immo!nvest – Die Plattform für Standorte und Immobilien

Tag: SNB

  • Reaction of the Swiss interest rate markets to global and local inflation trends

    Reaction of the Swiss interest rate markets to global and local inflation trends

    In April of this year, the inflation rate in Switzerland surprisingly rose from 1.04% to 1.37%. This increase, which is reflected in almost all sub-indices, nevertheless remains below the critical level of 2.00%. This development indicates that inflation remains manageable and does not require any drastic measures. The Swiss National Bank had already expected a moderate rise in inflation and now appears to have been confirmed that this rise will not be permanent.

    Influence of global interest rate policy on Switzerland
    The latest US inflation data has brought calm not only to international markets, but also to the Swiss interest rate markets. The positive reaction to the US data has lowered interest rate swap rates in Switzerland and indicates that a rate cut in June is almost certain. The SNB’s monetary policy decisions depend heavily on how the European Central Bank (ECB) and the Federal Reserve (Fed) adjust their interest rates. Current developments show a synchronisation of interest rate policy at a global level, which influences the Swiss franc and inflation forecasts.

    Future expectations and monetary policy forecasts
    The SNB remains committed to the possibility of lowering the key interest rate by 25 basis points, with a potential further reduction by the end of the year, depending on the actions of the ECB and the Fed. These adjustments are essential to stabilise the Swiss franc in the context of global currency dynamics and prevent excessive appreciation, which could weigh on the export economy. Despite the current inflation expectations and the weaker position of the franc, the SNB remains proactive and adaptable in its monetary policy strategy.

  • Zinsupdate Juni 2023

    Zinsupdate Juni 2023

    Nach turbulenten Zeiten im Bankensektor, die eine aussergewöhnliche Volatilität bei den Hypothekarzinsen mit sich brachten, zeigen sich die vergangenen Monate als eine relativ ruhige Periode. Inzwischen hat sich die Kurve der Hypothekarzinsen gänzlich abgeflacht, wobei die SARON-Hypothek immer noch günstiger ausfällt als eine Festhypothek. Die Hypothekarzinsen bleiben gegenüber dem jeweiligen Referenzzinssatz weiterhin hoch. Das liegt am erhöhten Risiko am Finanzmarkt und an der restriktiven Kreditvergabe der Banken.

    Entwicklung der Hypothekarzinsen
    Nach den turbulenten Zeiten im Bankensektor, die eine aussergewöhnliche Volatilität mit sich brachten, haben wir in den vergangenen Monaten eine Periode relativer Ruhe erlebt. Inzwischen hat sich die Kurve der Hypothekenzinsen gänzlich abgeflacht, wobei eine SARON-Hypothek immer noch günstiger ausfällt als eine Festhypothek. Des Weiteren bleiben die Hypothekarzinsen gegenüber dem jeweiligen Referenzzinssatz weiterhin hoch, was auf das erhöhte Risiko am Finanzmarkt und auf die restriktive Kreditvergabe der Banken zurückzuführen ist.

    Prognose SARON-Hypothek
    Wir verorten weiterhin einen Höhepunkt für den Leitzins bei 2.0% und erwarten eine weitere Erhöhung um 25 Bps in der nächsten Sitzung im September. Dies hätte zur Folge, dass eine SARON-Hypothek temporär kostspieliger als eine Festhypothek sein könnte. Zudem schliessen wir jegliche Zinssenkungen bis ins erste Quartal des kommenden Jahres aus.

    Prognose langfristige Festhypotheken
    Der Entscheid der SNB, nur um 25 Bps zu erhöhen, wirkt entgegen der marktimplizierten Entwicklung am Zinsmarkt wie auch den Erwartungen – was einen leichten Anstieg der langfristigen Zinsen zur Folge haben könnte, da der Markt auf ein energischeres Vorgehen der SNB gesetzt hatte. Dennoch dürften sich mit der abnehmenden Inflation auch die langfristigen Referenzzinssätze umkehren. Allerdings ist zu beachten, dass sich diese Entwicklung nicht zwangsläufig auf die festen Zinssätze längerfristiger Festhypotheken auswirkt, da die Risikoprämien aufgrund der wirtschaftlichen Unsicherheit höher ausfallen. Daher rechnen wir damit, dass die langfristigen Festhypothekenzinssätze auf dem derzeitigen Niveau verbleiben werden.

