Market environment

In Switzerland, demand remains high for real estate as a long-term investment with intrinsic value and as an alternative to other investment categories. The trend toward constantly rising real estate prices reflects the investment pressure on institutional investors, the disappointing development of the stock market, and the low level of interest rates. Properties in peripheral locations, commercial real estate and residential real estate in the highest price range represent an exception to the trend.

The market for income-producing real estate with a stable income over the long term was characterised by demand clearly above supply without signs of a trend reversal.

Demand for residential real estate remained stable at a high level due to continuing low mortgage rates and the below-average rate of ownership in Switzerland compared to other European countries.

Considering that demand for income-producing real estate and residential real estate remains at a high level, the price for land ready for construction continues to rise. Therefore, due to the high value of building land, more residential buildings are being constructed for ownership than for renting.

With the exception of very centrally located city centre locations, where residential rents continue to rise, only slight changes were observed in the market for rental accommodation. In the period under review, rents for office, commercial and sales space also remained stable.

General contracting

In 2011, some 45 000 new apartments were added in Switzerland. The buoyant construction activity resulted in a very good capacity utilisation in the industry. Prices did not come under pressure and, as a rule, companies submitted tenders at approximately the previous year’s level. In some cases, the good capacity utilisation resulted in a price hike. The high level of the Swiss franc mostly set off higher prices for imported raw materials which, therefore, did not affect prices.

For general contractors, the market was characterised by an increasing pressure on prices and declining margins. For most clients, price remains the decisive factor in awarding a contract to a total or general contractor. As projects often undergo adjustment during the tender process and the schedule of such tenders is growing increasingly tight, careful calculation is often difficult to accomplish. Contracts calculated with insufficient care, or jobs accepted only to utilise capacity, harm both the entire industry and ultimately also the building owner – be it for subsequently made financial demands or not entirely met quality standards.