Expert Anna Pohl in an interview: “The flight in real estate is over”

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Despite the increase in interest rates, there was no noticeable decrease in house prices. What is the reason for this and will prices still move?
Anna Pohl: Housing prices fell only partially, for example in the luxury segment. Prices remain stable in large cities and their agglomerations. And there was a slight decline at the edges of agglomerations or in rural areas. In principle, the demand for housing in Switzerland, and therefore the prices, remains high. Especially since the interest rate situation and the inflation rate have stabilized. Another factor is the current high level of immigration, which primarily affects the demand for rental apartments, but may also encourage one or two tenants to consider homeownership rather than paying high rent. In short: I don’t currently assume house prices will change significantly.

How much does the increase in interest rates affect the investment real estate business?
As a service provider and transaction manager, we had already noticed investors’ uncertainty in the third quarter of 2022. This uncertainty has continued for the last twelve months. The reason for this was not only the rise in interest rates, but also fluctuations in stock markets, past and present crises and inflation. Real estate markets in other European countries have already come under great pressure in 2022. In contrast, the local market still varies in price and supply, albeit at a low level.

Are there many investment properties for sale?

The offer is relatively large, yes. This is because individual investors are coming under pressure due to their financing models, the real estate quota for others has become too high in the context of overall asset allocation, and opportunistic investors are more likely to turn to investment. alternatives. Price expectations of buyers and sellers differ much more this year than in previous years; Finally, the “flight” in real estate is over due to available investment alternatives and selective devaluations of real estate.

Which type of flat is in particular high demand right now?
Due to the scarcity of rental apartments and high rents in big cities, self-sufficient people are increasingly considering homeownership. However, in a new building project, not every flat is sold at the highest prices. The quality needs to be right; buyers are becoming better informed and more aware.

The home office has become entrenched in the Swiss economy. Has it become more difficult to rent office space because companies need less office space due to remote working?
The office market in the best locations remains stable. However, demand in decentralized locations has not recovered since the pandemic. It is unclear whether this is due to the trend towards more remote working. I wonder if the home office trend is truly sustainable. Conflicting statements about the much-discussed issue in recent weeks have been increasing. Some companies are even trying to get their employees back to the office, with the help of a reward system if necessary. Additionally, due to digitalization, the use of space is changing in general – this development is described by the term “New Business”. Flexible desks, quiet areas, collaboration areas and community spaces are now part of the modern office concept. Even in offices where workstations are shared, this does not necessarily lead to less square footage of office space.

CO₂-Emissions from real estate need to decrease, which will lead to many renovations. Will housing become more expensive due to this green transformation?
This question is a political one, because some cantons are already taking regulatory measures, which means that housing cannot become more expensive after renovation. However, in these cases, some necessary renovation works are postponed because investors are not allowed to transfer or completely transfer value-added investments to tenants. Of course, renovations aimed at increasing or achieving sustainability lead to high initial costs, which can potentially lead to higher rents. The actual impact on rental costs will be affected by Switzerland’s unique political, economic and social environment. The transition to more sustainable buildings will provide both environmental and economic benefits in the long term; This is important to emphasize.

For a long time, many investors preferred to build rental apartments instead of apartments. Will more apartments be developed again?
First of all, the concerns of real estate developers are still noticeable. The entire real estate market is coming out of an unprecedented high phase and has to get used to new conditions and, accordingly, low profits. The complexity of developments has increased significantly. Increasing interest rates, increasing construction costs and long approval processes cause developers to be more careful. Whether to develop rental apartments or condominium units is primarily a matter of strategy. The rental income that can be obtained in the top centers is so high that the construction of rental apartments may continue to be more attractive than condominiums.

Pension funds, which have invested heavily in real estate in recent years, are now seeing other interesting investment opportunities. Are funds therefore less active in the real estate market?
The decline in bond and stock prices caused strategic real estate quotas in institutional investors’ portfolios to reach or even exceed upper limits. We could already see this in the 2022/23 annual financial statements. So pension funds in particular initially put the brakes on buying, even though the capital was actually there. Thanks to increasing interest rates, real investment alternatives have re-emerged. But it’s not just pension funds that are being more cautious about investments. Most institutional investors remain cautious or cautious in 2023. Because it provides constant income, real estate investments continue to be an attractive and safe investment option for retirement funds. We assume that these institutions will continue to be active market participants in the future. In general, the Swiss real estate market enjoys an advantageous position in international comparisons. While property markets in the US, UK and EU have experienced significant declines, the stability of the Swiss franc, relatively low inflation and the SNB’s interest rate policy have contributed to our property market continuing to function well, albeit at more modest levels.

Anna Pohl answered the questions in writing.

Source :Blick