Economic and Market Overview

The global economy has recently grown more strongly than expected. However, moderate growth is emerging for the coming quarters. Geopolitical tensions, higher energy prices and uncertainty surrounding trade policy are shaping the environment. The Swiss economy remains stable, while the real estate and financial markets are developing differently.

The conflict in the Middle East remains the greatest geopolitical risk. A further escalation could disrupt key trade routes, drive energy prices even higher and slow global growth. Inflation is already above central bank targets in many countries. The prospect of further US tariffs is also creating uncertainty and making planning more difficult for companies. At the end of September 2026, policy rates stand at 3.875% in the US, 2.50% in the euro area, 3.75% in the United Kingdom, 1.00% in Japan and 0.00% in Switzerland.

The Situation in Switzerland

The Swiss economy grew by 1.5% in the second quarter of 2026. Growth was broad-based, with the chemical and pharmaceutical industry making a significant contribution. The economic outlook has also improved: the KOF Economic Barometer rose by a further 1.6 points to 109.1 in September. Positive momentum came particularly from industry, services and construction.

Private consumption remains an important pillar of growth. Moderate inflation is supporting purchasing power, while higher unemployment and geopolitical uncertainty are limiting a stronger recovery. The Swiss National Bank (SNB) left its policy rate unchanged at 0% in September. The recent weakening of the Swiss franc is also providing relief for the export sector.

Swiss Economic Outlook

• Inflation: Inflation stood at 1.0% in September. The SNB expects average inflation of 0.7% in 2026 and 0.8% in 2027. Higher energy prices could push inflation up further in the short term. Over the forecast period, however, it is expected to remain within the SNB’s target range.
• Economic growth: Adjusted for the effects of major sporting events, growth forecasts for 2026 range between 1.5% and 2.0%. Growth of around 1.5% to 1.6% is expected for 2027. The 2026 FIFA World Cup is expected to increase Swiss GDP growth by around 0.4 percentage points, as the revenues of Zurich-based FIFA are included in Swiss economic statistics. A stronger international recovery could provide additional support.
• Labour market and consumption: Employment has recently developed positively, including in sectors with a high demand for office space. The unemployment rate is expected to stand at 3.1% in 2026 and 3.0% in 2027. Private consumption is expected to continue growing moderately and remain an important, though not particularly dynamic, driver of growth.

Swiss Real Estate Market

The rental housing market continues to be characterised by strong demand and limited supply. The housing vacancy rate fell to 0.93% as of 1 June 2026. At the same time, market rents for apartments nationwide were 2.0% higher in the second quarter than a year earlier. Although immigration has slowed, it remains an important driver of demand, particularly in urban centres and well-connected agglomerations. Rents and Market values for multifamily properties are expected to continue rising in 2026 and 2027. According to Fahrländer Partner, the minimum real net discount rates for a medium-sized multifamily property in a prime micro-location in Zurich ranged from 1.75% to 2.00% as of 15 September 2026, averaging 1.86%. Low interest rates and investor appetite have resulted in lower acquisition yields and, correspondingly, higher transaction prices.

The office market presents a mixed regional picture. According to Fahrländer Partner, market rents in the Lake Geneva region rose by 3.1% in the second quarter of 2026 compared with the first quarter, while they declined by 2.0% in the Mittelland region, 0.6% in Basel and 2.6% in Zurich. Modern, flexible and easily accessible space continues to have an advantage. Renewed growth in office-based employment is supporting demand.

For Retail spaces, stable income and Market values are expected overall in 2026 and 2027. However, regional location remains crucial: high-footfall shopping streets continue to perform well, while peripheral locations are in some cases facing declining demand and falling rents. The continued growth of online retail, most recently at 6%, is increasing the pressure on bricks-and-mortar retail to adapt.

Financial Markets and Indirect Real Estate Investments

Despite geopolitical tensions, global equity markets, as measured by the MSCI World in USD, remained up by 2%. By the end of September, the index had generated a year-to-date return of 12.1% in US dollars. The Swiss equity market, as measured by the SPI, recorded a gain of 7.6%, although it suffered losses in the third quarter. Rising market interest rates weighed on bond markets. Positive developments in the AI sector, particularly among the large leading companies, helped technology-heavy indices advance. The Nasdaq is up 16.1% year to date. Inflationary pressure and expectations that interest rates will remain higher for longer, or even rise further, weighed on bond prices. In addition, manoeuvres by the US Treasury created uncertainty and contributed to a steeper yield curve.

The Swiss equity market initially performed slightly positively in the third quarter before heavyweight Novartis announced at the beginning of September that its Phase III trial for muscle disorders had failed. The SPI fell by 2% in the third quarter but remains up 7.6% year to date. The Swiss Bond Index AAA-BBB TR Index lost 1.69% in the third quarter and 1% over the year as a whole. Although the SNB made no change to interest rates at its most recent meeting in September, the market consensus has shifted towards rising interest rates.

Listed Swiss real estate investments also came under pressure in the third quarter. In addition to higher market interest rates, announced capital increases weighed on prices. The volume of issues and IPOs reached almost CHF 9.3 billion by the end of September, already close to the previous year’s record level.

Year to date, listed real estate funds, as measured by the SWIIT Index, lost 3.0% by the end of September, while real estate companies, as measured by the REAL Index, declined by 0.3%. By contrast, real estate investment foundations generated a positive return of 2.8% according to the KGAST Immo-Index during the first eight months.

Outlook

Geopolitical risks, together with the resulting economic and interest-rate trajectory, represent the greatest risks. Initial negative surprises related to the AI boom could also trigger setbacks in equity markets. In addition, equity markets are generally weak and volatile ahead of the US midterm elections, but could recover afterwards as political uncertainty subsides.

The environment for Swiss real estate investments remains positive. Continued investment pressure and the resulting lower acquisition yields are likely to have a further positive impact on revaluations. Nevertheless, an unexpected rise in interest rates could also negatively affect the price performance of listed funds.