The Swiss housing market faces a fundamental conflict of interests: Policymakers want to protect renters from sharply rising housing costs while also creating additional housing. Just how difficult it is to balance these interests is illustrated by the recent study “Real Estate Investments: Groundhog Day?” by the Institute for Financial Services Zug (IFZ) at the Lucerne University of Applied Sciences and Arts.
A total of 249 institutional investors participated in the survey, including 134 pension funds and collective foundations, as well as real estate funds, investment foundation products, insurance companies, and family offices.
Regulation as the Top Concern
81 percent of respondents view increasing regulation as a risk to the current real estate cycle. This issue ranks well ahead of weaker economic growth, declining immigration, or higher interest rates in the long term.
Investors view stricter tenant protection regulations, building and land-use codes, and protracted permitting processes particularly critically.
Depending on the type of investor, 65 to 92 percent of respondents expect that strict tenant protection measures could reduce the housing supply. In addition, 78 percent state that they are increasingly investing in regions with more liberal rental laws.
These results describe the respondents’ expectations and investment strategies. They do not prove that every additional tenant protection rule automatically leads to less housing construction.
Pension Funds Continue to Invest in Real Estate
Despite these concerns, interest in real estate remains high. The surveyed pension funds have increased their average real estate allocation from 24.3 to 25.1 percent and intend to continue investing, particularly in Swiss residential properties.
This creates a notable contradiction: On the one hand, substantial capital is available for real estate investments. On the other hand, investors fear that regulatory restrictions will hinder the development of new projects.
Nearly 70 percent of those surveyed also see the risk that the market has only limited capacity to absorb the high volumes of investment. This could cause prices of existing properties to rise further, while returns decline.
Additional Housing Is Key
For the real estate industry, the central question is therefore not solely about the amount of available capital. What matters most is whether investments actually lead to additional housing units, replacement new construction, and the renovation of existing stock.
From the tenants’ perspective, protective measures serve an important function, particularly in tight housing markets. At the same time, economically viable framework conditions must exist for developers and owners.
The study thus makes an important contribution to current housing policy. It shows how institutional investors might respond to regulatory developments and which location factors influence investment decisions.
The challenge lies in combining effective tenant protection with sufficient construction activity. After all, neither additional capital nor new regulations alone can solve the housing shortage.
