The Raiffeisen Group is the market leader in the Swiss mortgage business. Nevertheless, Roland Altwegg, Head of Products & Investment Services at Raiffeisen Switzerland, knows where there are still opportunities for growth. With finews.ch he spoke about the outlook for the real estate market.
Mr. Altwegg, how do you currently assess the mortgage market for Raiffeisen?
We grew in the mortgage business last year. We have been focusing on qualitative growth for several years now. This means that we do not close the mortgages at any price.
The Raiffeisen Group is the market leader in this business, with a market share of almost 18 percent in the first half of 2023. Is there still room for improvement?
We still have very different market penetrations depending on the region. That depends on how rooted Raiffeisen is there. The market share is high in the areas that can be described as Raiffeisen core regions.
This is not yet the case in the cities. But there are also many competitors. There are clearly opportunities regionally, but in a highly competitive market.
Key interest rates have risen at record speeds since 2022. How did customers react?
With the interest rate turnaround there was a rethink. It has been noticed that a mortgage costs significantly more money again. As interest rates began to rise, we saw a run on Saron mortgages.
In the short term, customers resorted to Saron mortgages, which were even cheaper at the time. When the bigger steps came, the interest rate effect took effect. This meant that the argument of budget security gained importance again.
“We have reached a point where buying is becoming more attractive again”
The decision whether to take out a short-term or long-term mortgage has also become more important again. There has also been a shift in the calculation of whether to rent or buy. For many years, buying was more attractive, but that has changed with the end of record low interest rates.
The signs are currently pointing to interest rate cuts again. Does this mean another change is imminent?
Interest rates are now expected to fall again, which can also be seen in the development of interest rates for fixed-rate mortgages. At the same time, rents continue to rise. We have now reached a point where buying is becoming more attractive again.
Are fixed-rate or variable-rate mortgages preferred?
It’s pretty balanced right now. Of course, that depends heavily on interest rate expectations. Anyone who is now betting on falling interest rates should opt for Saron or fixed-rate mortgages with a short term.
We usually advise our customers to stagger the terms anyway. This avoids the entire mortgage becoming due at once and allows you to compensate for any price fluctuations.
“The demand is there unbroken, but no longer at every price”
However, the high interest rates have had little effect on real estate prices. What were the reasons?
Higher interest rates have led to a slowdown in home price increases. In addition to a latent shortage of supply, the calculative affordability of 5 percent has meant that interested parties have to raise more and more of their own funds, which is not possible given the development of income. Fewer and fewer people can afford property.
This is also due to the price development over the past 10 years. This has widened the gap between the older population, who have already built up wealth, and the younger ones.
How does this affect the aftermath?
The demand is there unbroken, but no longer at every price. A decline in transactions of 25 to 30 percent has been seen. The advertisements on the real estate portals also stay up longer.
The Swiss real estate market is very stable compared to other countries. Why is that?
If we had seen interest rates in Switzerland like those in the euro countries or Great Britain, that would have had a greater impact here too. Historically, a key interest rate of 1.75 percent is not high, and with similarly high inflation it is not restrictive either.
The slowing effect on the economy is moderate. The desire for home ownership is still very strong in Switzerland. In this country, 40 percent own their own home; in the EU the average is two thirds.
What are you expecting this year?
We assume that demand will be stimulated again by falling interest rates. There are currently no developments to be identified that would have a major negative impact on the real estate market. This would require drastic events such as a massive economic downturn or severe restrictions on immigration.
“When it comes to building, I also see the state being called upon”
Especially in larger cities, living space and the supply of condominiums are very scarce. What framework conditions are needed for this to change?
Living space will remain scarce in Swiss centers such as Zurich, Basel, Bern, Lausanne and Geneva. I see building regulations and regulations as obstacles to housing construction, which often no longer correspond to current conditions.
Zoning planning is also often an obstacle. In the periphery, densification must be considered if more space is not available. When it comes to building, I also see the state being called upon, either through regulation or subsidies. This also needs to be thought about in tourist areas, where there is hardly any affordable housing available for locals.
Pressure is also growing in the periphery. Have people’s housing needs changed?
With the pandemic and the establishment of home offices, a rethink has also taken place when it comes to living. People accept a longer commute if they only have to commute two or three days a week. This means that the high demand in the larger cities radiates more strongly into the surrounding communities.
Roland Altwegg has been with Raiffeisen since 2007. He was appointed to the executive board in 2021 as head of the Products & Investment Services department. Previously, he headed the areas of new business models & ecosystems, product management, private customers and operational risk controlling. His positions in banking also include Bank Sarasin and Pictet.
What are the best investment themes in 2024?
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China stocks that have suffered massive price drops.
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Uranium stocks and mining companies.
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Blue chips from Western European countries.
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S&P500 stocks ahead of Donald Trump’s re-election.
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Bitcoin and other cryptocurrencies.
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Stocks in companies that develop artificial intelligence.
2024-02-26 09:48:17
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