Immospektive May 2025

Sebastian Zollinger

Director, Head Real Estate Advisory, PwC Switzerland

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In March 2025, the Swiss National Bank (SNB) lowered the policy rate by 0.25 percentage points to 0.25%. Given the low inflation rate of 0.3% and geopolitical uncertainties, particularly due to US tariff policy, further interest rate cuts are possible. A return to negative interest rates is increasingly being discussed due to the extremely low inflation figures. The continued low interest rate environment is having a stimulating effect on the real estate market. Rents for new tenancies rose significantly in the first quarter of 2025, reflecting continued high demand and a record low number of vacancies. Construction activity remains insufficient to address the structural supply deficit. Office rents for new tenancies declined in the first quarter of 2025 depending on location, particularly in peripheral regions. Central locations, on the other hand, developed at a stable to positive rate, emphasising the growing gap between economic centres and peripheral areas in the office space market. The prices of owner-occupied housing continued to rise in the first quarter of 2025, supported by favourable financing conditions. The planned abolition of imputed rental value, if accepted by the people and the cantons, is likely to further reinforce this trend, with new builds in particular benefiting and existing buildings in need of renovation losing out.

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: will negative interest rates soon be a reality again?

The Swiss National Bank (SNB) is continuing its easing of monetary policy and lowered the SNB policy rate by a further 0.25 percentage points to 0.25% in March. In doing so, the SNB is responding to the persistently weak inflationary pressure in Switzerland. Inflation fell to 0.3% in February 2025, down from 0.7% in November, mainly due to a reduction in electricity prices in January. Nevertheless, domestic services continue to drive up prices.¹ The SNB’s conditional inflation forecast was adjusted slightly. Average inflation of 0.4% is expected in 2025 and 0.8% in both 2026 and 2027 [9]. Geopolitical uncertainty continues to cause unrest, particularly due to the negative impact of US tariff policy on world trade.² Against this background, the discussion about the possible return of negative interest rates in Switzerland in the first quarter of 2025 has gained considerable attention. Raiffeisen is already forecasting a further interest rate cut of 0.25 percentage points to 0% at the next SNB meeting in June.³ A reintroduction of negative interest rates therefore seems possible. The low interest rates are likely to continue to have a positive impact on the Swiss real estate market.

Economic growth in Switzerland was solid in the fourth quarter of 2024, with unemployment rising slightly and production capacity utilisation at an average level. The service sector and parts of industry performed positively, although overall economic momentum continues to be held back by the moderate foreign economy. For the current year 2025, the SNB expects GDP growth of between 1.0% and 1.5%, driven primarily by robust domestic demand, which will be further supported by increased real wages and the easing of monetary policy. In contrast, the continued subdued economic situation abroad is likely to have a dampening effect on Swiss foreign trade. In this environment, the labour market is likely to deteriorate slightly, with the unemployment rate continuing to rise moderately.⁴ The average forecasts for real Swiss GDP growth are 1.2% for 2025 and 1.4% for 2026. This represents a slight decrease compared to the previous quarter’s forecast of 0.2% for 2025 and 0.3% for 2026 [6].

In particular, uncertainty regarding the impact of US tariff policy on world trade dampened sentiment on the stock markets and caused the US dollar and the euro to depreciate against the Swiss franc. This increases the pressure on the SNB to further lower the policy rate.⁵ Martin Schlegel, chairman of the Governing Board of the SNB, also does not rule out a return to a negative policy rate and recently mentioned its beneficial effect on monetary conditions during the last negative interest rate phase from 2015 to 2022.⁶ Even if not all market participants consider the reintroduction of negative interest rates by the SNB to be the most likely scenario, the current low interest rate environment should be sufficient to further stimulate the Swiss real estate market and result in a higher willingness to pay as well as increasing transaction volumes.

