Real estate investment market: price expectations for all segments, locations and regions negative

• One year after the interest rate turnaround, professional market participants expect prices to fall across all property segments, regions and locations.
• Negative expectations push the Swiss Real Estate Sentiment Index to a new all-time low.
• Interest rate risks, regulations and the risk of falling real estate values cloud the outlook.
• Just 18% are confident that the 2050 net zero target can be achieved on the defined reduction routes. 
• Only 3% are convinced that portfolio values consider all forthcoming ESG measures.

Swiss investment real estate is facing a challenging year. This is borne out by the Swiss Real Estate Sentiment Index (sresi®) survey results which reflect the expectations of professional investors, developers, consultants and appraisers for the Swiss real estate investment market. Whilst expectations for economic growth are a little more optimistic than last year, rising to -32.4 pts compared to -51.4 pts in 2022, the assessments of price trends are distinctly negative across all real estate segments at -88.6 pts (2022: -27.7 pts), dragging the sresi® to an all-time low of -77.4 pts (2022: -32.5 pts).

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For the first time in the over 10-year time series of sresi®, respondents’ assessments of price trends are negative across all real estate segments. This not only applies to peripheral locations, for which almost all of the respondents assume negative price movements. For the first time, assessments of price trends in central locations were also in negative territory.

According to the consolidated responses, no price rises are expected in any of the major regions or economic centres. Last year, respondents were still optimistic in their price expectations for the Lake Geneva region, Zurich and part of central Switzerland. 

In the residential segment, the respondents still rate adequate investment opportunities as scarce, with -60.9 pts. Nonetheless, this figure has improved by a third compared to last year (-103.2 pts). The availability of special-use properties is also rated as scarce, albeit only moderately (-21.6 pts) and is less pronounced than last year (-41.1 pts). The availability rates for office, industrial and retail space have also improved and are now showing a slight plus.

Three components stand out in the respondents’ perception of risk. Like last year, interest rate risks are viewed as the greatest risk at 2.3 out of 3.0 pts. Whilst it was less than half this level in 2020 at 1.1 pts, this figure has risen sharply over the last few years. 

The long-standing former leading risk, the risk of tougher regulation (2.1 pts), is in second place. Besides the well-known policy objective of capping yields and spatial planning challenges, expected measures in the field of sustainability may well have contributed to perceiving this risk at its second-highest level since the launch of the survey.

In previous sresi® surveys, respondents have assessed the risk of falling real estate values as low. In 2023, this risk was ranked third, at 2.0 pts. 

Just 18% of those surveyed believe that the 2050 net zero target can be achieved by following the defined reduction routes and associated measures. 

Notable are survey respondents’ views as to whether all the costs and investments needed for ESG measures are included in portfolio values. 86% of respondents believe that this is not, or is only partially the case. Only 3% are convinced that the values consider all forthcoming ESG measures. 

Just 6% of respondents think that the recently published ESG key performance indicators allow market participants to make a meaningful comparison. More than half believe that no comparison at all is possible. According to Beat Seger, partner and real estate expert at KPMG: "Our survey of professional market participants clearly shows that the outline conditions and standards in the area of sustainability need further definition."

Further information and the detailed study can be found at: www.kpmg.ch/sresi