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    Die Sitzung hat einmal mehr verdeutlicht, dass die SNB mit stoischer Haltung ihrem Kampf gegen die Inflation nachgeht und nicht zögert, weiter an den geldpolitischen Stellschrauben zu drehen. Die Folgen der Bankenkrise lassen sich weiterhin auf dem Zinsmarkt ausmachen und manifestieren sich in hohen Margen bei Hypothekarkrediten. In dieser Situation ist es von entscheidender Bedeutung, die eigenen Optionen und Risiken genau zu kennen. Property Captain kann Ihnen dabei zur Seite stehen, eine umfassende und transparente Grundlage für Ihre Finanzierungsentscheidungen zu erstellen. Wir helfen Ihnen dabei, den Überblick zu behalten und die richtigen Entscheidungen zu treffen.

  • Assessment of the interest rate market in March by Avobis

    Assessment of the interest rate market in March by Avobis

    Fears of inflationary dynamics getting out of hand seem to be confirmed. In February, almost all nine CPI segments recorded price increases compared to the previous month. This is due to increasing prices for services and goods regardless of their origin (Figure 1). An easing of inflation is currently not in sight and with the first adjustment of the mortgage reference rate expected in June, inflation is likely to move further away from the SNB target. The market then adjusted its interest rate and inflation expectations significantly upwards, as can be seen from the strongly inverted yield curve.

    However, the problems at Silicon Valley Bank and later at Credit Suisse led to fears of a possible banking crisis, which pushed the inflation issue into the background. The concern that further interest rate steps by the central banks could cause a systemic collapse in the banking sector also led to a rethink in the Swiss interest rate market, causing market interest rates to correct sharply downwards. The takeover of Credit Suisse by UBS and the global injection of liquidity into the banking system subsequently partially alleviated fears. Ultimately, the SNB’s monetary policy decision on 23 March and its signal caused a certain disillusionment in the markets, whereupon the focus returned to the inflation problem and higher interest rate steps were thus again priced in.

    Although the swap curve at the end of the month is roughly the same as at the beginning of the month, the initial situation has changed noticeably, which is particularly evident in the higher expected interest rate volatilities at the end of the month compared to the beginning of the month.

    The impact of the banking turmoil on economic growth is uncertain. A decline in demand could dampen inflationary pressures. The impact on financing conditions is equally unclear, as banks may become more cautious and reluctant to lend. This would be similar to an interest rate hike in the fight against inflation. These effects now need to be monitored and assessed accordingly, which is why the swap curve implies only moderate interest rate steps for the next two meetings despite decoupled inflation.

    Our expectations
    Inflation in Switzerland has been decoupled from normal conditions. The Swiss franc as a monetary policy instrument to combat imported inflation is only effective to a limited extent in the fight against rising domestic inflation. Additional restrictive measures are therefore necessary. If the global financial system continues to prove robust, another 50 bps hike could be implemented at the next meeting. However, should further systemic risks emerge, a smaller rate hike or even a pause in interest rates could be considered. It is crucial to monitor the situation carefully and evaluate various scenarios comprehensively.

    Abroad
    Growing concerns about a possible banking crisis following the collapse of three regional banks in the US have prompted central banks to respond with liquidity injections. Nevertheless, a recent study suggests that the US banking system has unrealised losses of two trillion USD, which strongly questions the possibility of further interest rate hikes. Thus, while inflation remains unimpressed despite the unexpectedly rapid rise in interest rates, cracks are beginning to appear in the banking system.

    The rise in interest rates since last year has led to considerable losses in the value of mortgage-backed bonds and other virtually risk-free bonds, which make up a large part of banks’ assets. One study shows that the market value of the assets of the US banking system is two trillion USD lower than the binancial value. Combined with a high proportion of uninsured deposits at some US banks, loss realisations could threaten their stability.
    If half of the uninsured depositors were to withdraw funds, close to 190 banks would be potentially exposed to risk. This would also affect insured depositors, with potentially $300 billion of insured deposits at risk.

    Although the banking system is currently sound, there could be a lack of liquidity in the event of a bank run, leading to a cascading effect in loss realisation and ultimately jeopardising solvency. This could expose both American and other banks to a looming liquidity crisis. Therefore, the Fed, the ECB and other central banks are taking coordinated measures to strengthen liquidity.