^{1 SNB, Geldpolitische Lagebeurteilung vom 20. März 2025

2 SNB, Geldpolitische Lagebeurteilung vom 20. März 2025

3 Raiffeisen, Newsletter Zinsprognose Mai 2025

4 SNB, Geldpolitische Lagebeurteilung vom 20. März 2025

5 SwissLife Asset Managers, Perspektiven Flash Comment: Marktreaktion auf Zollstreit, 8. April 2025

6 SRF, Martin Schlegel im Interview Eco Talk vom 27.1.2025}

Rental housing market: record low number of vacancies and return to rising rents for new tenancies

After the slight decline in the previous quarter (-0.4%), the rental housing market in Switzerland is again seeing a significant increase in rents.⁷ In the first quarter of 2025, rents for new tenancies increased by an average of +1.8% compared to the previous quarter, which corresponds to an increase of +2.4% year on year [23]. The return to rising rents for new tenancies indicates that continued high demand is once again having an impact on rents for new tenancies. On the supply side, this is reflected in the record low vacancy rate of 1.08%, among other things. In June 2024, for example, only 51,974 apartments stood vacant in Switzerland. In the centres of Zurich and Geneva especially, where the vacancy rate is 0.58%, the housing situation is extremely strained.⁸ Construction activity remains low and is still insufficient to meet the high demand for housing, especially in urban centres [14].

In the first quarter of 2025, rents for new tenancies for rental apartments rose in most cantons, thus showing another increase after stabilising in the previous quarter. A look at the cantonal change in rents for new tenancies for new and existing apartments in a quarterly comparison shows a clear differentiation between the urban centres of Zurich (existing buildings: +1.7% and new builds: +1.9%) and Geneva (existing buildings: +2.9% and new builds: 2.2%), which show solid growth, and the peripheral areas such as the Jura (existing buildings: -1.7% and new builds: -1.5%), which recorded a decline. Compared to the previous year, the low-tax cantons of Obwalden, Uri and Zug recorded the greatest increase in rents for new tenancies, with growth in the high single-digit range.⁹

The development of construction activity, measured by the SBV construction index (BAK construction activity forecast), remains negative and has again improved slightly compared to the previous quarter (change per year, construction index total: -1.8% first quarter 2025 versus -3.5% fourth quarter 2024) [15]. On the demand side, growth can still be observed in the Swiss resident population, which exceeded the nine million mark for the first time at the end of 2024 [12]. In April 2025, the Federal Statistical Office (FSO) published updated population scenarios, which, in the reference scenario, assume a further increase in the resident population to over 10.4 million people by 2055. Above-average growth is forecast, particularly in urban centres such as Zurich, Geneva and Lausanne.¹⁰ In view of this development, there are still no signs of any weakening in the excess demand. The structurally high demand is likely to maintain upward pressure on apartment rents in the upcoming quarters, too.

Rental housing market – development Q1 2025

new buildings
old buildings

^{Source: FPRE, Marktmieten- und Baulandindizes von Renditeimmobilien Schweiz, 1. Quartal 2025}

^{7 FPRE, Marktmieten- und Baulandindizes von Renditeimmobilien Schweiz, 1. Quartal 2025

8 BFS, Leerwohnungszählung vom 1. Juni 2024

9 FPRE, Marktmieten- und Baulandindizes von Renditeimmobilien Schweiz, 1. Quartal 2025

10 BAS, Entwicklung der ständigen Wohnbevölkerung der Kantone gemäss den drei Grundszenarien, 15.04.2025}

Office space market: office rents lower - with widening gap between centres and peripheral regions

The Swiss office real estate market shows a significant decline in the first quarter of 2025. Rents for new tenancies for office space fell by -2.0% at a national level in the first quarter and by -2.6% year on year. At a regional level, only eastern Switzerland (4.1%) recorded growth in rents for new tenancies compared to the previous quarter. All other regions recorded a decline [35]. This decline can be interpreted as a response to the vacancy rates in peripheral locations already observed in the previous quarter. The KOF economic forecast remains unchanged for 2025 and has been slightly improved for 2026. A particular focus here is on the increased uncertainty over economic policy; in particular, US tariff policy poses various risks to world trade and is having a negative impact on the global economy. A look at the labour market gives reason for hope. There are initial signs that the slowdown in the labour market is coming to a halt.¹¹

