Raiffeisen, the second-largest banking group in Switzerland, notes that private individuals are increasingly moving away from residential construction. In its press release, the bank writes: “In addition to the requirement for high-density construction, which further increases the complexity of construction projects, the flood of regulations, the trend towards larger residential buildings and even certain “affluence phenomena”, such as the decline in craftsmanship, are also responsible for this development.
According to Raiffeisen, only around one in ten new rental apartments are now built by private developers. Twenty years ago, it was still one in five. Even the construction of single-family homes is increasingly being left to professionals. In 2008, two thirds of planning applications for single-family homes were submitted by private individuals, but this figure is now less than half.
As Raiffeisen Economic Research notes in the study, the increasing complexity seems to deter many private developers. By contrast, institutional investors generally have more financial and human resources at their disposal and can achieve economies of scale and synergies. It is also apparent that private individuals are not only acting less as developers, but are also selling their existing yield-producing properties more often, particularly to institutional investors. Since 2017, the proportion of privately owned rental apartments has fallen from 49% to 45%. “For a long time, this development took place in secret, because during the low-interest phase, institutional investors willingly filled the gap left by private investors. It was only with the rise in interest rates and the dwindling relative attractiveness of real estate investments that institutional investors curbed their appetite, making the withdrawal of private developers, which had been underway for many years, visible,” explains Fredy Hasenmaile, Chief Economist at Raiffeisen Switzerland.
At the same time, certain “prosperity phenomena” are also likely to have reinforced the trend. “The basic manual skills of Mr. and Mrs. Swiss are tending to decline, as there are more and more office jobs and most employees hardly do any manual work in their everyday working lives. What’s more, in our leisure society, people increasingly prefer a weekend off after a hard week’s work to a ‘second job’ on a building site,” Hasenmaile estimates.
You can find out more about the current state of the real estate market in Switzerland in the Raiffeisen Study Real Estate Switzerland 2Q2024 (German language only), which you can download here as a PDF.
