Switzerland

Details

  • Type: Press release
  • Date: 11/13/2012

Trend towards increasing prices for commercial real estate broken 

The most important investor groups expect prices for real estate investments in the residential segment to increase slightly over the next 12 months. For commercial property, however, a trend reversal is apparent, as investors and appraises are forecasting stable prices which are falling slightly. These are the findings of the Swiss Real Estate Sentiment Index, a survey that has been published for the first time.
According to the Swiss Real Estate Sentiment Index, a survey conducted by KPMG Switzerland for the first time, sentiment on the Swiss market for investment property ranges from neutral to cautiously optimistic. The representative survey of around 190 institutional and professional investors and appraises of Swiss investment property shows moderately positive expectations to be found primarily among developers and pension funds. Professional investors are much more skeptical with regard to the future trend. One of the main reasons for this is the economic situation which respondents rate as stable to moderately negative with an index score of -38.0 points. 39% of all respondents also expect market risk to increase over the next 12 months. Nevertheless, at +35.2 index points, the expected price trend across all segments of use ranges from neutral to slightly positive.

KPMG Swiss Real Estate Sentiment Index 2012

Sentiment Index

Challenging situation in the residential segment

Suitable investment opportunities in the residential segment remain scarce. At -140.3 points, the availability index points to a distinct shortage of residential properties. The shortage is being felt most acutely by insurance companies (-164.7 points) and pension funds (-162.5 points). Despite slightly negative trends as regards price expectations for commercial use segments, a slight surplus in demand is also in evidence here, with market participants in this area virtually predicting a balanced market for the next 12 months (office: -27.6 points; retail -31.7 points; commercial/industrial: -5.0 points; special-purpose real estate: -16.3 points).

Availability index and price expectation index for the next 12 months

Availability Index

Commercial property prices heading downwards

The gap between supposedly safe residential real estate in economic centers and price expectations for real estate investments in the commercial/industrial sector is widening. All of the sub-indices for office (-58.7 points), retail (-45.5 points) and commercial space (-57.8 points) as well as for special-purpose real estate (-13.5 points) are in negative territory and reflect the feeling among market players that prices for these segments of use will trend downwards. In terms of office space, this trend is partly due to structural relocation trends as a result of an increase in new construction activity. In the residential sector, the prolonged high demand can be attributed to the demographic trend.

Continued demand for real estate generating stable earnings in Zurich and Geneva

At +79.2 points, respondents anticipate moderate price increases in central locations (‘core segment’). In Geneva and Zurich especially (+60.9 points and +66.4 points respectively), the market participants also expect moderate price rises over the next 12 months. Lausanne and Lucerne/Zug (+47.0 points and +48.1 points respectively) are similarly attractive. Basel, Berne, St. Gallen and Lugano are rated by the respondents as largely stable, with a slightly negative trend (-13.0 points) identified in St. Gallen. At -54.2 points, however, respondents are forecasting a slightly negative price trend in peripheral locations.

KPMG Real Estate Sentiment Matrix

Sentiment Index Matrix

Swiss Real Estate Sentiment Index

The Swiss Real Estate Sentiment Index serves as an indicator for the anticipated trends on the Swiss real estate investment market and shows, on a scale ranging from -200 to +200 points, the estimates of market players for the next 12 months. As the index was based on a first-time survey, it does not include any benchmarks to earlier periods.

 

The representative survey questions institutional and professional investors and appraises of Swiss investment properties. This year’s survey took place between 15 May 2012 and 15 August 2012. The index is continued on an annual basis.
 

Andreas Hammer

Andreas Hammer

Director, Head of Corporate Communications

+41 58 249 55 71

Real Estate

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