Market environment

The introduction of negative interest rates in 2015 put further investment pressure on institutional and private investors. Owing to sometimes short-term yield expectations and insufficient consideration given to object-specific risks, properties on the market fetch peak prices. As a result, the situation on the transaction market is leading to diminishing yields.

Overall, the market for privately owned homes proves to be resilient. Strong demand was seen for homes close to urban centres and easily accessible, in the lower and middle-range price segment and at generally stable to slightly decreasing prices. In contrast, the supply surplus in the high-end residential segment continued to grow, although with regional variations. As a result, prices are dropping and absorption times are growing. In general, the stricter financing regulations and tightened access to mortgages show a slowing-down effect on the sale of residential property.

In the economic regions of Basel, Lake Geneva and Zurich, low and medium-priced rental apartments remain in high demand. Consequently, rents in these segments may continue to rise, at least in the regions mentioned above.

The current over-supply of commercial space has resulted in growing vacancy rates and slightly lower rents. Rental of office space continues to be extremely demanding. Generally, successful closing of rental agreements is connected with price reductions, granting of rent-free periods, contributions toward interior finishing and other investments.

The price of land suitable for the development and realisation of residential space persists at a high level and, therefore, represents an additional burden on the development and construction of low and medium-priced buildings demanded by the market.

Projects & Development

For companies in the construction and sub-construction industries, the cooling down process that is becoming apparent – especially in civil engineering – is resulting in growing pressure on capacity utilisation. This, in turn, aggravates the price war and puts increased pressure on margins along the industry’s entire value-added chain.