(Financial) services Confidence returns to the real estate investment market

The outlook for the Swiss real estate market has brightened. However, according to a survey, regulatory hurdles and doubts about the achievability of sustainability targets are causing concern in the sector.

The Swiss Real Estate Sentiment Index (SRESI), which is compiled annually by KPMG Switzerland, has returned to positive territory compared to the previous year. The index, which reflects the real estate industry's expectations regarding price and market developments, reached 29.9 points, as the consulting firm announced on Tuesday. In the previous year, a historic low of -77.4 points was recorded.

Positive economic environment

Market participants are much more confident about the economic outlook. Economic development over the next twelve months is expected to be significantly more positive than a year ago. In this area, the corresponding index has moved back into the positive zone at 21.5 points after two negative years.

According to Beat Seger, partner and real estate expert at KPMG, the more optimistic outlook is due to the easing of tensions on the interest rate front. There has also been progress in the fight against inflation by the central banks.

Higher prices expected for residential real estate

The second component of the Swiss Real Estate Sentiment Index, expectations regarding the price development of real estate investments, has also increased significantly compared to the previous year. A majority of market participants expect prices to rise slightly over the next twelve months.

Higher prices are expected for residential real estate in particular. However, the mood remains negative for commercial real estate such as office, commercial and retail space. Geographically, the sector is expecting higher prices above all in the economic centers of Zurich, Lucerne/Zug and Geneva, while the outlook for Lugano and Basel remains pessimistic.

Regulation is the biggest concern

The biggest concerns in the sector relate to increasing regulation. In particular, measures already adopted to cap revenues and upcoming political initiatives are likely to be responsible for this result, according to the report. In contrast, interest rate risks have become less important compared to previous years.

Skepticism remains high with regard to achieving the net-zero target by 2050. 72% of respondents still believe that this target can only be achieved partially or not at all within the specified time frame. Nevertheless, 28% of respondents now believe they are well on the way to achieving this goal, which represents an increase of 10 percentage points compared to the previous year.