The real estate market in Switzerland has been characterized for some time by the low interest rate phase, which prevails in all western countries.
Institutional and private investors therefore have virtually no investment opportunities in the traditional markets for fixed-income securities with the required return on their investment without taking significant risks. For larger-scale bank accounts, in part, there is also a negative interest. The stock exchanges are currently considered "nervous" and bear considerable risks, mainly due to the global political upheavals. For these reasons, pension funds, family offices and wealthy private individuals in Switzerland are increasingly investing in real estate, because fundamentally low, but sustainable, returns are expected here.
Due to these circumstances, over which we have no influence at all, the real estate market in Switzerland, especially in terms of residential properties, is currently overheating. In some cases, residential real estate is traded at prices that can no longer be traced economically. Only speculation on even higher prices can justify the current level of transactions, something we distance ourselves from.
Irrespective of the fact that the aforementioned low-interest phase could last even longer, it should be noted that the high house prices have an impact on rents and that in the future political resistance to rent increases is to be expected.
Moreover, in the recent past, when examining two major investments - some of which have already been announced - which were already pre-contracted, it has been shown that the current price expectations of the seller side can no longer be reconciled with reasonable economic expectations, so that in both cases the due diligence check had to be discontinued due to the price expectations of the sellers. It should be noted that in both cases the potential sellers have not yet been able to sell their real estate packages, which we had been offered to buy and which we subjected to intensive scrutiny.
For these reasons, we are currently holding back (as of 07/2019) with investments rather and take the time to optimize our property portfolio to eliminate existing vacancies and to exploit opportunities for expansion through conversions.