The Swiss real estate market: A year of nuanced shifts amid changing interest rates, new data suggests the market might be cooling off.

The Swiss real estate landscape in 2023 had many economic adjustments, notably interest rate trends and market fluctuations in Europe. A detailed analysis reveals a market characterised by both caution and enduring strength, with notable regional disparities and diverse investment performances.

Interest Rates and Market Dynamics

Shift in Interest Rates: The year saw a pivotal adjustment in interest rates, moving away from the prolonged low-interest phase. This development was anticipated to cool the real estate fervour.

SNB’s Strategy: Contrary to expectations, the Swiss National Bank’s rate cut provided a silver lining, hinting at market stability and potentially revitalising investor confidence.

Performance from Investment

Overall Investment Trends: The real estate investment sector saw a shift, with performance indices retracting slightly from the highs of the low-interest era, marking a cautious investor sentiment.

Investment properties registered a +2.3% performance, a dip from the previous +5.2%, reflecting a recalibrated market expectation.

Mixed-use properties maintained a steady performance at +2.3%, closely mirroring the previous year’s +5.5%, suggesting their consistent appeal to investors.

Residential properties experienced a slight performance contraction to +2.9%, down from +5.9%, with certain cantons like Zug (+3.2%) and Zurich (+0.5%) showcasing resilience through positive value trends.

Commercial properties faced a sharper adjustment, with their performance dropping to +1.4% from +4.1%, indicating sector-specific challenges.

Rental Market Dynamics

Asking Rents Increase: Across Switzerland, asking rents witnessed a significant surge of +6.4%, with regions like Zurich (+7.0%), Ticino (+6.1%), and Geneva (+5.6%) leading the rise, reflecting heightened demand and potentially tighter supply dynamics.

Vacancy Rate Trends: The overall vacancy rate for residential and office properties decreased to 3.8% from 4.2%, signaling a tightening market. However, regions like Jura (15.6%) and Ticino (6.9%) reported higher vacancy rates, pointing to localized oversupply issues.

Disparity by Region

The Swiss real estate market in 2023 displayed pronounced regional disparities:

Value Appreciation: Zug and Zurich emerged as regions with positive residential value trends, contrary to the depreciating trend in Glarus (-2.5%).

Vacancy Challenges: High vacancy rates in commercial properties were notable in Basel-Landschaft (7.0%) and Geneva (9.2%), contrasting with the low vacancy rates in residential sectors within Zug (0.2%), Zurich (1.3%), and Geneva (2.4%).

Forward-Looking Perspectives

The market outlook for 2024 is cautiously optimistic, with the SNB’s rate adjustments expected to ease financing costs. While global economic uncertainties loom, the Swiss real estate market’s foundational strength and regional diversity suggest a path of measured growth and potential opportunities.

In conclusion, the Swiss real estate market in 2023 presented a tapestry of cooling signs, resilience, and stark regional disparities. As stakeholders navigate this landscape it is yet to see if there is a bubble to be burst. Some negative signs found in the data are slightly worrying. Any negative growth is not to be celebrated and almost never occurs during the “good times”. While 2024 is still up for grabs I doubt we have property boom on the horizon.

©Keystone/SDA