In contrast with other publicly listed competitors, Swiss Estates AG is concentrated solely on residential buildings in Switzerland. Compared with other real estate funds, there are advantages that result primarily from flexibility in the area of refinancing and asset management. SE Swiss Estates AG intends to grow sustainably in the coming years. A portfolio of income properties amounting to a total of CHF 200+ million is desired before the end of financial year 2016. The target proprietary capital return is 6 – 8 percent. (1)
According to the publication "HEV Real Estate Survey 2013/14" (Swiss Home Owners' Association), the majority of real estate experts expect increasing prices for multi-family homes. The expected price increases are nevertheless clearly below those of previous years. In the case of single-family homes, 53 percent of experts expect unchanged prices, 33 percent expect increasing prices. In the case of multi-family homes, 53 percent expect unchanged and 42 percent expect increasing prices in 2014. In the previous year, these values were still at 36 percent and 60 percent. This is a sign that price growth is also beginning to weaken for multi-family homes. If the expectations of the majority of real estate experts are correct, then the prices for multi-family houses will stabilise at a comparably high level or possibly even continue rise. Specifically, this means that multi-family homes in the greater Zurich area and in other urban areas of German-speaking Switzerland have been sold for gross income clearly below fiver percent, in the city of Zurich clearly below this in some cases; in rural areas, slightly above this mark. We conclude from this that a direct purchase of multi-family homes at current market prices is no longer interesting from a commercial perspective.
Due to existing framework conditions within the Swiss real estate market, we recommend moving away from current acquisition models or waiting from a counteractive cyclical development, which should accompany increasing interest rates, before multi-family homes are able to be acquired again, lucrative exceptions notwithstanding. As in the current case of the property at Badenerstrasse 294 in Zurich, it seems more interesting to us at the moment to pursue repurposing of existing buildings that have previously had a commercial character for residential real estate, since commercial properties, even in some very interesting locations, are still able to be acquired at very interesting prices.
Furthermore, optimisations, renovations, and extensions of buildings currently held in the portfolio are being planned. Provided this will increase profits and market values and long-term rental seems realistic, we will implement projects of this kind.