Immo expert on faltering housing construction: “Many construction projects are stuck in the approval process”

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Apartment prices are falling. How deep will they fall?

The price drop was expected, but its size looks surprising. Due to the sharp decline in real estate transactions, market participants continue to be cautious about being full-blown.

Overall, the residential real estate market in Switzerland remains attractive due to excessive demand and limited land resources. In the last year, the excesses in the market have dispersed and we are on the way to return to normalization in housing prices.

And will the value of the houses be lost?

Depreciation occurs only when the item is resold below its purchase price. However, real estate is acquired for a long holding period. Over the past three decades, homeowners have enjoyed above-average performance.

Significantly higher financing costs currently lead to limited price development for home ownership. In individual regions, this could also lead to short-term equivalent losses. However, private home ownership is well-funded, at least because of mortgage lending guidelines. A sale that will trigger further price corrections is certainly not expected.

How will mortgage interest rates evolve and how popular will Saronic mortgages remain?

Mortgage interest rates depend on the interest rate level in the capital market. Due to the interest rate hike on 22 June 2023, the Swiss National Bank announced that further interest rate hikes could be expected.

Fixed rate mortgages reflect the market’s long-term interest rate expectations, while Saron mortgages more directly reflect current interest rates. In uncertain times, it can be thought that those who receive interest will prefer fixed rate housing loans. But the banking community has learned that the rate of Saron home loans has increased significantly.

Rents are rising – so will investors build more rental apartments? Recently, demand has increased much faster than supply.

Interest rate hikes by the Central Bank lead to increases in existing rents, but not higher income than initial leases. Negative interest rates have been the main driver of rental flats across the country.

Due to the lack of investment alternatives and the penal interest rate for uninvested capital, pension funds invested the majority of their pension funds in investment properties. Those days are over. However, investments in investment properties remain attractive and sought after due to the high demand for living space.

Switzerland is facing a housing shortage. What are the four most important levers for creating more living space?

Housing shortage “home build”: Many construction projects are currently stuck in the approval process. According to a study by the Zürcher Kantonalbank (ZKB), it now takes an average of 330 days to obtain a building permit in the city of Zurich. The ZKB researchers also determined that every tenth flat since 2010 has never been built. This means 40,000 apartments in Switzerland with unbuilt planning permission every year.

There will be three major levers: inward consolidation through simplified approval procedures, limitation of objections, addition of floors and completion of space improvements.

In addition, today’s family structures require new forms of settlement that support social cohesion and also allow for a higher housing density. I am lucky to live with my family in such a contemporary settlement with public meeting rooms. We consume less space for a significantly better quality of life.

Rent levels became a political issue. Do many investors get high enough returns to abuse on rental apartments?

I can definitely answer this question in the negative for all institutional investors. Yields have known only one direction in recent years: down. Swiss rental law binds rent to mortgage interest. Tenants who have benefited from rent reductions in recent years can now expect an increase in rents. Thus, returns are indirectly linked to rents.

The abuse happens elsewhere: as independent real estate appraisers, we inspect hundreds of apartments each year, and in some places it seems to me that they are renting abandoned properties for free to tenants who, due to their personal circumstances, have little chance. The housing market looks bad. There is a lack of social justice here.

According to the new Climate Protection Law, CO2 emissions from buildings will be reduced by 50 percent by 2027 compared to 1990. Is this goal realistic?

We discussed exactly this question at this year’s Real Estate Symposium. Lino Guzzella, former rector of ETH Zurich and professor of thermotronics, has made it clear that net zero cannot be reached unless Switzerland provides much more seasonal storage for green energy. We certainly overestimate ourselves in meeting the 2027 goal, but we shouldn’t underestimate what we can achieve by promoting innovation by 2050.

Many institutional real estate investors have recently aligned their real estate strategies to reach net zero by 2050 and will achieve these goals.

What measures are required?

A lot of rethinking is required when it comes to energy consumption. The building stock in Switzerland is largely privately owned. As only a few households today buy predominantly biodynamically grown food, there is a cautious desire to take responsibility for global climate goals by phasing out fossil fuels when it comes to green energy.

Gunnar Gärtner answered the questions in writing.

Source :Blick