Forecast for the Swiss real estate market after the Coronavirus crisis.
At the time of the Coronavirus, everyone’s worries are growing, work is done from home and companies are studying new strategies to counter the effects of this virus. Covid-19 is also affecting the housing market and expectations for 2020 may change.
In Switzerland, 2019 was a good year overall for the many real estate investors and 2020 looks set to be a less rosy year.
The Coronavirus and its consequences could impact the good market performance. However, the latest “Monitor Switzerland” report by Credit Suisse states that, fortunately, there will not be a total collapse of the real estate sector, but some consequences have to be considered.
In 2019, rates of rent lowered and the number of empty, non-rented apartments increased. At the end of the year 2019, real estate increased in value by around 3%, a point higher than the previous year (source: CIFI Swiss Property Benchmark). Last year in Switzerland, the value of residential properties grew mainly (in Ticino, however, there was a slight decline) and overall returns were satisfying investors.
As anticipated, the positive trend in Switzerland was expected to continue in 2020, both for investors and tenants. Indeed, the negative interest rates of the Swiss National Bank (SNB) had led to the massive construction of new properties and consequently to an increase in offerings. Many units remained vacant and this process caused a slight reduction in rents.
Despite the expectations for both investors and tenants, growth is closely linked to the development of the Covid-19 situation. The initial crisis caused by this new virus has changed any economic forecast, not only in the real estate sector, but also in other fields.
The Coronavirus is an extraordinary crisis.
The freedom of the individual is restricted, insecurity prevails and economic unconfidence influences decisions. This situation cannot be compared to other scenarios that have occurred in the past. For example, in 2008 the financial crisis hit several sectors hard, but the real estate field did not have such drastic consequences. In the situation in which we live today, with the stock markets in trouble, rents are paid anyway and the brick still remains the safe harbour. In practice, any losses in value should still be compensated with rental income.
Analysts point out that the Coronavirus scenario cannot be compared to the 2008 crisis, as this situation is more similar to the Spanish fever crisis of 1918. The period we are going through now also puts companies and self-employed professionals in serious difficulty, who in most cases have to remain closed. There is no guarantee that rental income will always be able to be relied on, as it will probably not flow in a stable and lasting way. In fact, in Switzerland, as in many other parts of the world, only those activities that are considered indispensable remain open; a limitation that is a cause for anxiety among citizens and especially among small and medium-sized enterprises. It is therefore probable that the lack of revenue and debt will also create a change of trend in the Swiss real estate market.
Consequences after the Coronavirus.
It is a fact that the Swiss real estate market will change and that the forecast for 2020 is less rosy than expected at the end of 2019. In the current situation there is also little good news for tenants, who could save around 2% this year compared to last year.
According to the report issued by Credit Suisse, the residential segment in Switzerland is expected to remain fairly stable thanks to the measures taken by the Federal Government. Economic losses at the domestic level should be contained, so there should also be no major mortgage instalment losses and no forced sales.
The less positive outlook is for new housing developers, as a prolonged period of restrictions could lead to liquidity problems and loss of returns.
Finally, commercial spaces, especially office spaces, could suffer a significant drop in demand. There is a general change in mindset; the majority of the population has admitted that it is possible to work as a team even in home office mode.
Jetika Group and the Coronavirus.
The Covid-19 crisis took everyone by surprise. A paradoxical event like this made us realize how fundamental people are in a company and how much the motto “one for all, all for one” makes sense today more than ever. The virus confirmed the important role that technology plays in the life of a company and how important it is to constantly improve processes, keeping up with the challenges of the market; in this case, also with those of life.
Fortunately, we have always preferred the financial well-being of the team rather than a prestigious location downtown for our offices, which saves us a lot of money on rent. This foresight now allows us to continue to invest in tailor-made IT solutions to achieve our professional goal “Excellence as Standard”. Our customers will be able to take advantage of the innovative solutions we are finalizing, thanks to the precious time available from this stand-by period.
Today it is time for Jetika to plan, to realize what up to a month ago were just projects and, over all, to convey to our customers that we are distant but nearby.