Real Estate Market Switzerland 2024
Switzerland’s real estate market continues to thrive in 2024 despite global economic challenges, interest rate fluctuations, and the expected real estate bubble burst. Known for its stability, Switzerland remains an attractive destination for investors, particularly in the residential and commercial property sectors.
Photo by Francesca Tosolini on Unsplash
In this guide, we will explore key housing market trends, investment opportunities, market challenges, and projections for the Swiss real estate market in 2024.
Macroeconomic Context
Switzerland’s economy, while resilient, faced significant challenges in 2023, particularly due to increased interest rates, supply chain disruptions, and macroeconomic pressure from neighboring European countries.
However, Switzerland ended the year with a 1.3% real economic growth, supported by strong private consumption and a remarkably low unemployment rate of under 2%.
The Swiss National Bank (SNB) initiated a series of interest rate hikes from -0.75% in June 2022 to 1.75% in 2023. By March 2024, the SNB slightly reduced the key rate to 1.5%, a sign of recovery in inflation and economic stability. The lower-than-expected inflation rate, combined with strong employment growth, has kept the Swiss economy relatively strong.
However, challenges persist. The war in Ukraine has continued to disrupt supply chains and increase construction costs, leading to slower growth in housing production, despite high demand.
Real Estate Investment Trends
Shifts in market dynamics and sustainability demands are reshaping real estate investment in Switzerland.
Investment overview
The increase in interest rates had a profound effect on the Swiss real estate market in 2023, leading investors to adopt a more defensive strategy. Demand for prime real estate slowed, with higher borrowing costs making it harder to achieve high returns.
Prime yields for office properties increased to 2.7%-3.0% in Zurich and Geneva, and many institutional investors either retreated from the market or became net sellers, especially insurance companies and pension funds.
However, as interest rates begin to stabilize in 2024, we expect the market to regain momentum, particularly in high-demand regions like Zurich, Geneva, and Basel.
Sustainability and ESG compliance
Sustainability is an increasingly important factor in the real estate market, particularly with the newly passed Swiss Climate and Innovation Act. The Act mandates that real estate portfolios must be carbon-neutral by 2050.
In 2023, around 30% of Swiss office space met ESG criteria, and this figure is expected to grow as investors focus on renovating or selling non-compliant properties.
Residential Real Estate Market
Photo by Daniel Abadia on Unsplash
Switzerland’s residential real estate market faces surging demand and rising prices as limited supply and strong population growth continue to drive both the rental and owner-occupied sectors.
Rental market
Switzerland’s rental market is characterized by low vacancy rates and rising rental prices. In the second quarter of 2024, the supply of rental apartments dropped by 11% compared to the same period in 2023, pushing vacancy rates to a decade low of 3.8%. This scarcity has driven rental prices up by 6.3% year-over-year.
Although signs of increased residential property construction are beginning to appear, it will take time for new developments to alleviate the housing shortage. In the short term, rental prices are expected to continue their upward trajectory due to dynamic population growth and limited supply.
Owner-occupied housing market
The owner-occupied housing market saw similar growth trends, with property prices for single-family homes rising by 2.5% year-over-year and apartment prices increasing by 3.5%. Lower interest rates have made homeownership more attractive, driving demand in regions with lower taxes, such as Zug, Lucerne, and Obwalden.
Commercial Real Estate Market
Switzerland’s commercial real estate market is navigating a period of change, with shifting demand in office and retail spaces influenced by hybrid work trends and the growth of eCommerce.
Office space
The Swiss office market is undergoing significant transformation as hybrid work models become more prevalent. Office space demand has shifted toward high-quality, sustainable spaces, while secondary assets struggle to find tenants. As of Q2 2024, the number of advertised office spaces had declined by 7.1% year-over-year, and asking rents for office space dropped by 2.0%.
However, prime office rents in cities like Zurich and Geneva have increased due to strong demand for modern, accessible offices that meet sustainability standards. This polarization between prime and secondary office spaces is expected to continue, with lower-tier properties facing longer vacancies.
Retail space
Retail real estate remains under pressure from the rise of eCommerce, particularly in non-prime locations. While prime retail spaces in major cities like Zurich and Geneva continue to command stable rents, the overall property market saw a 1.6% decline in asking rents year-over-year. The slow recovery of retail sales and the rise of online shopping present challenges for the sector.