A look at the cantonal development of rents for new tenancies for office space presents a differentiated picture. Rents for new tenancies for office space fell significantly in most cantons, both quarterly and year on year. The Cantons of St. Gallen (3.9%) and Thurgau (2.7%) in eastern Switzerland stand out, as they recorded significant growth compared to the previous quarter, bucking the trend. Compared to the previous year, the decline in rents for new tenancies for office space is particularly evident in peripheral locations. A double-digit percentage decline can be observed in several cantons (Schwyz -10.9%, Solothurn -12.1% and Ticino -15.2%). In addition to eastern Switzerland, the Canton of Geneva also defied the downturn and recorded year-on-year growth of 11.7%.¹²

However, progress can be observed in the way companies deal with working from home. According to UBS, around 80% of companies use hybrid working arrangements. Despite this flexibility, the office remains the central place of work for many companies. However, the functional requirements for office space have changed with regard to the need for space for discussions, collaboration and social interaction.¹³

The current development of rents for new tenancies highlights the differences in demand for office space, which is influenced on the one hand by the supply in peripheral locations and the continued demand in urban centres and on the other hand by changing requirements. In particular, the availability of centrally located and modern office space for larger companies remains limited.¹⁴

Office space market – development Q1 2025

^{Source: FPRE, Marktmieten- und Baulandindizes von Renditeimmobilien Schweiz, 1. Quartal 2025}

^{11 KOF, Konjunkturbericht Schweizer Wirtschaft im Spannungsfeld: Handelskonflikt versus Fiskalimpuls, Frühjahr 2025

12 FPRE, Marktmieten- und Baulandindizes von Renditeimmobilien Schweiz, 1. Quartal 2025

13 UBS, 1H25 Switzerland – Real Estate Outlook Back in the low-interest environment, März 2025

14 Finanz und Wirtschaft REAL ESTATE, Titelinterview Jan Eckert JLL, 05/2025}

Return performance: multi-family units perform well - office properties under regional pressure

The total return for multi-family units increased significantly in the first quarter of 2025, with a rise from 8.7% to 10.6% [51]. From a regional perspective, a consistent picture is emerging. While the cash flow return fell on average by 0.1 percentage points to 3.3%, multi-family units benefited from an increasing return from changes in value.¹⁵ As in previous quarters, returns on office properties vary considerably from region to region. While the total return in the first quarter of 2025 is positive at 6.3%, several regions recorded a negative total return. This is due to a partly negative return on changes in value. The cash flow return of office properties fell on average by 0.2 percentage points to 3.5% [52].

A look at the cantonal development of total returns on multi-family units reveals uniform performance in the first quarter of 2025. Most of the cantons have a double-digit total return with slightly declining cash flow returns. At 14.3%, the Canton of Uri leads the pack, as was previously the case in 2024 (14.2%). The lowest total return in the first quarter of 2025 was recorded by the Canton of Grison at 7.7%.¹⁶ The average minimum discount rate (net, real) for multi-family units (assessment by Switzerland’s largest valuation firms) was 1.86% in mid-May, which corresponds to a decrease of two percentage points compared to the previous quarter (1.88%) [32].

The overall return performance for office properties continues to show a differentiated picture and the differences between central and peripheral locations are becoming clearer. In the first quarter of 2025, five cantons (Schwyz -3.9 percentage points, Zug -2.4 percentage points, Fribourg -1.5 percentage points, Solothurn -1.8 percentage points and Ticino -4.0 percentage points) for which data is available recorded a negative total return. A remarkably high total return can be observed in the cantons of eastern Switzerland (Schaffhausen 18.1%, St. Gallen 20.5% and Thurgau 14.8%). Differentiated performance was also observed in the cash flow return in the first quarter of 2025. Compared to 2024, it fell in 15 cantons by up to 1.2 percentage points (Fribourg), while it increased in four cantons (Schaffhausen +0.6%, St. Gallen +0.4%, Vaud +0.1% and Geneva +0.2%).¹⁷

With the current return performance in the first quarter of 2025, we are thus seeing the continued recovery of the real estate market in 2024. Multi-family units are once again characterised by a stable overall return, while office properties clearly show the difference between attractive, centrally located office properties and those in peripheral regions.

