Assessment of the real estate market situation under the special circumstances of the corona crisis

The special circumstances are challenging us all in equal measure these days. For us, it means continuing to maintain operations as well as protecting our employees. To date, we have had almost no buyer withdrawals from reserved contracts and have been able to notarize the transactions regularly in the last few days. However, the demand for viewings has decreased in recent days due to the measures imposed by the Federal Council.  

Back in 2008, we experienced a stock market downturn of 30 percent, which we as a Real Estate company felt. Please allow us to briefly outline our assessment of the current real estate market situation based on my previous experience:  

In principle, the real estate market is based on the following four pillars:
 

1. robust economic situation/stock market
2. robust immigration
3. low interest rates
4. good market psychology

Two and a half of these pillars are currently tottering:
 

• The stock market has lost almost 30 % in value, individual shares even 50 %: the gains of the last 2-5 years are therefore no longer there. However, investors with a longer investment horizon still have a good (and positive) overall performance over the last 10 years.
• Switzerland has been experiencing a decline in immigration for some years now, which is particularly noticeable in rural areas and in new construction projects. This decline has not yet had any effect in the Zurich metropolitan area.  
• The current market psychology is negative. Analysts are forecasting an economic downturn, which is leading to a general reluctance to buy.  

In such turbulent phases of a possible economic downturn, there is usually a “mismatch”: trading hardly takes place. In 2008, too, there were only a few changes of ownership after the stock market crash. Only when the stock market started to rise again did the real estate market regain momentum. This could also happen in the near future.  

Only in two to three months will we be able to see more clearly whether the current crisis can be described as a temporary standstill or whether it will lead to a major economic crisis. Even a yo-yo effect with a greatly improved stock market and economic situation cannot be ruled out in early summer. 

At this point in time (and without knowing how the situation will develop), we remain skeptical about the possibility of a drastic economic downturn. For this reason, most of us do not recommend lowering real estate prices. Exceptions are properties that were already difficult to sell before the current crisis. In these cases, a price adjustment could revitalize the market. Should a sustained economic crisis actually materialize, a “survival of the fittest” competition will ensue. In that case, the seller who reduces the asking price the most—and does so first—will be the first to sell. As a general rule, each property should be considered on a case-by-case basis. If you’d like to discuss individual strategies for Sales of your property, we’re always here to help.

We are currently in the process of equipping many properties with virtual tours so that customers will be able to gain a first impression in the coming weeks without having to visit the property. We believe that customers will appreciate this new way of viewing properties in times of Corona.  

We wish you good health and hope that we will soon be heading for more positive times. 

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