Market Commentary July 2025
Contrary to expectations, Switzerland reported moderate inflation figures for June. Many analysts believe that the Swiss National Bank lowered its interest rates too quickly. Others argue that the weakness of the US dollar should actually be importing deflation. This rare disagreement among analysts has gained further momentum following the U.S. initiative announced during the night of August 1. The coming months will reveal which side was right. In the canton of Zurich, intense debate surrounds the popular initiative for more affordable housing in the Canton of Zurich, which proposes giving municipalities pre-emptive rights to purchase land. However, the initiative faces opposition. A counterproposal is on the table instead, aiming to double funding for housing promotion. The ongoing demand among investors for stable long-term investments continues to benefit the real estate sector. Several capital increases were successfully completed in July. Yet, the dilemma for real estate managers remains: those unable to create value within their existing portfolios are forced to purchase new properties at elevated prices. The issue of debt persists. Refinancing maturing mortgages is becoming increasingly challenging, as attractive offers from banks are becoming scarce. In the medium term, managers will need to pay closer attention to liabilities and refinancing risk. This summer’s hot topic is the merger of several UBS real estate funds. While market consolidation is generally viewed positively, UBS’s dominance raises concerns: UBS manages 35% of the SREAL Index and Swiss Prime Site another 9%. The concentration is even more pronounced within SWIIT index investors, where UBS manages 48% of the funds. Investors are keeping a close eye—and pushing back where necessary. For the market to rebalance, other players—particularly insurance companies—would need to gain market share. Given the weakness of the transaction market, further mergers or acquisitions may occur in the next 18 months. For now, the Swiss real estate market remains attractive—but the challenges are mounting.
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