Moderate economic growth
In the first quarter of 2025, Swiss economic growth accelerated more than expected, recording a (sports-event-adjusted) increase of 0.8%. The main drivers of this growth were once again the services sector and the pharmaceutical industry, with the latter receiving a boost from US tariff policy and the associated anticipatory purchase effects in connection with exports to the US. In addition, the Swiss economy continues to gain support from robust consumer spending and government investment. In the current year, the dampening effects of international trade policy and the associated uncertainty can be expected to weigh on the Swiss economy, with the result that only modest growth of 1.2% is expected for 2025 as a whole. Stronger growth of 1.4% should follow in 2026 on the back of an expected economic recovery.
Return to zero interest rates
In June 2025, the Swiss National Bank reduced its key interest rate for the sixth time in the current cycle. This latest step pushed the interest rate down to 0%. This move is likely to have been driven by a rate of inflation that was once again lower in a year-on-year comparison (–0.1% in May 2025), signs of an emerging economic slowdown, and a persistently strong Swiss franc. Given this latest lowering of Switzerland’s key interest rate, the reference mortgage interest rate for apartment rents is likely to be reduced for a second time this year. This will lead to lower rents for existing tenancy agreements and thus exert prolonged downward pressure on inflation.
Property investments gain in appeal
The persistent low-interest environment is continuing to buoy Swiss property markets and can be expected to support demand for upmarket owner-occupied housing as well as investment properties. In particular, the financing of both money-market mortgages and fixed-interest mortgages with short terms is becoming cheaper. But in a historical comparison, even long-term fixed-interest mortgages remain attractive in the current environment.