New Construction and Development
Photo by Josh Olalde on Unsplash
The number of new residential building permits increased by 22% in Q2 2024, signaling a potential recovery in construction activity. However, the overall supply remains low, with building permits still well below long-term averages. In addition, rising construction costs and lengthy approval processes continue to hamper development.
It’s no surprise that new office and retail developments are largely concentrated in suburban areas, particularly around Zurich and Geneva. Notable projects, such as the Lancy Pont-Rouge development in Geneva, will enhance the attractiveness of suburban locations, particularly for companies seeking modern, sustainable offices at lower costs.
Challenges Facing the Swiss Real Estate Market
The Swiss real estate market faces numerous challenges, which affects both residential and commercial sectors.
Supply constraints
Limited land availability, complex approval processes, and rising construction costs have all contributed to the undersupply of residential and commercial properties. This shortage is most acutely felt in high-demand cities like Zurich and Geneva.
Political and regulatory pressures
Switzerland has seen increased political intervention in the housing market in recent years, particularly around rental regulations. Proposed changes to rent controls, such as caps on renovation-related rent hikes and limits on rent increases tied to mortgage reference rates, could further complicate the market for landlords and investors.
Key Opportunities in the Swiss Real Estate Market
Amidst the challenges, key opportunities emerge in luxury real estate and sustainability-driven investments.
Luxury real estate
Despite its small size, Switzerland remains a hotspot for luxury real estate, particularly in cities like Zurich, Geneva, and Zug. High demand for luxury properties, combined with Switzerland’s favorable tax environment, leads to higher housing costs in this segment.
Sustainability-driven investments
With increasing regulations surrounding ESG compliance, properties that meet sustainability criteria will become even more valuable in the coming years. Investors who focus on green building initiatives and energy-efficient properties are likely to see strong returns as demand for sustainable real estate grows.
Swiss Resorts Still in High Demand
The Swiss property market in the Alps, after experiencing rapid price growth during the pandemic, is beginning to stabilize as 2024 unfolds. Ski property values surged by around 15% annually since the start of the pandemic, driven by increased interest in outdoor activities and remote work, but the market couldn’t sustain such growth indefinitely.
Despite a modest recalibration of prices, demand for luxury properties in the Alps remains robust, with resorts continuously enhancing their year-round appeal. Factors like climate change and rising winter temperatures have not diminished the allure of Swiss ski resorts, thanks to advancements in artificial snowmaking and the development of summer activities such as hiking, biking, and festivals.
The Swiss Alps have become a two-tiered market, where ultra-prime properties continue to command premium prices, driven by cash buyers and foreign investors limited by Swiss property regulations. Resorts at higher altitudes, such as St. Moritz, Zermatt, and Verbier, remain attractive due to their longer ski seasons and reliable conditions.
Meanwhile, lower-altitude resorts and less prime properties are facing more pricing pressure. Despite global economic challenges and rising interest rates, Swiss ski resorts have shown resilience, maintaining their reputation as luxury destinations for both winter and summer activities.
This means now is the perfect time to invest in the Swiss Alps, and Verbier stands out as one of the premier destinations for luxury property. With its high altitude, long ski season, and growing appeal as a year-round resort, Verbier offers not only breathtaking views and top-tier amenities but also a solid investment opportunity.
Whether you’re seeking a mountain retreat for your family or a high-yield property in a sought-after location, Verbier’s real estate market provides the ideal mix of exclusivity, natural beauty, and long-term value. Explore our exclusive listings and find your perfect Alpine property today.
Market Outlook and Predictions
Switzerland’s real estate market in 2024 is defined by resilience and opportunity. While challenges remain, strong demand, especially in the luxury and sustainable property sectors, continues to drive the market forward. Investors who focus on high-demand regions and sustainable developments will most likely benefit from the positive market outlook in the years to come.
The Swiss real estate market is expected to grow steadily over the next five years, with a projected compound annual growth rate (CAGR) of 4.11%, reaching a market volume of $6.58 trillion by 2029. Continued interest rate cuts, combined with rising demand for both commercial and residential properties, suggest that Switzerland’s real estate market will remain attractive to both domestic and international investors.
