The Swiss real estate market will not be brought to its knees by the coronavirus crisis. But he will face bodily harm. In particular, developers of new construction and luxury real estate are likely to suffer the most, Credit Suisse (CS) said in its latest study “Monitor Switzerland”, released on Tuesday.
Fears of an impending real estate crisis are unjustified. After all, the housing market, more specifically, is firmly entrenched.
Thanks to emergency aid approved by the Federal Council, the loss of income of Swiss households should be significantly reduced, write forecasters of the number two Swiss bank. They expect neither a significant default on monthly mortgage payments, nor a multiplication of emergency sales.
Anyone who dreams of owning their own home is unlikely to find it cheaper due to the Coronavirus crisis, according to the CS study. Because even in the long run, the low level of interest rates supports real estate prices. At the same time, construction activity is showing a decline, which is why supply is barely maintained.
Developers and luxury suffer
However, it is clear that the Swiss real estate market will not emerge entirely unscathed from the crisis. According to the SC, developers of condominiums will suffer particularly.
If the current crisis were to continue, the sale of new residential units will collapse substantially and create liquidity problems for developers.
But when the crisis is over, the residential property market is expected to recover relatively quickly – with the exception of the luxury segment. The sharp correction in the capital markets is unlikely to fade again so quickly, the CS said.
New rents drop
In addition, the new rental objects announced should see their rent fall by 1.5 to 2% this year. In fact, economic uncertainty is slowing demand and with the closing of borders, immigration is falling. As a result, the number of vacant objects will take the elevator somewhat.
On the other hand, the setbacks for commercial spaces will be greater. Credit Suisse economists predict a series of insolvencies, business closings and “healthy settlements” in the stationary retail trade and the hotel market in particular. These two sectors are considered to be weakened in any case due to a difficult structural change.
Recession is inevitable
Credit Suisse expects a brief recession in Switzerland for the current year, described as “inevitable.” They confirm their forecasts released last week of a 0.5% drop in gross domestic product (GDP). Previously they had estimated growth at 1.0%.
This exceptional situation should not extend beyond mid-May and gradually relax thereafter. With this scenario we will see a sharp acceleration in growth at the end of the year and an overshoot of forecasts in 2021.
Consequently, Swiss GDP should come out with a 2.0% increase in 2021, unless the pandemic is to last longer than expected, in which case growth would weaken over a longer period, conclude the study’s authors.
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