    The market is already pricing in interest rate cuts for the Fed and only small interest rate steps for the ECB due to fears of possible systemic risks (Figures 5 and 6). The reasons for this are, on the one hand, the restrictive effect of the liquidity problem on lending and, on the other hand, the aggravation of the liquidity problem or even the emergence of systemic risks in other areas through a continued restrictive monetary policy. Both would lead to a decline in economic growth and thus a dampening effect on inflation. Thus, market-implied inflation expectations have not risen despite continued high inflation figures and falling interest rate expectations.

    Our expectations
    The current situation in the banking sector seems to have calmed down for the time being, but there is still a risk that the rapid rise in interest rates since last year could burden other areas of the financial system besides the banking sector. Therefore, we rule out further interest rate hikes for the time being. At the same time, however, we also consider interest rate cuts unlikely. Inflation is still too high and must be fought with a restrictive monetary policy. Moreover, besides the key interest rate, central banks have a wide range of instruments at their disposal to deal with problems such as liquidity difficulties. For these reasons, we expect the Fed to pause on interest rates at its next meeting and to keep a close eye on the situation surrounding the banks and the inflation trend in the coming months. For the ECB, on the other hand, we expect a rate hike of at least 25 bps due to the devastating inflation trend.

  • Price correction in Swiss real estate is gaining momentum

    Price correction in Swiss real estate is gaining momentum

    Current interest rate situation in Switzerland
    After more than seven years, the Swiss Confederation wants to end the period of low interest rates on September 21st. An increase of half a percentage point to 0.25 is planned. In scenarios that assume further inflation, a 0.75 percent increase to 0.5 percent is planned.

    As early as mid-June, the SNB raised interest rates by half a percentage point to minus 0.25 percent as a first step. The Governing Board weighted the dangers of an uncontrollable fall in prices more than that of a weakening of the export economy. SNB President Thomas Jordan stated: “The price stability goal is absolutely central to us.”

    Real estate prices have plummeted in some cases
    What promises relaxation from an economic point of view is being observed critically by real estate buyers. Because even before the National Bank’s decision, the interest rates for fixed-rate mortgages had risen, in some cases significantly. At the same time, real estate prices fell in certain regions.

    For example, the residential real estate price index of the Federal Statistical Office shows that the value of real estate fell by 0.4 percent in the first quarter of 2022, but partially recovered in the second quarter. There were sometimes significant differences depending on the region and type of property. Owners of smaller single-family homes in smaller towns such as Glarus, Davos or Langenthal were hardest hit. Here the discounts were recently 4.2 percent, in rural regions such as Dissentis and Maggia 1.7 percent and in larger cities such as Winterthur, St. Gallen and Lugano 1.4 percent. Losses in condominiums were even greater. Losses of 3.3 percent were recorded in medium-sized cities and 3.2 percent in rural areas.

    Consequences of the development for real estate buyers and owners
    Due to falling prices, there are already regionally noticeable declines in demand, with places in less good locations being particularly affected. For a long time it was also possible to achieve high prices here with relatively little (marketing) effort. That should change now. The following scenarios are particularly conceivable.

    developments on the buyer side
    As interest rates rise, loans also become more expensive. This increases the monthly burden for all those who use financing to buy real estate. Two problems arise from this.

    First of all, it will no longer be possible for everyone who wants to buy to get financing because they cannot bear the monthly burden. Accordingly, the demand will decrease. While this is not currently a problem due to the excess demand, it could become one if follow-up financing expires in 10 to 15 years and not all buyers can afford further financing at less favorable conditions.

    The second problem is closely related to the first. If follow-up financing can no longer be served and properties have to be sold, more properties come onto the market, which meet falling demand due to higher prices. At the same time, there is a risk for the banks that they will no longer be able to sell mortgaged real estate at the intended price if follow-up financing fails.

    Developments on the owner side
    If demand falls as a result of prospectively rising interest rates, this also becomes a problem for all those who bought the property to maintain the value of their assets. If prices go down, you can get less for them. In that case, the value of the assets protected against currency depreciation is lost elsewhere.

