Real estate market: How the coronavirus is shaping trends in 2021 -

Real estate market: How the coronavirus is shaping trends in 2021

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30.03.2021 | 3 minutes

Corona has shaken things up with the pandemic proving to be a catalyst for various social developments. This certainly includes working from home, which has become a part of everyday life for an increasing amount of people. According to research conducted by UBS, the number of people regularly working from home is expected to double in the next five years. Consumer behavior has also become more confined to people’s own four walls with a staggering increase in online orders and home deliveries.

In this article, we describe the short-term outlook for the most important real estate market segments in Switzerland – and what the lasting consequences of the corona crisis are likely to be.

Owner-occupied homes: Growing popularity of single-family homes and remote locations

In the owner-occupied home market, interest in additional living space, such as separate office space for homeworking or space for a home gym or game rooms etc., is on the rise. However, given the lack of affordability, such real estate is primarily available away from urban centers. In addition, the place of work and place of residence are becoming increasingly decoupled, reinforcing the distribution of demand for properties outside of urban centers. Regions that were not previously within classic commuter zones can also benefit from this trend. The Lower Valais, the Rhine Valley around Chur and the Lake Constance region are likely to become even more attractive thanks to their relatively low total housing costs at the present time.

Conversely, demand in the agglomerations will decline somewhat since the typical commuter communities will lose their appeal as proximity to urban centers and the workplace becomes less important. For very remote regions, there should be relatively little change. A commute of two hours or more to the place of work is too big a hurdle for the vast majority of employees, even if working some of the time from home.

Owner-occupied homes continue to represent attractive long-term investments. Overall, prices will therefore continue to rise in 2021, albeit at a slightly slower rate than in the previous year. Single-family homes in particular enjoyed strong demand, making a significant contribution to this price increase.

A train running through a rural setting of mountains and a lake.
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Rental apartments: Rising purchase prices despite falling rents

In Switzerland, a growing number of rental apartments stand empty: Just under three percent of properties were unoccupied at the end of 2020. Thus, not only does the record vacancy rate from 1998 look set to be beaten, rents also fell by two percentage points year-on-year due to the drop in demand. According to the latest UBS study, vacancy rates will continue to rise slightly in 2021 before the market stabilizes over the course of the year.

At the same time, the general trend of falling rents will continue into 2021. Purchase prices are rising however as institutional and private investors alike remain unphased by the situation on the market. Especially in economically uncertain times, real estate remains an attractive investment. Rental apartments continue to be built, especially in urban centers and agglomerations. The high demand for rental apartments in metropolitan areas is also reflected in the 40 percent higher rents.

Overall, the rent gap will level off: Due to the rise in working from home, home office space is gaining in importance. In order to be able to afford this additional space while housing costs remain the same, many workers accept a longer commute. Peripheral regions are unlikely to benefit from this trend, however, given that ownership is sufficiently affordable in these areas that rental housing does not represent a cost advantage. The working from home trend is therefore unlikely to ease the challenging situation for rental apartments in vacancy-plagued peripheral regions.

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Offices: More homeworking, fewer business premises

As the rising proportion of employees working from home is causing demand for private residential space to increase, demand for office space is declining. No significant increases in value are therefore to be expected in the next few years. In the last two years, building permits were already 25 percent below previous-year levels. This trend can be summarized in weaker market growth coupled with sluggish business space expansion.

Even after the end of the pandemic, working from home will remain an integral part of everyday working life – and will accelerate the market polarization: If a larger proportion of employees live in peripheral areas and work at least partly from home, well-developed office space in central locations becomes all the more important in order to guarantee the largest possible catchment area. By contrast, experts expect lower demand for office space in C locations. In the coming years, the number of permanent local jobs needed is also expected to grow at a much slower rate.

Employee sitting before a screen in a meeting room, taking part in a video conference.
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Retail space: stabilization of brick-and-mortar retail

Despite the corona-induced lockdown, UBS analysts believe that brick-and-mortar retail is holding up better than expected, at least in attractive locations. In many places, however, rents remain high, making it difficult to find buyers for retail space. In mixed-use properties, conversion is often inevitable: Restaurateurs or providers of personal care and health services are taking over these retail spaces, preventing an across-the-board increase in vacancies. However, this is expected to change in the foreseeable future with a renewed fall in rents in second-tier locations in particular.


At the start of 2021, as vaccination programs start to be rolled out, there is nevertheless some hope that the economy will, in the course of the year, gradually emerge from crisis mode. In Switzerland, however, the status quo and prospects vary greatly depending on industry. In the Swiss real estate market, the pandemic will have positive or negative consequences, depending on the segment.

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