Property Market Switzerland 2024 | 4

Inflation has receded more than expected in recent months, above all due to a decline in the prices of fuels and imported goods. A likely fall in Switzerland’s reference mortgage interest rate can be expected to lead to lower rents for existing rental agreements and therefore a further suppression of inflation in 2025.

The SNB is now weighing up the risk of inflation falling to an undesirably low level. Furthermore, planned cuts in key interest rates on the part of the Fed and the ECB, as well as the threat of an overvaluation of the Swiss franc – due to its status as a safe haven and rate cuts from other central banks – could prompt the SNB to cut its own key rate further, potentially from its current level of 1.0% to 0.5% by mid-2025.

Both past and possible future cuts to key rates should benefit the real economy by stimulating construction activity, investment and consumer spending. In addition, the latter is being fuelled by rises in real wages, this in turn being the result of falling inflation. Against this backdrop, Switzerland is expected to record real GDP growth of 1.6% in 2025.

The labour market proved more dynamic than expected in 2024. In a year-on-year comparison, 60,000 new jobs were created in the second quarter, which represents a rise of 1.4% on the equivalent quarter of 2023. However, employment growth is expected to slow in 2025 (Wüest Partner forecast: +1.2%) while the unemployment rate is expected to rise slightly.