Switzerland has the necessary capital and expertise to create new housing. But turning this capacity into actual homes requires faster procedures, reliable framework conditions and a shared understanding among policymakers, authorities, investors and society.
Speaking to business journalist Reto Lipp, Anastasius Tschopp, CEO of Swiss Prime Site Solutions, explains why institutional investors are part of the solution – and why the pressure on the housing market can only be eased sustainably if all stakeholders work together.
Discussions about the Swiss housing market are often focused on institutional investors. But what is frequently overlooked is who is behind these investments. Anastasius Tschopp therefore believes it is important to understand the role of institutional investors: «When we talk about institutional investors, we are primarily referring to pension funds and thus to the pension capital of the Swiss population. This capital belongs to the insured persons and serves to secure their pensions over the long term.»
With pension assets of around CHF 1.1 trillion, Swiss pension funds invest in real assets for the long term. Residential real estate plays a central role in this. It provides housing, generates stable returns for pensions and creates business for numerous companies in the construction and real estate sectors.
For Swiss Prime Site Solutions, this entails a dual responsibility: towards investors and towards society. The focus is not on maximising short-term profits, but on the sustainable development of Switzerland’s building stock.
Capital is available – but viable projects are needed
According to Tschopp, Swiss Prime Site Solutions’ current investment pipeline shows that institutional investors are prepared to play their part: «Our investment pipeline totals around CHF 1.5 billion. This shows that institutional capital is available to build more homes in Switzerland.»
Swiss pension funds invest over a period of decades and need reliable returns rather than short-term value increases. «Our investment horizon is measured in decades, not months. Pension funds expect us to deliver reliable returns so they can secure pensions over the long term», explains Tschopp. This long-term investment horizon creates planning security and allows investments to develop over many years – for example through site developments, densification projects or extensive renovations of existing properties.
Rising rents are primarily a question of insufficient supply
The debate over rising rents is often highly emotive. According to Tschopp, a key cause is the imbalance between supply and demand. For years, the population has been growing faster than the housing supply. At the same time, planning and approval procedures are taking longer and longer.
«If not enough new homes are being built, this puts further upward pressure on prices. It is not the return expectations of institutional investors that are driving up housing costs», explains Tschopp. Residential real estate typically generates returns of between 2.5 and 3 percent for pension funds. This moderate level supports the long-term financing of pensions while taking into account construction risks and the low liquidity of real estate. Anastasius Tschopp emphasises the need for action: «To sustainably ease the pressure on the real estate market, we need to create additional housing quickly and with minimal bureaucracy.»
Densification requires expertise and a long-term perspective
The challenge is not simply to build more. New housing is increasingly being created through densification, renovation and replacement new builds. At the same time, the requirements for energy efficiency, climate targets and building quality are increasing, as Tschopp explains: «Renovations and replacement new builds are an important societal responsibility. They create additional homes, improve energy efficiency and enhance the quality of housing over the long term.»
But this also makes projects more complex, as technical specifications, regulatory requirements and sustainability targets all have to be taken into account at the same time. Tschopp believes this is where one of the key strengths of professional real estate managers lies: «Swiss Prime Site Solutions not only provides pension fund capital, but also has the knowledge and experience required today to create new housing while meeting the climate targets.» Institutional investors can develop such projects over the long term, assume the associated risks and provide the capital needed for these investments.
Housing can only be created together
According to Tschopp, the task of easing the pressure on the housing market does not lie solely with investors. Policymakers, authorities, investors and society must see housing construction as a shared responsibility. This includes more efficient approval procedures, a clear regulatory framework, more opportunities for densification and stronger coordination across cantonal borders.
«The real estate market relies on policymakers, authorities, investors and society working together. We can only move forward if everyone takes responsibility», explains Tschopp, adding that it is particularly important to be able to complete projects more quickly: «Housing is not created by standing still, but through long-term thinking and decisive action. The capital is available. What is needed now is political will and a concerted effort from all stakeholders.»
The key is to work together to translate this expertise and willingness to invest into viable projects, so that urgently needed housing can be created for current and future generations.
FACTS & FIGURES ABOUT THE SWISS REAL ESTATE LANDSCAPE
Professor John Davidson, a real estate expert at Lucerne University of Applied Sciences and Arts, puts the current situation into context:
Cyclical market trends: The Swiss housing market is cyclical. In 2020, more homes in Switzerland were vacant than ever before. However, we have been seeing a reversal of this trend since 2021, when the vacancy rate fell for the first time in 12 years.
Importance of the rental market: The housing market is extremely important in Switzerland: 60 percent of the population rent, while only 40 percent are home owners.
Steady growth in demand: The demand for housing has been growing steadily for years, driven mainly by population growth and the fact that people now live in smaller households and need more living space per person.
Required living space has doubled: In Switzerland, each person currently requires around 46 square metres of living space. This compares to around 34 square metres 40 years ago, and around 23 square metres 80 years ago. The required living space per person has therefore doubled.
Limited land for construction: The amount of land in Switzerland that is available, zoned and suitable for construction is severely limited, accounting for just 8 percent of the country’s total area. Vacancy rates are falling to very low levels in many regions.
Delayed supply: The supply of new homes is slow to respond to demand. This is due to time-consuming planning and approval procedures, as well as increasingly complex construction projects.
Construction activity vs. demand: Around 45 000 homes are expected to be built in Switzerland in 2026. By contrast, net immigration is expected to be around 65 000.
Rent trends: Given this foreseeable shortage, asking rents will increase by around 2 percent in this kind of environment. Existing rents, however, will remain unaffected by this specific shortage, as they are linked to the reference interest rate. This means the shortage will primarily be felt by those currently looking for somewhere to live.
Rising construction costs: Between 2020 and 2025, the cost of constructing a new apartment building increased by around 17 percent.
Stringent requirements: In addition to costs, a number of other factors have a major influence on how much new housing is created, how quickly and at what cost. These include stringent energy efficiency and sustainability requirements, growing regulatory complexity, and objections.
The solution: To ease the pressure on the housing market and rents, we quite simply need more homes. These can be created by constructing new buildings, but also by renovating and developing existing ones. Together with the regulatory framework, including the Spatial Planning Act, this ultimately leads to greater densification.
Professor John Davidson is a recognised real estate expert with many years of academic experience. His main research areas are real estate and private equity. He is the author of several specialist books and articles and is frequently cited in the trade press as an expert on real estate matters. Professor Davidson is currently a lecturer at the Institute of Financial Services Zug (IFZ) at Lucerne University of Applied Sciences and Arts, Co-Head of the MAS in Real Estate Management and Head of the BSc BA Major in Real Estate. He is also a member of the Board of Trustees of the Fundamenta Group Investment Foundation.
