SWITZERLAND Trends and Developments Contributed by: Martin Furrer, Alexander Wyss, Samuel Marbacher and Charles Gschwind, Baker McKenzie
In contrast to condominiums, the price increase for single-family homes continued almost una - bated in 2023. In particular, prices in the 3rd quarter of 2023 rose by 6.4% in the lower seg - ment and by 5.3% in the middle segment. The upmarket segment did not develop quite as positively, with an increase of 2.9% between the third quarter of 2022 and the third quarter of 2023. This is nowhere near the performance of previous years, and the increase is mainly due to the rise in inflation. The two-step increase in the reference interest rate in 2023 caused existing and asking rents to rise. As of March 2024, the reference interest rate is at 1.75%. Existing leases could be adjust - ed accordingly, and inflation and general costs could also be partially passed on the tenants. However, political efforts are underway to limit the latter by amending the relevant ordinance. More political activism Despite being a liberal economy, Switzerland has known some forms of state intervention to regulate the housing market for many years. His - torically, governmental efforts were focused on increasing the availability of affordable housing through land use and financial measures. For example, the City of Zurich is creating a housing fund of CHF300 million to invest in prop - erties and buildings on the free market in com - petition with private investors. In recent years, it has become a significant player in local real estate transactions. In addition, two initiatives aimed at regulating the housing market have been launched in the Canton of Zurich. • The first aims to introduce legislation accord - ing to which landlords must obtain authori - sation for any renovation, transformation, demolition or new construction project. Rent
caps may be set for up to a maximum dura - tion of ten years in connection with such authorisation. • The second initiative would give municipali - ties a right of first refusal on third-party trans - actions, providing them with a direct tool to influence real estate development. The model for these initiatives is the existing can - tonal legislation in the French-speaking cantons of Geneva (LDTR) and Vaud (LPPPL). In addition, the German-speaking canton of Basel-Stadt introduced rent control legislation in 2022 that has resulted, inter alia, in a significant decrease in construction permit applications. Legal Developments Transactions General trends and developments The activities of investors have changed sig - nificantly in recent quarters. For several years, institutional actors such as insurance companies and real estate funds dominated the acquisition market. Under the new framework conditions, these two groups have become predominantly passive or appeared as sellers. Family offices, ultra-high net worth individuals, public entities (eg, the City of Zurich) and housing co-opera - tives are now increasingly involved in real estate transactions, making the universe of active buy - ers both more diverse and more volatile. The Swiss real estate transactions market remains liquid Despite the described challenges, the Swiss real estate market remained active in terms of transaction number and volumes, particularly in comparison with other countries. As an example, German fund management company Union Invest sold its two office build - ings – Westpark and Fifty-One in Zurich West
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