Real Estate Focus

Origins, change and outlook - From a promise to an obligation

Debt has been a feature of human existence for thousands of years. The benefits and risks involved are closely tied up with trust, morality and the legal framework. A look at the past shows how debt generates prosperity – and why it constantly has to be brought back under new regulations.

50 years of mortgage boom
Mortgage volumes in Switzerland, in CHF and as a percentage of GDP

Sources: Jordà et al. 2017 1, SNB, FSO, SECO, UBS

Government debt and the real estate market - Not a safe haven

Government debt is becoming an increasing challenge all over the world. Many governments used to be able to rely on inflation to reduce their debt, which would also cut the value of real estate borrowings. But the way things look now, property owners will have to be braced for rising nominal interest rates and the possibility of tax hikes.

Government debt is rising
Government debt for the country as a whole (gross) as a percentage of gross domestic product (GDP)

Source: IWF, UBS

Mortgage debt and the real estate market - The leverage behind the real estate boom

Mortgages have made homes accessible for large parts of the population. A high degree of leverage is attractive for both households and banks. At the same time, though, this gives rise to dependencies and risks for the market and the financial system.

Mortgage debt: leverage for better or worse
Annualized return on equity of a diversified real estate portfolio in 2020–2022 (low interest rates) and 2023–2024 (higher interest rates), with and without leverage

Note: Calculations are based on the assumption that the portfolio is financed with a ten year mortgage at the market interest rate at the start of the period and held until the end of the period. Changes are taken into account, but not taxes or currency fluctuations.

Sources: MSCI, SNB, Deutsche Bundesbank, UBS

Investing in real estate lending - Potential for returns away from the mainstream

Stiffer capital requirements are increasingly restricting bank lending – which is being particularly felt by highly leveraged property developers. This opens up the opportunity for private investors to access new sources of return by issuing private debt. Despite the growth, however, private debt remains a marginal segment.

Private debt on the growth path
Assets in private debt funds by region, in USD billion

* As at the first quarter of 2025

Sources: Preqin, UBS GWM CIO Alternatives, UBS.

Owner-occupied homes - No peak in sight

The market for owner-occupied homes is facing further price rises. Low interest rates, asset transfers as part of inheritance and gifts, and investment plans are all contributing to sustained high demand. However, the affordability issue is such that interest is increasingly shifting towards smaller properties in low-cost regions.

Affordability limiting the living space that can be financed in central locations
Affordable* space for high-quality condominiums (70th percentile by asking price), in square meters, Q3 2025

* According to the affordability rules for a household with local median income and an 80% leverage ratio.

Sources: FTA, Wüest Partner, UBS

Rental apartments - Renovation boom driving rents

The market for rental apartments is again being influenced by low interest rates. Purchase prices for multi-family homes are shooting up and capital is increasingly flowing into renovations of existing properties. There is a risk of oversupply of highly priced rental apartments, with shortages persisting in the cheaper segments. High regulatory burdens and construction costs are holding back a potential boom in building.

Investment in redevelopment doubles within five years
Planned investment in conversions and extensions* to multi-family homes, in CHF million

* Based on construction applications submitted and permits granted. All construction works (renovations, conversions, and extensions) requiring a permit included. Mixed projects including some new-build not included.

Sources: Infopro Digital, UBS

Office space - Under the microscope

The Swiss office space market has proven resilient recently, despite a weak economy and optimizations of space. Institutional investors have managed to keep rental defaults stable overall and even bring them down in central locations. Weakening demand for space will likely result in rising vacancies this year.

Swiss office market solid as a rock
Vacancy rate for office investment properties, in percent

* Swiss vacancies as estimated by UBS

Sources: MSCI, UBS

Retail space - Persistent pressure

Swiss retailers are facing ongoing challenges. Top locations are still stable, but the broader market is being affected by stagnation, structural oversupply and pressure on margins. The future demands flexibility – from both retailers and landlords.

Retail rents falling in real terms
Change in asking rents between 2010 and 2025 by type of use and inflation, cumulative in percent*

* Calculated based on average rent and consumer prices for 2010 and 2025

Sources: Wüest Partner, FSO, UBS

Logistics and industrial space – A sensible addition to a portfolio

The Swiss market for logistics properties is continuing to benefit strongly from the boom in online shopping and, in our view, offers attractive returns. But a shortage of properties, regulatory barriers and the high share of own users limit growth—and call for selective investment strategies.

More parcels, fewer sales outlets
Key figures on bricks and mortar and online retailing in 2015 and 2025, 2025: UBS estimate

* Standard parcels, plus express and courier deliveries, including cross-border deliveries

** Retail bricks and mortar outlets, excluding car dealerships, garages, and gas stations

*** Including foreign providers

Sources: PostCom, FSO, Swiss Retailers Trade Association, UBS

Swiss funds and stocks - A boom with an expiry date

Swiss real estate investments have delivered a strong performance since 2022. But prospects are being clouded by high valuations and weaker fundamental data. The ongoing glut of capital could also affect portfolio quality. Returns are therefore likely to be below average in the coming quarters.

Swiss real estate investments are on the rise
Total performance of different listed asset classes, month-end data in CHF
Index: 13 October 2022 = 100*

* The SREAL index hit its low point on 13 October 2022.

Sources: Bloomberg, UBS; as of 28 February 2026

Global – Hesitant upwards trend

After years of volatile performance, global real estate markets are now showing the first signs of stabilization. Attractive valuations encounter an improved economic environment. Structural trends and sectoral divergences mean investors need to take a selective approach. Industrial, logistics and residential still well placed.

Industrial and logistics outperform
Total return on global direct investments, by sector, in US dollars, indexed: 1Q 2019 = 100

* Total return year on year as of Q3 2025

Sources: MSCI Real Assets, UBS

An interim assessment of the net-zero objective – Replacement of heating systems falters

The current rate at which heating systems are being replaced is not sufficient to achieve net-zero by 2050. There is considerable work still to be done, but the number of energy refurbishments has declined recently. It will likely not be possible to pick up the pace as required until new cantonal Energy Acts are introduced.

Considerable differences between cantons in sustainability efforts
Percentage of sustainable heating systems in homes by type of heating and canton as at end-2025

Sources: FSO and UBS

The abolition of imputed rental value – Less support for refurbishments

The abolition of imputed rental value also means some of the tax deductions on renovation projects will be lost. Straightforward replacement of a heating system will remain profitable under the new tax arrangements, but additional investments in energy efficiency will likely more often be deferred in future.

Switching to a heat pump is getting more expensive
Financing the investment in an air-source heat pump and replacement windows for a single-family home, broken down by source of funds; national average, before the abolition of imputed rental value (old arrangements) and after (new arrangements) (in CHF 000s)

*Note: Tax deductions are estimated for a married couple with CHF 200,000 gross annual income.

Source: UBS