Investing in Swiss real estate and imputed rental value

Real estate prices in Switzerland have tripled in the past thirty years. A remarkable performance that raises critical questions for investors today.

Is it better to buy a residential property or an investment property? Does direct investment remain relevant over the long term? Do real estate funds offer a more flexible alternative? How can succession planning feature in a real estate wealth strategy?

The conference organised by Lombard Odier as part of the LO Women cycle focussed on these challenges. Launched ten years ago with the bank’s female clients and our women’s networks in mind, this initiative has already brought together over 1,500 participants at dedicated events in Geneva, Lausanne, Zurich, Paris, Brussels, London, Madrid, and even São Paulo.

In the auditorium of our 1Roof headquarters in Bellevue, our guests benefited from the insights provided by Fabio Simonici, an expert in managing real estate funds. He explained the fundamentals of the Swiss real estate market and the various ways to invest in it today.

We have created three graphs summarising the key information needed to help investors, and women investors in particular, gain a better understanding of the market and make informed decisions.

The rise in real estate prices in Switzerland is structural

FIGURE 1. Real estate price growth in Switzerland remains strong

Rising property prices in Switzerland are not a cyclical phenomenon. They are part of a long-standing trend, driven by sound structural factors.

“In the early 2000s, around 40% of the Swiss population were in a financial position to become home-owners. This proportion has now fallen below 20%,” said Fabio Simonici in his introduction. That figure alone reveals the extent to which the property market has been revalued.

This dynamic can be put down first of all to the geographical constraints of Swiss territory. Switzerland is a small country with only a small amount of land suitable for building on. The supply of real estate is structurally limited, which automatically supports the valuation of existing assets. A significant easing of the supply shortage seems unlikely.

The supply of real estate is structurally limited, which automatically supports the valuation of existing assets. A significant easing of the supply shortage seems unlikely

Added to these geographical constraints are growing regulatory impediments. The Spatial Planning Act (SPA) restricts building on new land, while there is increasing opposition to new real estate projects. These are further factors curbing supply growth and accentuating the pressure on prices.

At this stage, beyond geopolitical or growth potential shocks, the main risks that look likely to affect valuations are legislative ones. Sometimes initiatives seeking to regulate rents or strengthen market regulation are mentioned. However, these risks remain contained and do not affect the fundamentals of the Swiss property market, which continues to operate in a stable framework offering long-term visibility to investors.

What’s the best way to invest? Getting to grips with investing indirectly

FIGURE 2. Spread between the dividend yield on real estate funds and 10-year Swiss government bonds

The yield spread between the dividend yield on listed real estate funds and the yield on 10-year Swiss Confederation bonds has narrowed to 1.88%, mainly due to the rise in the 10-year Swiss Confederation bond yield to 0.42%. The SNB’s decision in December 2025 did not have any significant impact on the dividend yield, which makes Swiss real estate all the more attractive.

Figure 2 highlights a key point: the persistent spread between the dividend yield on Swiss real estate funds and 10-year Swiss government bonds. In an environment of historically low rates, this spread increases the appeal of real estate funds for investors seeking regular income, a factor often mentioned by property investors.

There are two ways to invest in real estate: directly and indirectly. The two approaches are quite different, both in terms of how they work and in terms of yield, liquidity, and taxation.

Investing directly means purchasing a property, letting it, then collecting the income. This approach requires a large amount of capital, generates high expenses (maintenance, renovation, management, taxation), and entails direct exposure to operating constraints that are becoming ever more complicated and take up a great deal of time. At the end of the day, the final net yield is sometimes less attractive than anticipated.

On the other hand, investing indirectly involves buying units in real estate funds, which are listed on the stock exchange and can be traded every day like shares. The fund owns the properties, collects the rent, takes care of renovating the buildings, and manages the assets. Once a year it distributes a dividend to investors. The price of a unit depends on supply and demand in the market.

investing indirectly involves buying units in real estate funds, which are listed on the stock exchange and can be traded every day like shares

A major tax advantage for funds

One of the main advantages of investing indirectly is the tax treatment. Tax is levied at two levels: on dividends and on wealth.

Some real estate funds are “tax-advantaged” or “tax-exempt”, which makes them more tax efficient. The dividend paid out by these funds can be up to 100% tax-exempt. The capital invested is almost entirely exempt from wealth tax. Tax is levied within the fund itself, at rates generally more advantageous than those applied to individuals.

