Real estate monitoring 2025
Despite increasing construction activity, the housing shortage in Switzerland remains. Rising prices, bottlenecks in the rental segment and a clear focus on replacements and conversions will characterise the market in 2025. New impetus will come from lower interest rates, stable demand and building construction that is capable of growth.
The residential construction balance will be lower than expected in 2025. Replacement new builds and extensions are increasingly replacing traditional new builds on greenfield sites. Although the number of building permits rose in 2024, net additions due to demolition projects will remain limited. The canton of Zurich is particularly affected, where only 73% of new construction projects actually lead to more living space.
At the same time, the supply rate for rental flats has fallen to a historic low of 3.7 %. Demand clearly exceeds supply in almost all regions.
Price increases due to boom in demand
The reduction in interest rates and the rising net wealth of households are stimulating demand for residential property, particularly in the upper price segment. Transaction prices are continuing to rise. The momentum is particularly pronounced in Central Switzerland. An increase of 3.6 % for condominiums and 3.8 % for single-family homes is forecast for 2025. Rents on offer will also rise, albeit at a more moderate rate ( 1.7 %), while existing rents are likely to fall slightly due to the lower reference interest rate.
Office space market stable with regional impetus
Developments in the office segment are more subdued. Following moderate employment growth of 1.1 % in 2024, demand for space is expected to slow slightly in 2025. Although construction activity rose by 51.5 % in nominal terms, this was due to a small number of major projects. Growth across the board is significantly lower.
Asking rents rose by an average of 2.4 %, in major centres by as much as 4.4 %. In Zurich and Geneva, prime rents fell slightly, while Bern saw an increase of 5.3 %.
Building construction Trend reversal and renovation as the key
After six years of decline, a new phase of growth in building construction will begin in 2024, with an expected increase of just under 5 % in 2025. The renovation sector in particular is becoming a growth driver ( 7.2 %), driven by the shortage of building land, the energy transition, tax incentives and the high need for renovation.
Investment in apartment blocks is rising significantly, while traditional single-family house construction continues to decline. Investment activity is increasingly focussing on inner-city densification, renovation of existing buildings and energy-efficient refurbishments.
Intermediate spurt with uncertainties
The economic environment remains volatile. The Swiss economy is expected to grow by 1.3 % in 2025, driven by consumption and construction investment. Global trade continues to suffer from geopolitical tensions and customs conflicts, which is weighing on the export industry with the exception of the pharmaceutical sector.
Inflation remains low ( 0.3 %), the key interest rate cut to 0.25 % is supporting the economy, but could exacerbate deflationary tendencies. At the same time, the labour market is cooling. Population and household growth is slowing, which could have an impact on demand for housing in the medium term.