Swiss institutional investors are increasingly investing their money in their own country. At the same time, they see increasing regulation as the biggest risk in the Swiss real estate market. These are the findings of a new study on real estate investments by the Lucerne University of Applied Sciences and Arts.
For a quarter of a century, real estate prices in Switzerland have only gone in one direction: upwards. Unsurprisingly, Swiss institutional investors therefore like to invest in the domestic market. As a study conducted by the Lucerne University of Applied Sciences and Arts with a total of 228 institutional investors shows, Swiss real estate remains extremely popular with pension funds, insurance companies, investment foundations and funds. The participants cite increasing regulation and political pressure as the greatest risks.
Swiss residential real estate increasingly attractive
Pension funds do not want to expand any other asset class as significantly as Swiss residential real estate (Fig. 1). For the first time since the survey began in 2022, almost half of the pension funds that took part in the survey (47%) plan to increase their proportion of direct real estate investments in Switzerland - only 3% want to reduce it. By contrast, the portfolios of commercial real estate and foreign investments are expected to remain largely stable. At the same time, mortgages are attractive again: the reason for this is the difference in yield between mortgages and bonds. Pension funds are taking advantage of this to grow more strongly in this segment than other institutional investors.
Figure 1: Target allocation of pension funds over the next three years (click to enlarge)
Rising prices and currency fluctuations as reasons
Pension funds already invest up to 92% of their real estate assets in Switzerland. Although foreign real estate often promises higher returns, Swiss residential properties remain attractive for institutional investors, according to co-head of the study John Davidson: "On the one hand, the rising prices over the past 25 years seem to confirm the stability of the market. On the other hand, investments abroad appear less attractive due to currency hedging costs and higher volatility."
Focus on Swiss residential real estate despite expected risks
Although many institutional investors assume that the real estate boom could soon come to an end, they continue to invest heavily in Swiss residential real estate and mortgages. Against this backdrop, the strong focus is all the more surprising. Other risks that have historically tended to trigger real estate crises - such as a slump in economic growth (45%), higher interest rates over a longer period of time (37%) or weaker population growth (35%) - are less likely to be on investors’ radar. According to co-head of the study Stephan Kloess, one reason why investors are nevertheless continuing to expand their investments is that they do not yet expect the cycle to end immediately: "There is hardly any other explanation for the current intention to invest in Swiss real estate."
Regulation is the biggest concern
At the same time, increasing regulation is seen as the biggest risk in the Swiss real estate market among those surveyed (Fig. 2). Only a small minority of the pension funds surveyed (9 %) believe that the current boom will continue. Most expect the upward trend to come to an end, citing complex building regulations (92%), objections (90%) and stronger tenant protection (88%) as the main reasons. "This strong focus on regulation as a risk is surprising," says co-author of the study Daniel Steffen. "It is probably also related to the intensive media coverage of stricter tenant protection measures - for example in cities such as Geneva or Basel."
Study ’Real estate investments: an (un)finite story’
A research team from the Institute of Financial Services Zug (IFZ) at Lucerne University of Applied Sciences and Arts has conducted a broad-based study for the fourth time in a row to investigate developments in investments by institutional investors in real estate and mortgages. The study, which is conducted annually with the support of Auwiesen Immobilien AG, Swiss Prime Site Solutions AG, Helvetia and Empira AG, is based on a broad-based survey of 228 institutional investors (pension funds, insurance companies, investment foundations, funds). the survey covers 50 percent of the total assets of pension funds, includes a large proportion of real estate funds, investment foundations and insurance companies and was conducted in Switzerland between May and July 2025.