^{Source: FPRE, Marktindizes für Renditeimmobilien, 1. Quartal 2025}

^{15 FPRE, Marktindizes für Renditeimmobilien, 1. Quartal 2025

16 FPRE, Marktindizes für Renditeimmobilien, 1. Quartal 2025

17 FPRE, Marktindizes für Renditeimmobilien, 1. Quartal 2025}

Owner-occupied housing: price increases continue - driven by low financing costs

The price of owner-occupied housing continues to rise in the first quarter of 2025, with an increase of 2.1% and 4.1% year on year.¹⁸ The transaction prices for single-family units (1.5%) and owner-occupied apartments (2.5%) thus continued the price increase of the previous quarters in the last quarter [55, 61]. A further reduction was observed with the SARON (Swiss Average Rate Overnight) interest rate, which fell from 0.45% at the end of January to 0.2% at the beginning of May.¹⁹ Regional differences in the growth of owner-occupied housing prices remain.²⁰ According to ZKB, the further reduction in financing costs continues to act as a driver on the prices of owner-occupied housing.²¹ The expected abolition of imputed rental value will provide additional impetus for the price development of owner-occupied housing, although the anticipated effects on new builds and existing buildings will differ.²²

The trend of rising transaction prices for single-family units and owner-occupied apartments continued in the first quarter of 2025. Compared to the previous quarter, transaction prices for single-family units rose overall by 1.9%, while transaction prices for owner-occupied apartments rose by 2.4% compared to the previous quarter. Year on year, transaction prices for single-family units increased by 4.8%, while transaction prices for owner-occupied apartments rose by 3.1%.²³ The cantonal differences in the price development of single-family units in the first quarter of 2025 ranged between -0.2% (Zug) and 3.9% (Appenzell Innerrhoden), while the price development of owner-occupied apartments ranged between -2.6% (Uri) and 3.6% (Schwyz).²⁴

The mortgage volume in Switzerland continued to grow in February and stood at CHF 1,211.3 billion. The annualised growth of the mortgage volume rose slightly to 2.7% in February 2025 compared to November 2024 [22]. The interest rate forecasts of SECO, KOF and UBS suggest that the SARON interest rate will remain at a level of 0.0%–0.3% in 2025 and 2026 [18]. The further improvement in financing conditions will also have an impact on price expectations for owner-occupied housing in the coming 12 months. A large proportion of respondents continue to assume that owner-occupied housing prices will rise in the next 12 months [59, 65].

The abolition of imputed rental value could take effect from the 2028 tax year at the earliest, provided the people and the cantons approve the reform. However, initial market reactions, such as renovations or demand for owner-occupied housing, can be expected as early as the transition phase. New builds in particular are likely to benefit, while existing buildings in need of renovation could become less attractive due to the abolition of tax deductions.²⁵

Price development – owner-occupied housing Q1 2025

condominiums
single-family houses

^{Source: FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 1. Quartal 2025}

^{18 FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 1. Quartal 2025

19 SNB, Current interest rates and exchange rates, Mai 2025

20 FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 1. Quartal 2025

21 ZKB, Immobilienbarometer 1. Quartal 2025

22 Raiffeisen, Immobilien Schweiz, 1.Quartal 2025

23 FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 1. Quartal 2025

24 FPRE, Transaktionspreis- und Baulandindizes für Wohneigentum Schweiz, 1. Quartal 2025

25 Raiffeisen, Immobilien Schweiz, 1.Quartal 2025}

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