Tag: Raiffeisen Schweiz

Prices for residential property rise despite interest rate turnaround

The market for owner-occupied residential property remains unaffected by the turnaround in interest rates, Raiffeisen Switzerland informs in a release on the current transaction price index of the cooperative banking group. According to the index, prices for single-family homes in the second quarter of 2023 were 1.3 per cent higher than in the previous quarter. A year-on-year increase of 6.1 per cent was observed. Prices for condominiums increased by 1.2 per cent quarter-on-quarter and 5.1 per cent year-on-year.

“In the power struggle between thin supply and higher financing costs due to interest rates, the supply shortage currently continues to hold the upper hand,” Fredy Hasenmaile, chief economist at Raiffeisen Switzerland, is quoted as saying in the statement. The experts of the banking group have observed the greatest increase in central Switzerland. Here, prices for single-family homes increased by 18.8 per cent year-on-year. At the same time, prices for condominiums rose by 11.3 per cent. The smallest increases were recorded for single-family homes in Bern (+3.4 per cent) and northwestern Switzerland (+3.3 per cent). For condominiums, the smallest increase of 1.4 percent was observed in the Zurich region.

Prices for single-family homes went up more in urban municipalities than in other types of municipalities, at 7.3 per cent. For condominiums, tourist communities led the way with a year-on-year increase of 7.9 per cent.

July 2023
Swiss real estate market – turnaround in interest rates, so what?

After years of oversupply, the signs on the rental housing market are now clearly pointing to a shortage. Although demand will continue to exceed the supply of housing in the future, the real estate industry has so far not reacted with higher housing production. As long as rents do not rise sharply, there will be no incentive to expand residential construction in the current market environment. “The remaining vacancy reserves will soon be exhausted. Because the demand from immigration, individualization and demographic aging continues to increase,
while at the same time fewer and fewer new homes are being built. Significant increases in asking rents are therefore only a matter of time and the topic will move up the political agenda,” says Neff.
Densification progresses slowly
It's getting tighter and tighter in Switzerland. The new buildings in this country are getting taller, the apartments in them are getting smaller and more and more people live in the residential zones. So the scarce land is being used more and more economically. However, because land use per person continues to rise and more and more people are living in Switzerland, the pace of densification is far from sufficient to stop urban sprawl. “High hurdles stand in the way of the faster densification demanded by spatial planning. The construction costs of projects with higher density are significantly higher than for a new building on a green field. In addition, strict, inflexible and inconsistent building and zoning regulations limit, complicate or make densification efforts impossible. A very liberal objection practice increases the planning effort for projects with high consolidation potential and leads to ever greater administrative effort," says Martin Neff. For example, the average time from the submission of a building application to the granting of a building permit for buildings with more than three apartments has increased significantly in the last 20 years from 92 days to 150 days.
Bursting bubbles in the virtual world
Trading in digital assets based on blockchain technology has experienced a real hype in the course of the cryptocurrency boom. In the meantime, land and real estate can also be purchased in the digital world, the so-called metaverse. The more attractive a piece of digital soil is, the more people will pay for it. The relative attractiveness is strongly defined by how many players are in the vicinity of the property on average. The market for digital real estate has experienced enormous price increases. At the beginning of January 2021, for example, in one of the best-known Mataverses "The Sandbox", the average plot of land was still being traded for less than 150 US dollars. By the end of the year, the price had risen to over $16,000, an increase in value of almost 11,000 percent. By the end of June 2022, prices had collapsed to $2,500. Such a bubble formation with subsequent bursting has been observed in many Metaverse projects in recent months. Among other things, this is favored by the fact that many projects are tied to cryptocurrencies for technical reasons, the future of which cannot yet be estimated either. "Due to the extreme volatility, the obvious tendency to bubble and the questionable intentions of many providers, virtual real estate remains primarily a playing field for speculators who are very willing to take risks," says Martin Neff.
The “Immobilien Schweiz” study offers a detailed quarterly assessment of the Swiss real estate market. The current study and further information are available at raiffeisen.ch/casa.

August 2022
Privately used residential property is becoming more expensive

According to a media release from Raiffeisen Switzerland on the quarterly transaction price index, owner-occupied homes have to dig deeper into their pockets than in the first quarter and also compared to the previous year. Accordingly, the purchase of a condominium increased in price by 3.5 percent in the second quarter. Compared to the same period last year, there was a price increase of 7.7 percent. A single-family house costs 1.3 percent more than in the previous quarter. Year-on-year, prices for this type of property have risen by 8.7 percent.

According to the Raiffeisen chief economist Martin Neff, who was quoted in the media release, the price dynamic is due to the shortage of supply in the home ownership market. Neither the interest rate hike nor the heightened uncertainties in the reporting period would have changed that.

In the case of condominiums, the highest increase in prices compared to the previous year was in the Zurich region, where prices rose by 11 percent. In contrast, the Bern region has the lowest rate compared to 2021 at 3.5 percent. 10.6 percent more has to be paid for a condominium in tourist areas.

