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Housing and office demand

Booming property market attracts investors

By swissinfo.ch and agencies

Property development on the shores of Lake Zurich (Keystone)

Property development on the shores of Lake Zurich


The strong Swiss franc and negative interest rates are driving spooked investors into property, according to a study by Swiss bank Credit Suisse.

 The difference in the rate of return between property investments and other forms of investment is at a record level as a result of the central bank’s negative interest rate policy, say authors of “Property market 2015 – structures and prospects”, published on Wednesday. 

The flight into property is pushing up prices, thus increasing investment in new construction projects, creating more space and accelerating the trend for oversupply, the study said. 

At the same time, turmoil on the currency markets was forcing companies to make savings, reducing demand for office space. 

Nevertheless, the authors believed that, for the time being, property prices would continue to increase as a result of the yield gap. 

As for retail space, expensive locations, such as Zurich’s Bahnhofstrasse, still remain sought-after, while demand outside the city centres is weak. Retail areas near the border have been particularly hit. 

“The business environment in the retail sector, which in any case has seen better days, is only going to get gloomier following the appreciation shock,” according to the Credit Suisse report. 

‘Soft landing’

 Regarding rental accommodation, the study expects considerable renewed increase in the number of lodgings available. The rental market is moving towards an oversupply and should slowly turn into a tenant’s market, it said.

 The situation was different for the home ownership market, where little impact was expected. The study acknowledged that although desire to own property remained high, demand was being stifled by high prices and regulatory policies. Buyers were therefore turning instead to cheaper regions or smaller purchases.

 The report predicted the home ownership market would experience a so-called “soft landing”, when a sector is expected to slow down but not crash, while the wider economy doesn’t slow down as much.

swissinfo.ch and agencies


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