Swiss real estate investments: Boom with an expiration date?

Listed Swiss real estate investments have been among the highest-yielding assets in recent quarters. Between November 2024 and the end of February 2026, real estate stocks rose by 49 percent—more than twice as much as the overall Swiss equity market. Real estate funds posted a gain of 16 percent during the same period and benefited from record-high capital inflows in the primary market. For comparison: Global and European real estate stocks achieved only 4 and 9 percent returns, respectively (in Swiss francs). Real estate prices on the direct market also increased: Residential investment properties became 6 percent more expensive last year, twice the 10-year average.

Maciej Skoczek, CFA Economist, Swiss & Global Real Estate, UBS GWM Chief Investment Office

Drivers of the rally

The market environment for real estate investments has recently been favorable: Many central regions face housing shortages, and the robust economy has supported demand for well-connected, modern commercial spaces. Higher rents could be achieved for new and renewed leases. Investors benefited from rising gross rental income, declining vacancy rates, and—supported by lower interest rates—significant valuation gains.

Interest rates near 0 percent make listed real estate particularly attractive, as they offer a yield advantage over bonds. The allocation of institutional investors to the property market has relatively decreased as equity markets have risen, creating room for further real estate investments. At the same time, geopolitical uncertainty and the Swiss franc—seen as a safe-haven currency—have increased international demand for Swiss securities.

Rents rising more slowly

According to UBS forecasts, the Swiss economy is expected to grow by only 0.9 percent in 2026—half as much as the 10-year average. While the domestic economy remains the main pillar, its contribution to growth is expected to decline as the labor market cools. Employment is projected to grow by a very modest 0.5 percent, and the unemployment rate is expected to rise slightly.

With the subdued economic outlook, immigration is likely to weaken further, reducing excess demand in the housing market. Combined with low inflation and last year’s reductions in the mortgage reference rate, this will slow further increases in rental prices.

Residential segment: Advantages despite regulatory pressure

In this challenging environment, investments in residential properties offer attractive prospects: Demand for new housing remains robust, rents continue to rise—albeit more slowly—and supply is recovering only slowly. Real estate funds benefit from this. However, with premiums of nearly 40 percent, they are highly valued by historical standards. Dynamic activity in the primary market is likely to persist in the coming months, which will likely dampen price development. Overall, we expect a total return of around 5 percent in this segment for the year, supported by stable income and low-to-moderate value appreciation.

The greatest risk to this development is regulation. For example, a tenant protection initiative (Wohnschutz-Initiative) in the canton of Zurich, which will be voted on June 14, 2026, would introduce measures such as a permit requirement for demolitions, conversions, renovations, and changes of use. In addition, rent increases after refurbishments would be subject to additional conditions. The possible consequences are already evident in Basel, where a similar measure was voted for in 2021: Property values there are estimated to be 10 to 15 percent lower than they would be without regulation, renovations have been delayed, and rental income has barely risen. Since the Zurich housing market represents a significant share of fund portfolios, approval of the initiative would reduce the growth opportunity of real estate funds.

Challenges for commercial properties

The weaker economic and employment outlook is weighing on leasing prospects for commercial properties. Rising vacancies are likely to slow market rent growth—even in prime locations. Total returns on investments in commercial properties will likely be lower than those for residential properties.

The focus on commercial space calls into question the valuations of real estate stocks. Historically, they are highly valued, with premiums over 40 percent. Overall, the potential for real estate stocks remains limited, and downside risks outweigh the current outlook.

Review allocation

Short-term, positive momentum for further price increases is likely to be lacking. Further monetary easing by the Swiss National Bank is unlikely. If growth in the eurozone picks up and the interest rate differential between Switzerland and the eurozone narrows, demand for Swiss real estate securities is expected to decline, raising the risk of a price correction. We consider a portfolio allocation of 5 to 10 percent in listed Swiss real estate investments to be optimal. 

Biography

Maciej Skoczek has been an economist in the UBS Chief Investment Office, Swiss & Global Real Estate, since 2012. He is the author of several flagship publications, including the Global Real Estate Bubble Index, Swiss Alpine Property Focus, and European Alpine Property Focus, and is a regular contributor to Investing in Switzerland. Previously, he held various positions at the University of St. Gallen (HSG). Maciej Skoczek is CFA and CAIA charterholder.