The price spiral is also driving up the costs for single-family homes. In the Western Switzerland region, the segment has increased in price by 12.8 percent, in the Northwestern Switzerland region the value is 10.4 percent.

Broken down by place of residence, there is a pronounced desire for private home ownership in the countryside, where the prices for a single-family house have soared by 12 percent. In city centers, house prices are 8.7 percent higher than last year.

July 2022
Raiffeisen warns of housing shortage

With interest rates rising again, the “rule of thumb, now almost set in stone”, according to which owning is financially cheaper than renting, “has started to falter”, writes Raiffeisen Switzerland in a statement on the current issue of its quarterly study “ Real Estate Switzerland ”. However, there are still financing solutions that make home ownership more financially attractive than renting, the statement continues. In addition, the demand for one’s own four walls is also being driven by “various non-financial” aspects.

However, the demand for residential property, which continues to rise, is “meeting on a supply that has now completely dried up,” explains Martin Neff in the press release. “Hardly any new properties are being built and existing owners only sell their houses and apartments in exceptional cases,” says the chief economist at Raiffeisen Switzerland.

The analysts at Raiffeisen Switzerland have also noticed a shortage of supply on the market for rental apartments. Due to high vacancy rates, the construction of new apartments has already been curtailed in the past, writes Raiffeisen Switzerland. In addition, demand has increased due to demographic aging and a “trend towards individualization”. In 2021, the number of newly founded households exceeded the number of newly built apartments for the first time since 2009.

“Housing production will not be able to keep up with demand in the future either,” predicts Neff. “So the housing oversupply that prevailed until recently could soon become a housing shortage.”

May 2022
Raiffeisen expects prices to slow down for home ownership

After rising in the previous quarters, prices for owner-occupied residential property continued to rise in the first quarter of 2022, Raiffeisen Switzerland informed in a statement on the current transaction price index of the cooperative banking group. The prices for single-family homes throughout Switzerland increased by 1.2 percent compared to the previous quarter and by 9.5 percent year-on-year. 0.2 percent more had to be paid for owner-occupied condominiums than in the previous quarter. Year-on-year, prices increased by an average of 6.6 percent.

The price dynamics on the market for owner-occupied residential property have therefore weakened somewhat compared to the previous quarters, according to the statement. “Due to the recent sharp increase in mortgage interest rates and the restrictive equity and affordability requirements, which are increasingly restricting the group of buyers as prices rise, we expect the price dynamics in the market for owner-occupied residential property to continue to weaken,” says Martin Neff, Chief Economist at Raiffeisen Switzerland. quoted there.

Viewed by region, however, there are major differences in the development of prices. The prices for single-family houses in the Lake Geneva region and in eastern Switzerland rose by 15.3 percent and 12.5 percent, respectively, above average in a year-on-year comparison. The lowest year-on-year price increase of 4.0 percent was registered in eastern Switzerland. In addition, analysts have observed above-average increases in house prices in tourist communities and urban centers.

April 2022
Home prices continue to rise in the 4th quarter

The prices for owner-occupied residential property rose significantly in Switzerland in 2021. According to the Raiffeisen Switzerland transaction price index, this dynamic rise in prices continued in the fourth quarter. According to a press release , private homes were 1.6 percent and condominiums 1.8 percent more expensive than in the previous quarter. Calculated for the whole year, i.e. compared to the 4th quarter of 2020, prices for single-family houses rose by 10.3 percent. Condominiums were 7.2 percent more expensive than a year ago.

“The price dynamics on the market for owner-occupied residential property will therefore remain high. Prices are rising across the country and in all types of communities, ”Martin Neff, chief economist at Raiffeisen Switzerland, is quoted as saying. The price development is strongest in tourist regions.

According to the quarterly published index, house prices in tourist municipalities rose by 13.6 percent within one year, much faster than in other types of municipalities. In the case of condominiums, too, prices rose the most in tourist communities, with a plus of 12.3 percent. Condominiums were also 9 percent more expensive in the major centers year-on-year.

Broken down by region, the price pressure is highest in the Eastern Switzerland region with a plus of 13.3 percent, followed by the Central Switzerland region (+11 percent). In the regions of Bern (+5.5 percent) and Lake Geneva (+5.8 percent) the price increase was lower. In the case of condominiums, prices rose the most in the southern Switzerland region, at 9.4 percent. Western Switzerland recorded the lowest price increases of 5.8 percent compared to 2020.

January 2022
Homeownership is becoming unaffordable

In the years since 1990, the home ownership rate has risen steadily. Now it is going back for the first time, writes Raiffeisen Switzerland in a report on the study ” The dream of having one’s own four walls ” by Raiffeisen Economic Research. “Real estate prices are still rising, but in the completely dry market, the extremely high prices and the high regulatory hurdles of the vast majority of Swiss are blocking the dream of their own four walls”, Martin Neff, chief economist at Raiffeisen Switzerland, is quoted there. “Only prices are booming on the home market today.”

