Real Estate Focus 2025

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Highlighted chapters

The future – Migration as a value driver

The driver behind the development of values of residential property is population growth. The combination of declining immigration and demographic aging is set to cause a gradual slowdown in population growth in Switzerland out to 2045. Over the longer term, this should ease the shortages affecting the residential market.

The graphic shows net immigration and excess births for Switzerland between 1956 and 2045. Net immigration is likely to remain the major driver of population growth in future. Sources: FSO and �۶��Ƶ

Aging – The market is slowing down

The increasing aging of society will affect the Swiss real estate market in the decades ahead. In those regions where the overall population is growing only slowly, the risk is of a scenario with rising vacancies and falling house prices.

The graphic shows a map of Switzerland and its economic regions. It is likely that the number of pensioners will rise sharply out to 2045 primarily in the cantons of Thurgau, Aargau, Zurich and Bern and on Lake Geneva. The regions at risk of excess aging include large parts of the cantons of Graubünden and Ticino. Source: �۶��Ƶ

Housing shortage – Tenants looking for compromises

The strong population growth seen in recent years is contributing to the current shortage of housing. The result is a rise in the size of households and greater demand in cheaper regions. The difference between existing and market rents is leading to underoccupied apartments, further exacerbating the shortage.

The graphic shows the link between the number of empty apartments and the percentage contribution to total growth in number of households by those with at least three people. The fewer apartments stand empty, the greater the share of larger households. Sources: FSO and �۶��Ƶ

Home ownership – The affordability barrier

Demand for owner-occupied homes is clearly rising thanks to low financing costs, driving prices up again. However, the increasing affordability of owner-occupied housing is making it increasingly difficult for people to buy. This is especially the case for the agglomerations around the major cities.

The graphic shows that with an annual income of CHF 150,000, only one-third of properties advertised on 2024 were affordable. With CHF 200,000, it was 49%. Sources: Meta-Sys and �۶��Ƶ

Rental apartments – Confident investors

As low interest rates have returned, multi-family homes have again become a more attractive asset class. Demand has peaked on the market for rental apartments, but in the medium term it will still allow solid growth in rental income and hence further capital gains.

The graphic shows that since 2022 net immigration has been well above the long-term average. Sources: FSO and �۶��Ƶ

Offices – Focus on good locations

Ongoing optimization of space causing excess supply in the office market. Percentage of people working from home is likely to rise again in the medium term. Zurich and Zug will continue to pull away from the other big office markets for the time being.

The graphic shows that investments in office conversions have been consistently high, whereas new-build investments in centers has fallen sharply. Sources: FSO and �۶��Ƶ

Retail – No pause for breath

The structural change in retailing is continuing. The food segment seems little affected by online retailers, but shops in the non-food segment are struggling.

The graphic shows that the number of jobs in retailing fell between 2011 and 2022, but rose in commercial and the economy as a whole. Sources: FSO and �۶��Ƶ

Logistics and industry – Full of opportunities and challenging

Swiss industrial and logistics properties have been robust recently, against the backdrop of a challenging environment. The logistics segment in particular promises solid long-term returns, but is hard to assess directly.

The graphic shows that industrial and logistics properties offer a high and stable income return and have been outperforming the market as a whole in the recent past. Sources: MSCI and �۶��Ƶ

Real estate funds – Premiums under the microscope

Swiss real estate funds appear highly valued by historical standards following their strong performance in 2024. Much of the premium can only be attributed to expectations of falling interest rates. If these fade, prices may well come under pressure.

The chart shows that the agios (i.e., premiums) of Swiss real estate funds have increased on average in recent months and are currently above the long-term average. Sources are annual reports of listed real estate funds, Bloomberg, and �۶��Ƶ.

Global – Investors return

Interest in global commercial real estate as an investment is likely to rise in 2025. Inflation has largely returned to normal, pushing down interest rates and financing costs.

The current situation – The journey is the goal

The current replacement rate of heating systems is too low to meet sustainability goals by 2050. Bans on fossil fuel heating systems are likely to pave the way for climate neutrality in residential buildings. Cantons that already have such regulations should make much more rapid progress.

The graphic shows that, according to our forecasts, the share of buildings in Switzerland with sustainable heating will rise from 40% in 2024 to 53% in 2030. Sources: FSO and �۶��Ƶ

Profitability – Patchy incentives

The financial incentives for energy renovations are significant, but do not guarantee an attractive return on the work. The increasing political pressure to renovate is having some unfavorable effects on property values. Extending district heating is essential if the residential sector is to achieve the climate goals.

The graphic compares the return on energy-efficient refurbishments of single-family homes and multi-family dwellings. The highest returns come from replacing the heating in a single-family home, the lowest from total renovation of a multi-family dwelling. Source: �۶��Ƶ

The future – An expensive sprint to the finish

Switzerland has cut building sector CO₂ emissions considerably, but is not a leader by international standards. Attention is switching to reducing and offsetting gray emissions caused by new building and renovations.