Some real estate funds are “tax-advantaged” or “tax-exempt”, which makes them more tax efficient

Running numbers to compare the approaches

To provide a tangible illustration of these differences, Fabio Simonici presented several simulations of cost and yield, taking as an example a property worth CHF 20 million in the Canton of Geneva.

The estimated net annual returns are as follows:

• for a directly owned property without a mortgage: 0.7%
• for a directly owned property with a 30% mortgage: 1.15%
• for a taxed real estate fund: 0.41%
• for an untaxed real estate fund: 1.88%

Purely for the purposes of illustration, an estimate of annual cash flow was then presented for an investment property worth CHF 8 million, excluding financing costs, showing the advantage in terms of efficiency between a property operated and managed by its private owner and exactly the same building owned and managed through a real estate fund.
If owned directly by a private individual, this property would generate estimated annual cash flow of CHF 115,804. If owned through a real estate fund (e.g. Solvalor) the annual net cash flow would be CHF 160,560 (after deducting fund management costs), an uplift of over 40%.

Solid fundamentals and a sustainably supportive environment

GRAPH 3. Switzerland’s appeal should support growing net migration, in turn boosting demand for real estate

Real estate market fundamentals are highly sensitive to demographic factors. From this point of view, the prospects in Switzerland remain highly favourable. As can be seen in Figure 3, the current trend in net migration looks set to continue. This is a key factor in the demand for housing in a country where supply faces structural limitations.

Switzerland is highly attractive, both for skilled workers and high-net-worth individuals. Political stability, legal certainty, high-quality infrastructure: these benefits continue to attract long-term residents and are sustaining the demand for property, particularly in the major economic centres.

This appeal is all the stronger given the political and geopolitical uncertainty observed elsewhere. In this context, Switzerland is living up to its reputation as a safe haven, offering investors a predictable and stable environment.
For investors seeking long-term visibility and capital preservation, these provide a solid basis for investing in Swiss real estate.

Switzerland is living up to its reputation as a safe haven, offering investors a predictable and stable environment

The end of imputed rental value, financing, and transmission: the legal and wealth planning challenges with real estate

At the conference, Lombard Odier wealth planner Lea Baracchini referred to a major turning point for the Swiss property market: the end of imputed rental value, approved in a referendum last September. This reform fundamentally changes the tax framework for holding real estate.

Generally speaking, property owners will no longer be able to deduct renovation expenses or investments linked to energy improvements, except in certain cases. Although some cantons have indicated they intend to maintain deductions for energy renovations, the framework remains uncertain at present: they have until the end of 2028 to reach a decision. The reform also opens the way for cantons to levy a tax on second homes. For more details on this issue, please see our article on the consequences of the end of imputed rental value for investors.

Over and above the tax aspects, Lea Baracchini highlighted the importance of a holistic wealth approach to real estate projects. Who acquires the asset? What sources of financing are used? Equity, mortgages, Lombard loans: every choice has to be analysed in the light of the wealth position, long-term goals, and family situation. Formalising these elements at an early stage is essential, particularly with a view to preserving and transmitting wealth.

Over and above the tax aspects, Lea Baracchini highlighted the importance of a holistic wealth approach to real estate projects. Who acquires the asset? What sources of financing are used?

During the panel discussion, senior banker Delphine Barbaud pointed out that, for clients who are eligible, it can make sense to consider untaxed investment solutions such as defensive structured income products, which are a way of collecting coupons to cover some or all of the interest cost. The same approach can also be used over the longer term to set up private equity programmes, for example. The aim is to generate untaxed net cash flows to cover some of the interest paid on mortgages and/or Lombard loans.

Asset swaps were another mechanism mentioned. These involve an owner transferring a real estate asset to an investment fund in exchange for units in the fund. Apart from the tax advantage and reduction in the administrative costs associated with direct management, this approach could prove relevant in succession planning: it is far easier to share out fund units among heirs than an indivisible real estate asset.

Asset swaps were another mechanism mentioned. These involve an owner transferring a real estate asset to an investment fund in exchange for units in the fund

These reflections echo another LO Women event organised in Lausanne in early March, during which our specialists analysed the wealth-related challenges that arise at each stage of women’s lives. Some of those analyses and recommendations can be found in the latest edition of our publication LO Women Invest, available for download below.