The real estate market 8 months after the corona lockdown. A classification.

The home office is changing our requirements
The topic has been on the agenda for years and some employees have long wanted to be able to work from home more regularly. A survey has shown that 30 to 35% of people who have a job that can be done from home have this desire. The lockdown briefly ended the discussion and the desire to work from home became the home office test. How does that feel? Am I still working at full capacity? Can I still switch off in the evening with my laptop and documents permanently on my kitchen table? Will it work well with the children at home or will it be tight? Will I miss my colleagues? Not only employees, but also many employers see the test as a success and, according to the same survey, expect 25 to 30% of work to be done from home in future. In future, people will spend less on commuting to work and lunch, but they will want a really suitable space to work in at home. As a result, priorities are shifting towards improving the living situation: a quieter location, a more modern fit-out, more space for office use and private outdoor spaces to relax in between. The Covid-19 situation is also causing many more people to think about their current living situation: Furniture stores such as IKEA can no longer keep up with orders, while traditional office furniture specialists are experiencing a significant drop in sales.  
 

Aggressive buying in a market with few properties
The inquiries clearly show that the desire for a new home is strong—and currently even stronger than it already was. And the market has long been unable to adequately meet this demand, especially in the regions surrounding the cities of Zurich, Bern, Basel, Zug, Lucerne, Chur, Lausanne, and Geneva. Here, there are fewer properties available than average, and very few with a purchase price under one million. Moreover, the numbers of building permits issued are misleading: about 50% are for replacement buildings, and only 50% are truly new properties. Furthermore, interest rates appear set to remain low for some time, making a purchase potentially affordable for many. Accordingly, according to Wüst Partner, prices nationwide rose by a whopping 5.1% between the third quarter of 2019 and the third quarter of 2020. In metropolitan areas such as Zurich, we’re seeing even higher price increases of around 10% compared to the previous year. The fact that there are now significantly fewer newcomers from abroad is negligible, as the number of people moving away is also at a low level. What we’re definitely noticing is that time on the market has shortened significantly. Those who have their financing in order are making quick decisions. After all, now is still a good time to buy.  

The second-home market in the mountains remains robust
On March 11, 2012, Swiss voters approved the second-home initiative. This states that no new units may be approved in municipalities where the proportion of second homes exceeds 20%. However, the law allows exceptions to increase the number of second homes. For example, tourist apartments are permitted and it is possible to provide for second homes when extending or building new hotels. Properties recognized as worthy of protection can also be converted. All in all, the new legal framework has meant that hardly any new buildings have been constructed. The result: the resulting shortage of supply with corresponding price pressure is now clearly noticeable, particularly in the case of condominiums. Meanwhile, low interest rates, the general economic situation, the level of prosperity, the need for investment diversification and tangible assets and, more recently, the change in travel behavior due to COVID-19 remain equally important factors for the continued high level of interest in attractive properties.  

Investment properties continue to live up to their name
The trend among investors to invest in tangible assets continues. Despite higher vacancy rates throughout Switzerland, it is particularly important to carefully examine where and in what you currently want to invest. This is because there is a real surplus or shortage of apartments in four cantons in particular, while the market is intact everywhere else and good returns can still be achieved. What is clear, however, is that new construction is competing with older buildings, partly due to CO2 taxes. We can therefore expect a wave of Renovation of investment properties in favor of the environment and returns. Of interest to investors is the current yield spread, i.e. the difference between the risk-free investment of a federal bond, which currently stands at -0.75%, and the return on a real estate investment, such as an apartment building, which carries an investment risk. Studies have shown that the spread and thus the additional premium for holding an apartment building is the same as in 2010, when the federal bond still had an interest rate of 2%, despite falling interest rates. The spread is of course dependent on the property location and condition: in the city of Zurich it is currently around 2% or the net yield can be as low as 1.5% and in less attractive locations an investor can expect a spread of 3.0 to 4.5%, i.e. a net yield of around 3.25 to 4.0%.  

Looking across the pond
Switzerland is not the only country that remains a safe haven for investors. Leading Real Estate Companies of the World, one of the world’s largest brokerage networks, has conducted a global study on the development of real estate prices during the coronavirus crisis. The winners were the northern hemisphere and Australia, while the main losers were the major Asian cities and regions that are heavily dependent on tourism. Prices have fallen significantly in New York, where the epidemic has hit particularly hard. This is in stark contrast to the rest of the USA: in 83% of the regions surveyed, prices have increased in value during the crisis.  

Even if no one can predict the future, the realization remains that the confidence to actively shape one’s life and leave as little room as possible for uncertainty and fear has increased as people have learned to deal better with the crisis. Buying a property is one such step, as it ties your money to a secure asset and increases your quality of life in the long term and on a daily basis thanks to the quality of living you gain. You immediately feel a little more secure in a home that suits your current lifestyle.  

In any case, we are excited to see where the path leads. And above all, we are here to walk it together with you.