Domestic real estate remains attractive for Swiss institutional investors
Lucerne - Pension funds in particular are investing more in domestic real estate in Switzerland, while foreign investment portfolios remain stable, according to a study from Lucerne University of Applied Sciences and Arts analyzing the outlay of Swiss institutional investors. It found increasing regulation is considered the greatest investment risk.
The Institute of Financial Services Zug (IFZ) study Mortgage and Real Estate Investments 2025, conducted by Lucerne University of Applied Sciences and Arts, examined the investment behavior of 228 Swiss institutional investors, including pension funds, insurance companies, investment foundations, and funds, according to a statement. The IFZ at Lucerne University of Applied Sciences and Arts is located in Rotkreuz in the Swiss canton of Zug. According to the study, domestic real estate remains a particularly attractive investment.
Among the key findings, pension funds (PFs) are maintaining their average real estate allocation of 24.3 per cent and intend to expand it significantly in most cases. A total of 47 per cent want to strengthen their Swiss real estate portfolio, while 49 per cent want to keep it stable and only three per cent want to reduce it. All pension funds show a «home bias», according to the study: the Swiss allocation of real estate assets ranges between 85 per cent (large pension funds) and 92 per cent (medium-sized pension funds).
With regard to the preference for Swiss holdings, co-study lead John Davidson said that on the one hand, prices that have been rising for over 25 years seem to confirm the stability of the market. «On the other hand,» he is quoted as saying, «investments abroad appear less attractive due to currency hedging costs and higher volatility.»
Nevertheless, only nine per cent of the investors surveyed believe that this upward trend will continue. The biggest concern for investors in the Swiss real estate market is reportedly increasing regulation. A total of 82 per cent of institutional investors say this will lead to a premature end to the real estate boom. Particularly complex building regulations (92 per cent), objections (90 per cent), and stronger tenant protection (88 per cent) are hindering further growth, according to the findings.
Risks such as a slump in economic growth (45 per cent), higher interest rates over a longer period (37 per cent) or weaker population growth (35 per cent) reportedly hold less weight than political and regulatory pressure. The study was based on surveys of Swiss real estate funds, investment foundations, insurance companies, and 135 pension funds. With an investment volume of 568 billion Swiss francs, the pension funds surveyed cover around 50 per cent of the total assets of the funds.
