Growing economic risks
Swiss economic growth picked up somewhat in the fourth quarter of 2024, recording a (sports event-adjusted) increase of 0.5%. The main drivers of this growth were the services sector – particularly hospitality and the public sector – as well as the pharmaceutical industry. In addition, robust consumer spending and healthy government investment continued to buoy the economy. However, ongoing geopolitical tensions, the protectionist trade policy being pursued by the US, and global economic risks are creating growing uncertainty. Weakening demand from abroad is darkening the outlook for export-oriented industrial companies in most sectors. For this reason, economic growth in Switzerland is likely to be below average this year. Although employment growth remains solid, this too is set to come in below the average of previous years.
Persistently favourable interest rate environment thanks to further rate cut
Having already cut its key interest rate four times over the course of last year, the Swiss National Bank initiated a further cut of 25 basis points (to 0.25%) in March 2025. This step was expected by the majority of market observers, and was based on an inflation rate that was once again lower than in the prior year along with an anticipation of weaker economic momentum. The fall in the reference interest rate that is relevant for apartment rents, which likewise occurred in March 2025, is contributing to the ongoing trend of falling inflation as it means a reduction in rents covered by existing rental agreements
Property investments remain attractive
The latest cut in interest rates is giving further impetus to the Swiss property market, and can be expected to have a positive impact on demand for both upmarket owner-occupied housing and investment properties. The costs of financing are coming down, particularly in the case of money market mortgages and shorter-term fixed mortgages. But also longer-term fixed mortgages remain attractive in a historical comparison.