Market Commentary March 2024

The decision by the Swiss National Bank (SNB) to cut interest rates by 0.25% to 1.50% seemed largely priced into the stock prices of real estate funds. The cut now translates into more attractive conditions for short-term refinancing. It seems that further increases in the reference interest rate are likely off the table. In order to develop an action plan regarding housing shortage and tenant protection, a special session chaired by Federal Councillor Parmelin was held: Core measures include simplifications in approval procedures, strengthening of indirect housing subsidies and a reduction of the high degree of regulation, for example regarding noise protection. This is a positive signal for pending and future development projects – portfolios with land reserves and ongoing construction projects are thus likely to yield higher returns for investors. UBS predicts that due to sustained strong demand, driven by high migration balance, surplus births, and simultaneously low construction activity, price increases can be expected for residential properties. Regionally, however, price developments can vary: While lower transaction levels and consequently valuation discounts have been observed in Geneva, the Zurich market remains consistently stable. Price volatility historically tends to be higher in the Lake Geneva region – this, in turn, offers opportunities for active long-term investors. Unfortunately, current capital increases are not always launched with this intention. Several funds prefer to increase redemption fees and tap into their reserves for high dividend payouts, rather than positioning themselves for future attractive opportunities in the interest of investors. Real estate stocks such as Espace Real Estate, Plazza, Warteck, or Investis demonstrate their high level of activity in the annual reports, which should be reflected in significant excess returns in the medium to long term. The acquisition of Fundamenta by Swiss Prime Site, meanwhile, indicates that the expected market consolidation is finally gaining momentum – a healthy, necessary development.

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