Switzerland Real Estate Investment: Record Keeping & New Construction Challenges
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Swiss Real Estate: Investment Soars, New Construction Stalls, and Rents Rise
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Record investment in Swiss real estate is bypassing new construction, fueling a boom in renovations and pushing up rental costs, notably impacting lower-income residents. The complex regulatory landscape and lengthy approval processes for land progress are key drivers of this trend.
Updated as of December 29, 2023, at 22:53:53 UTC.
Investment trends and the Building Permit Bottleneck
Swiss real estate witnessed a surge in investment during the first nine months of the year, reaching a record 7 billion Swiss francs. Raiffeisen reports this influx of capital is overwhelmingly directed towards acquiring and renovating existing properties, rather than funding new construction projects. This coincides with a historic low in the number of building permits issued.
the preference for renovation is driving up rental prices. According to the report, tenants moving into renovated accommodations are paying an average of 3,500 francs more per month than their predecessors.This trend disproportionately affects lower-income individuals, forcing them towards the outskirts of cities.
The Challenges of Land Development
Obtaining land for new construction in Switzerland is a protracted and complex process.Developers face meaningful administrative hurdles, and approvals can take up to 15 years.”We have to find the right partnerships with the public authorities. It can last a very long time,” explains a source familiar with the process. “And then, there is still the question of the population who may not find it engaging.So there is a risk of appeal, litigation, or even a referendum which is significant.”
Julian Reymond, CEO of Realstone, highlights that land scarcity and stringent legal constraints incentivize investors to prioritize existing properties, which offer a quicker return on investment.”The LAT (land planning law) encourages densification inside building zones and not outside.And, the regulatory requirements are not only complex, but more stringent.”
The shift towards renovating existing properties is exacerbating social segregation within Swiss cities. As rental costs in central locations rise, lower-income residents are increasingly displaced to the periphery, possibly leading to longer commutes and reduced access to opportunities.
The following table illustrates the average rent increases observed in renovated properties:
| Property Type | Average Rent Increase (CHF/month) |
|---|---|
| Apartment | 3,500 |
| House | Data unavailable |