Last week’s substantial Swiss franc appreciation has significantly dented the outlook for economic growth and occupier demand, according to Capital Economics (CE).

The firm reports that the recent FX swing has also made Swiss property look even more expensive, especially to foreign buyers. Accordingly, Swiss property markets are likely to underperform this year.

Last week the Swiss Franc appreciated by around 16% against the Euro after the SNB scrapped its exchange rate ceiling. CE says of the Swiss economy: ‘The impact of this on the economic outlook is firmly negative. For instance, experience suggests that over the next year exports could fall by 10%. Given that exports account for 60% of GDP, that would represent a slump in total activity of 6%. The final effect will be largely mitigated by a corresponding fall in imports destined for use in production, but we have nonetheless cut our GDP growth forecasts from 1.5% to 1% this year and from 2% to 0.5% in 2016.

‘Even before this move, our expectations for the occupier market outlook in Zurich and Geneva were on the soft side. For instance, over 2015-16, across the two cities at the all-property level we had pencilled in an average annual rental growth rate of 1.7%, compared to 2.2% across core Eurozone and Scandinavian markets.’