    More houses will come onto the market in the future
    Around half of all homes in Switzerland are owned by pensioners . Many of these houses will come onto the market in the next few years. “Credit Suisse evaluated the data exclusively for Blick. These are impressive: Spread over the next 23 years, a total of over 419,000 homes will become vacant because pensioners move out or die inside. The number of houses that come onto the market in this way will increase every year from now on. If there are still 3,500 houses in 2023, according to CS calculations, there will be over 40,000 homes by 2045.”

    Recommendations for buyers The most important thing for buyers and owners is not to panic. A look at the development of interest rates over the past ten years makes it clear that many financing deals were still concluded at 3.2 to 4.0 percent. Moderate interest rate increases are currently not a problem for these people. They can continue to make their interest and principal payments. Problems are to be expected here at best in the course of an economic slump with sharply rising unemployment figures. But here, too, a stable picture emerges. Between 2011 and 2021, the rate was constant between 4.4 and 5.1%.

    The most important tip is to secure the interest rates, which are still low in a long-term comparison, for as long as possible. Above all, this includes the need to take care of follow-up financing as soon as possible. Here, for example, forward loans can be used. However, interest premiums should be taken into account here in order not to incur additional long-term costs.

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  • Swap interest rates rise

    Swap interest rates rise

    The yield curve for swap transactions is currently undergoing a non-parallel shift. Since the last decision on June 16, the curve has flattened, with sub-year rates staying high and longer-term rates falling. This decline speaks to the credibility of monetary policy that it will be successful in its efforts to maintain price stability over the long term. For medium-term maturities in particular, this decline reflects the market attitude: the SNB is not tightening the interest rate screw as much as previously expected for this venture. Although the maturities during the year signal an imminent increase in key interest rates, the size of the step will depend on future inflation data and currently leaves a lot of leeway for their estimation. The scenario of a 75bps rate hike, similar to the Fed, would not be inconceivable with surprisingly high inflation numbers.

    In any case, the end of negative interest rates is imminent. The prices for fixed-rate mortgages have become cheaper since the last decision by the SNB, but money market mortgages will also be affected in the future and will most likely become more expensive.

    Positive signs in the interest rate market
    The interest rate market has reacted positively to the monetary policy strategy in the past few weeks, thus underpinning the SNB's credibility in being able to guarantee price stability in the long term. Even if long-term interest rates have fallen and the strong domestic currency is likely to have a positive impact on inflation in the coming months, further increases are essential for successful monetary policy. However, it's over

    From today's perspective, it is very difficult to quantify the next rate hike, although we consider all scenarios from 25 to 75 bps to be extremely likely. Therefore, we will be closely monitoring the upcoming inflation numbers and the swap market to inform the next decision.

    Fed decision
    At its meetings on July 26th and 27th, the Federal Open Market Committee decided to raise the key interest rate again by 75%. The return to neutral monetary policy has so far resulted in the desired slowdown in macroeconomic activity to counteract the imbalance between supply and demand. Although inflation still appears to be rising unchecked, the Fed's monetary policy – thanks to the high pace of tightening in recent months –

    gained more credibility. This is supported, among other things, by the decline in bond yields and break-even inflation rates. In addition, the latest decision was in line with market expectations, which are currently pricing in another tightening of at least 50bps for the next meeting in September – along with the Fed's comments. It is now important to monitor inflation developments closely in the coming weeks.

    The ECB completed the exit from negative interest rates on July 21st and hiked rates by 50 instead of 25 bps. The strong fall in the value of the euro since the beginning of the year was of particular relevance to the decision, as this increases the imported inflationary pressure. Further interest rate adjustments could increase the attractiveness of the European currency and counteract inflation through exchange rate appreciation, at least in the short term. Furthermore, the Governing Council approved a new instrument called the Transmission Protection Mechanism (TPM) to measure the spread of bond yields between different member states

    to ensure the efficient transmission of monetary policy signals to all euro area countries.

    Will interest rate hikes pick up again in September?
    If there is no sign of a slowdown in inflation by September, we expect the Fed to hike rates by at least 50bps a third time. In any case, it is important to understand that due to the short succession of large rate hikes, the effectiveness of monetary policy is unlikely to be immediate and it will take some time for the economy to fully respond. We therefore think that stagnation or even a fall in prices is to be expected and that so-called peak inflation will soon be reached. Due to the development of the euro exchange rate and the significantly high inflation figures, we clearly expect further interest rate hikes from the ECB. In view of the interest rate moves by the Fed and also the SNB, we currently expect at least a 50bps adjustment for the September meeting.

