Switzerland's real estate market faces challenges due to rising demand, shrinking supply, and increasing rents. In response, cantons like Basel-Stadt and Geneva have implemented strict rent regulations. Institutional investors are increasingly confronted by these regulations and in the center of heated debates. This study analyzes the impact of these policies on investors' returns and investment decisions, exploring how they influence their behavior and financial performance.

The study conducted a fixed panel data analysis across all 26 Swiss cantons, coupled with a detailed descriptive analysis of the Swiss real estate market and an extensive literature review. The research aimed to quantify the impact of rent regulation on institutional investors' returns and investment behaviors, providing a comprehensive overview of regulatory effects on the market.

The research found that rent regulations, such as those in Geneva and Basel-Stadt, significantly reduce investments in renovations and new construction. However, these regulations do not appear to negatively impact the overall returns for institutional investors. For example, Geneva, despite its stringent rent controls, recorded some of the highest returns in Switzerland, demonstrating that investors can effectively adapt to a regulated environment. The study also highlights the "lock-in" effect, where long-term tenants benefit from lower rents, while new tenants face higher costs, worsening housing shortages. These findings suggest that while current regulations protect existing tenants from the disruptions of renovations, they may inadvertently reduce market efficiency and contribute to increased housing scarcity. The study recommends reevaluating rent regulations to mitigate these unintended consequences. Future research should focus on further exploring these dynamics as more data becomes available from recently regulated cantons like Basel-Stadt.