Market Commentary January 2024

The turn of the year is always characterized by uncertainty and new objectives. The geopolitical situation is anything but stable, with social unrest and strikes becoming commonplace. Macro-economic data shows that inflation is highly heterogeneous, somewhat normalizing but persisting. The IMMO24 investor fair provided a preview of what the real estate industry might expect in the next 12 months. Focus areas included interest rate trends and developments, inflation, rent increases vs. tenant protection, short-term vs. long-term financing, and sustainability. In general, a further deterioration of the economic situation can be expected in the fall – increasing job cuts could already be an initial indicator of this. Central banks would be compelled to readjust interest rates downwards in this case. When and how this happens varies in expectations. MV Invest anticipates a possible return towards a near-zero interest rate level by mid-2025. The significantly more challenging international market situation is affecting individual players in the country. Turbulent times generally lead to consolidations. However, Switzerland reaffirms its robust constitution, especially in comparison to Europe. Nevertheless, valuation losses of up to 3% are expected by the end of 2023. The local real estate market, however, stands on an extremely solid foundation. Operational results paint a strong picture, with vacancies decreasing at the fastest rate in years. Stable cash flows are expected – even assumed. Consequently, future valuations should stabilize. Potential and added value are sought and created in the existing portfolio. A healthy mix of residential, commercial, and special-use properties should continue to be considered. After the partial recovery in real estate funds, some asset managers are already contemplating capital increases – which would lead to dilution.

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