortgage interest rates, continued to fall and is expected to remain low in 2025 and 2026.²³ Regional differences in price trends showed that strong price increases for single-family units were recorded in the Alpine region and central Switzerland in particular. In some regions, such as southern Switzerland, prices remained stable or fell slightly. Overall, there was a higher year-on-year price increase for single-family units compared to owner-occupied apartments, which indicates that demand for single-family units remains high.²⁴ The fall in financing costs also makes home ownership more attractive and suggests further price growth in the market for owner occupied homes.²⁵

The trend of rising transaction prices for single-family units and owner-occupied apartments also continued in the last quarter of 2024. Compared to the same quarter in the previous year, transaction prices for single-family units rose by +1.4% overall, while transaction prices for owner-occupied apartments rose by +1.2% compared to the previous quarter. Compared to the previous year, transaction prices for single-family units rose by +4.8%, while transaction prices for owner-occupied apartments increased by +1.6%.²⁶

The mortgage volume in Switzerland increased further in November and totalled CHF 1’202.6 billion. Annualised growth in the mortgage volume weakened further in November 2024 at +2.54% compared to July 2024 (+2.8%) [22]. The significant reduction in SARON is also continuing into the beginning of 2025. SARON fell from 0.95% at the end of November 2024 to 0.45% at the end of January 2025.²⁷ The interest rate forecasts suggest that SARON will continue to fall in 2025 and remain at this level in 2026. SECO, KOF and UBS are forecasting a range of between 0.2% and 0.3% for SARON in 2025, while a stabilisation of between 0.2% and 0.7% is also expected for 2026 [18].

The regional growth rates for residential property, both for owner-occupied apartments and single-family units, continue to show significant differences. Most regions recorded an increase compared to the previous year. In southern Switzerland, prices for owner-occupied apartments remained stable (+0.1%), while prices for single-family units fell (−0.8%). The strongest growth in prices for single-family units was in the Alpine region with a rise of +8.1%; while in the Basel region the increase for owner-occupied apartments was −2.2%, in other regions such as Lake Geneva it was +2.1% for owner-occupied apartments and +3.7% for single-family units. In the Zurich region, prices rose by +2.8% for owner-occupied apartments and +6.4% for single-family units. Central Switzerland in particular saw a strong price trend for single-family units, with an increase of +6.5%. The Jura region recorded a slight decline of −1.1% for owner-occupied apartment prices, but positive growth of +3.2% for single-family units.²⁸

The current interest rate trend suggests further price growth on the owner-occupied property market, due in particular to the sharp fall in SARON interest rates. This is also reflected in the price expectations for single-family units and owner-occupied apartments over the next 12 months, which have risen since the previous quarter [59, 65].

^{22 FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 4. Quartal 2024

23 SNB, Current interest rates and exchange rates, Februar 2025

24 FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 4. Quartal 2024

25 Raiffeisen, Economic Research, Immobilien Schweiz, 4. Quartal 2024.

26 FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 4. Quartal 2024

27 SNB, Current interest rates and exchange rates, Februar 2025

28 FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 4. Quartal 2024}

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