According to the authors of the study, the rising prices are due, among other things, to the highly expansive monetary policy of the central banks. At the same time, they reject the speculation that the real estate bubble will soon burst. “The prevailing price level and the strong upward momentum can still be justified fundamentally and are not driven by speculation,” says Neff. “Even if the home market has now expanded significantly, this bubble will not burst.”

The authors of the study do not expect any relaxation in the home market in the near future. Neff therefore calls for “an open, unbiased public discussion about the future of Swiss home ownership”. According to the chief economist of Raiffeisen Switzerland, the increasing exclusion of large groups of the population from home ownership “without strong political will and the acceptance of certain systemic risks and societal costs” cannot be broken.

December 2021
Homeowners are ready to switch to renewable heating

The focus of the eleventh customer barometer renewable energies presented by Raiffeisen Switzerland is on the deployment and use of heating technologies, solar systems and electromobility. According to a media release , the survey by Raiffeisen, the University of St.Gallen and EnergieSchweiz showed that half of the homeowners surveyed are generally willing to replace their oil or gas heating with a more environmentally friendly technology.

A quarter of those surveyed have not yet thought about a replacement, according to the media release. 30 percent of those surveyed already use climate-friendly heating technologies such as heat pumps, solar thermal energy and district heating. But 28 percent still heat with oil. Around a fifth of these have already opted for a climate-friendly replacement in the next few years.

According to the Raiffeisen report, photovoltaic systems (PVA) are currently growing exponentially. 22 percent of the homeowners surveyed already have a system for generating solar power. 30 percent could imagine a purchase in the near future. This year’s study also looked at battery storage for photovoltaic systems. The main arguments for this are given as a 26 percent increase in revenue from electricity production, 23 percent a reduction in CO2 emissions and a reduction in electricity costs (22 percent).

According to the announcement, Raiffeisen relies on a holistic advisory process to increase the modernization rate. “We are convinced that long-term planning and financial preparation of the investment in the property are decisive success factors in order to carry out the optimal modernization measures at the right time,” Roland Altwegg, Head of New Business Models & Ecosystems at Raiffeisen Switzerland, is quoted as saying. And: “What is often forgotten: Environmentally friendly technologies also increase the value of a property.”

November 2021
Homes have only limited protection against inflation

Raiffeisen Switzerland has examined the connection between inflation and the development of the real estate market. In their current report “ Real Estate Switzerland ”, the bank's economists come to the conclusion that the real value of real estate is a myth. The price development over the past 50 years shows that home prices do not automatically rise with inflation rates. "Only in the very long term does the home actually protect against inflation," Raiffeisen chief economist Martin Neff is quoted in a media release.

In contrast, even the biggest economic and social crisis in recent history, the COVID-19 pandemic, could not throw the Swiss rental housing market off course. “Even if inflation were to rise sharply in this country, we can still expect falling asking rents,” said Neff. In the opinion of the authors, any rising interest rates should not harm professional real estate investors.

Raiffeisen sees an accelerated structural change in the stationary retail trade. Because "it is rather unlikely that non-food retailers or restaurateurs will scramble for space that is becoming empty after the experience of the last few months".

The Raiffeisen economists paid particular attention to the “little-screened market” for building land. Buildable land is very scarce in Switzerland. At the same time, free parcels for homes and rental apartments are in great demand in the current low interest rate environment. That has caused prices to rise by almost 70 percent since 2016. Only in tourist communities have the large building land reserves and the law on second homes led to price declines. In contrast, construction prices rose only slightly.

August 2021
Home ownership achieves new record prices

The prices for owner-occupied residential property rose to new highs at the end of 2020, informs Raiffeisen Switzerland in a report on the study “ Real Estate Switzerland Q1 / Q2 ”. Specifically, the analysts of the banking group observed an increase in the prices of single-family houses by 2.9 percent and of condominiums by 3.1 percent year-on-year. They expect home ownership prices to continue to rise this year as well. Martin Neff, chief economist at Raiffeisen Switzerland, is quoted in the press release: "For households that meet the affordability guidelines and equity requirements, the purchase of home ownership is and will remain an economically sensible decision from a purely cost perspective".

In the office space market, the pandemic has not yet led to falling prices either, the announcement further explains. "The test is still ahead of this market, because it is characterized by long-term rental agreements and changes to flexible working models do not take place overnight," says Neff. In the case of upcoming construction projects, however, “fundamental questions about the usefulness of a project and its chances in the post-Corona reality should be asked,” recommends the Raiffeisen chief economist.

In the niche market of residential communities (WG), however, the study authors identified clear traces of the pandemic. "The demand for rooms in shared apartments in this dynamically reacting market has literally collapsed, as our analysis of the data from the largest platform wgzimmer.ch shows," explains Neff. The proportion of Swiss people who share their apartment with one or more flatmates increased from 1.5 to 2.7 percent within ten years by 2018.

March 2021