  • Tangible assets become indispensable

    Tangible assets become indispensable

    Many are still talking about whether she’s coming – but she’s already here. The turnaround in interest rates has also reached Switzerland. The word turning sounds a bit bigger than what actually happened. It is simply a matter of a change of sign: For the first time in many years, the yields on medium- and long-term Swiss franc bonds are again nominally in positive territory. The same trend can be observed in the euro area and spreads in the peripheral countries are also widening.

    Is the real estate boom coming to an end?
     The reason for the nervousness on the interest rate markets is quickly found. Inflation is rising on both sides of the Atlantic – and now so fast that the US Federal Reserve is now clearly tightening the reins. That’s why everyone is now staring at the European Central Bank (ECB): Will it follow the USA and thus also burden the local economy with higher capital costs? And what would that mean for the Swiss National Bank (SNB)? Are we threatened with an end to the good economic environment and the long-standing real estate and material asset boom?

    Neither nor. Because the situation in Europe is fundamentally different than in the USA. First of all, real interest rates and, in some cases, nominal interest rates have been negative in the euro area and in Switzerland for years. This has never happened in the USA. Negative interest rates, such as those demanded by the ECB and the SNB for deposits for many years, are also unknown in the USA. Just like the negative interest rates for larger sight deposits that are now common here from commercial banks. Second, growth in Europe is structurally weaker than in the US. The American gross domestic product grew by 5.7% last year and even increased by 6.9% in the fourth quarter. This even puts inflation into perspective, which at 7.5% recently reached its highest level in 40 years. Employment in the USA has risen sharply and unemployment is falling. And at the same time, after two years of the pandemic, US citizens are sitting on a lot of money. All of this enables the Fed to fight inflation vigorously.

    Slow rate hikes
     The ECB, on the other hand, is stuck at low interest rates. Even if it did so to curb inflation, there’s no way it can raise rates as quickly and decisively as the Fed. Because the large amount of cheap money that they pumped into the market over the past ten years has increased the debt burden of the EU countries so massively that the central bank not only chokes off the upswing with a rise in interest rates, but also gives their own member states the air to breathe would take. Even the triple-A nation Germany is now stuck in the interest rate trap.

    As a result, the hands of the SNB are largely tied. On the one hand, the franc is stronger against the euro than it has been since January 2015. On the other hand, inflation in Switzerland is currently contained. The economic research center Kof expects consumer prices to rise by 2.0% in 2022 and by 1.3% in 2023. Rising energy costs are having less of an impact on the Swiss economy than the economic areas of the USA and the euro zone, and the strong currency generally has a price-inhibiting effect. If the SNB does not want to take the risk of an even stronger currency, it will have to wait for the ECB’s first interest rate hikes before it can move its key interest rates closer to zero.

    In other words, the monetary policy turnaround is here. But in Europe, including Switzerland, we do it in slow motion. The ECB will scale back its bond-buying programs; it doesn’t have the leeway for large rate hikes. The ECB must and will let inflation run its course for a while. The SNB is unlikely to be under pressure as inflation will remain moderate. It will proceed cautiously with regard to rate hikes.

    Tangible assets remain trumps
     In such an environment, investors are dependent on real assets, the only investments that offer them protection against inflation and prospects for returns. Investments in real estate and other tangible assets are therefore becoming indispensable, and because investment pressure is increasing, prices in the segment are also continuing to rise. What we are witnessing here is not bubble formation. Normal market forces are at work here. Anyone who fears a bubble in the USA can also relax: There, the yield levels for most asset classes – especially on the real estate markets – are structurally higher than in the euro area. This in turn acts as a buffer against rising capital costs. If the Fed is now planning to return to interest rate normality, this is no cause for concern, but rather proof of economic strength.

    We are a long way from that in Europe and in Switzerland. Instead, we must brace ourselves for a phase of persistently low real interest rates. In this environment, which penalizes holding cash and investments that pay nominal interest, equities, real estate and commodities continue to promise the greatest success. Against this background, securities of globally active real estate companies continue to show good prospects. In Switzerland, the real estate market has moved up sharply in terms of prices in recent years. From an economic perspective, however, there is little reason why prices should fall as long as negative real interest rates persist.