Latest forecast on property market development

Article from 24.07.2020
Latest forecast on property market development
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The corona pandemic has left its mark economically worldwide. The economic forecast for the Swiss economy for 2020 presented by the federal expert group in June 2020 looked rather bleak. It predicted the worst economic downturn since 1975. This prompted the independent consulting and research company Fahrländer Partner Spatial Development (FPRE) in July to check whether these pessimistic prospects also apply to the real estate market. The company compared and evaluated the results of the FPRE real estate survey and the HEV Switzerland survey. The forecast for the real estate market is a little more optimistic, at least for the private residential property sector.

 

Condominiums and single-family houses in the index check

The corona lockdown presents the Swiss economy with the most difficult challenge since 1975. This is the result of the latest economic forecast by the federal expert group. FPRE wanted to know whether these bleak prospects also apply to the real estate sector and real estate prices. The company has been regularly launching real estate surveys among Swiss real estate experts since 2008. It compared and evaluated these results with the results of the HEV Switzerland cronogram. The price expectations indices of the two surveys show a tendency towards the development of different property segments.

Overall, the 2020 spring survey shows a backward trend in all segments compared to the 2019 autumn survey. However, there is a big difference between residential real estate and what is business and office real estate. In other words the 804 survey participants for private residential property are expecting a relatively stable price trend for 2020. According to the price expectation index, a slight downward trend can be observed in condominium prices, but according to the experts, prices for single-family houses should remain stable. A quarter of the survey participants even expect price increases in this segment. FPRE's transaction price indices confirm this assessment. For example, condominium prices rose 2.2% in the first quarter of 2020 and single-family house prices rose 2.7%.

 

No doldrums in apartment buildings

However, regional differences must be taken into account when real estate prices develop. In southern Switzerland, the expectations of real estate experts have been greatly reduced. Half a year ago, 21% of those surveyed expected an increase in the price of home ownership, compared to 6% in the spring survey. After all, 43 percent of real estate experts expect stable home prices. However, 51 percent are less optimistic and expect prices to fall. However, the proportion of respondents who anticipate price increases for home ownership has also decreased overall in the other Swiss regions.

By contrast, according to the spring survey, the experts assess the situation on the rental apartment market as stable. Although the index for apartment rents was negative at -48.2 points, it already was so before the corona pandemic. However, due to rising vacancies and an overproduction of real estate, it is expected to further slip downwards. Apartment buildings are a positive highlight. Due to the lack of alternative investment opportunities, they will remain a popular investment, the experts expect. So you can continue to expect rising prices in this property segment. Overall, the situation in the private residential sector can be described as relatively stable compared to the entire Swiss market. Stefan Fahrländer, CEO of Fahrländer Partner (FPRE) puts it very succinctly: "An escape to concrete gold will support the market".

 

Hard times for the office and commercial space market

However, the situation is very different for office and business properties. The corona pandemic has had a clearly negative impact here. While it was hoped that this property segment, which had been battered for a long time, would stabilize before the Corona crisis, real estate insiders are now seeing the future very bleakly. According to the spring survey, the price expectation index for office rents, at -95.9 points, is a whopping 62.3 points lower than in autumn 2019. The index for transaction prices of office and commercial buildings also doesn't look any more positive. At -68.0 points, it roughly reached the level experienced in the financial crisis.

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