This imbalance is now becoming apparent in the portfolios themselves. According to the Swisscanto Pension Fund Study 2025, property investments accounted for a total of 23.9 per cent of assets as at 2024. Of this, 14.4 per cent was in indirect property investments and 9.5 per cent in direct property investments. The gap has therefore widened further.
The market for direct purchases is becoming particularly tight where residential properties in cities and conurbations are in demand. High prices are squeezing net returns so severely that many pension funds can barely meet their purchase criteria. Those operating with low financing costs or lower return requirements are more often able to compete in bidding than traditional pension funds.
Yields are falling towards the target yield
The pressure is delicate because many funds cannot cope with major setbacks. The Swisscanto study puts the median target yield for 2026 at 1.9 per cent. If residential properties yield just over 2 per cent net, the safety buffer will quickly dwindle. It is precisely this trend that makes further acquisitions difficult, even though property remains in demand across the Swiss franc area as a stable source of income.
Indirect investment vehicles continue to gain ground
For small and medium-sized pension funds, the indirect route is thus becoming even more attractive. Funds and other collective investment vehicles facilitate diversification across regions and sectors and ease the burden of management. The downside remains the reduced direct influence over acquisitions and management, as well as the ongoing fees.
Interest rates could affect valuations
Despite the current low interest rate environment, interest rate risk has not disappeared entirely. On 24 September 2026, the SNB left its key interest rate at 0.00 per cent. The yield on ten-year Swiss government bonds stood at 0.491 per cent on 23 October 2026. As long as this level remains low, bond yields will underpin property prices. If long-term interest rates rise more significantly, valuations and indirect property investments will come under pressure once again, as was the case during the 2022 interest rate cycle.
As new purchases stall, work on the existing portfolio is taking centre stage. This includes densification, adding storeys and floor plan modifications, which can create additional rental space. At the same time, lengthy planning and approval procedures remain a stumbling block. Particularly where pension funds wish to switch to development rather than expensive purchases of existing properties, the time factor eats into part of the return.
