SGKB REAL ESTATE FORUM
Homeowners and tenants are hoping for lower interest rates – but this hope will not be fulfilled in 2024, says SGKB investment boss Thomas Stucki
The interest rate turnaround is coming – but not this year, confirmed Thomas Stucki from SGKB at the bank’s real estate forum in the Olma Hall. The trends on the housing market continue like last year – just a little slower in eastern Switzerland.
Thomas Stucki, Chief Investment Officer of SGKB, explains why he does not expect any interest rate cuts this year.
Image: PD
This year interest rates are falling again. At least these are the signals from the financial markets. The markets have a point, says Thomas Stucki, Chief Investment Officer of St.Galler Kantonalbank. «I am also convinced that the trend reversal is coming. The question is when and where,” he said at the bank’s real estate forum. And in Switzerland interest rates will not fall until 2025, he confirmed.
Because the National Bank still has no reason to lower interest rates. Inflation appears to have been defeated, says Stucki. “But only imported goods have become cheaper.” However, inflation for domestic goods is still around two percent, “too high for the SNB”. Stucki believes that a certain economic slowdown is noticeable. However, companies continue to assess the business situation positively and the labor market remains tight.
The only argument for a quick interest rate turnaround is that the SNB always designs its interest rate policy with the US Fed and the ECB in mind. And Stucki believes that they will actually lower their interest rates this year. Interest rates there are currently quite high: the Fed’s key interest rates are above five percent, and the ECB’s are at 4.5 percent, which is particularly felt by the construction industry. “In Switzerland, interest rates are still low by historical standards.” If the SNB were to cut interest rates soon, there would be hardly any scope left for monetary policy if it were really necessary.
Rents are also driving up inflation
Patrick Schnorf, board member of the real estate consulting firm Wüest Partner, does not entirely agree. He does share some of Stucki’s observations. Nevertheless, he believes a slight interest rate cut is likely in 2024. “The National Bank is also monitoring the housing market,” he points out in the discussion with Stucki. And rents have risen sharply in recent months, which is fueling inflation. With a slight interest rate cut, the SNB could curb rent inflation somewhat.
Because, at least across Switzerland, there are no signs of a turnaround, as Schnorf explained in his presentation. The population continues to grow, the construction of new rental apartments is lagging behind the supply, and rents are rising. Which in turn leads to an apparent decline in demand. “Tenants prefer to stay in their apartment because they fear they will have to pay significantly more rent if they move.” At the same time, prices for residential property are growing less quickly: prices for condominiums were 1.9 percent higher, and those for single-family homes were 0.6 percent higher than in autumn 2022.
Everything isn’t as bad in eastern Switzerland
Patrick Schnorf, Wüest Partner.
Bild: Alex Spichale/AGR
In eastern Switzerland, however, demand for residential property continues to be strong and supply is low. Despite the higher interest rates, the prices for condominiums in the canton of St.Gallen rose by 4.3 percent over the last year, and those for single-family homes by 4.1 percent. Home ownership is still cheaper in eastern Switzerland than in the major centers. However, prices are catching up. On the map of average prices in recent years, Schnorf points out, it looks as if the greater Zurich area is expanding in all directions.
At the same time, rents in eastern Switzerland are rising more moderately than the national average. And significantly less quickly than in the large centers. This doesn’t just have to do with the more moderate population growth. There is also more construction going on here. “Especially in the Rhine Valley you still seem to be able to build,” says Schnorf.
New building law: Depending on the municipality
The largest construction project in the canton is currently the “Rheincity” in Buchs. Over 200 apartments are to be built here. The driver of the project is Mettler2Invest, whose CEO Peter Mettler then discussed the new planning and building law in the canton of St.Gallen with spatial planner Armin Meier (Raum.manufaktur). The instrument of special use plans in particular offers many opportunities, said Mettler.
This means that the advantages of the new law can already be used today: utilization rates and floor limits should be lifted in order to limit internal density. The municipalities still have to incorporate the new rules into their own local planning before they have an impact – and only very few municipalities have already completed this process, Meier makes clear. And rejects the prospect of high-rise buildings next to farmhouses: “Despite the relief, most communities will try to limit the density,” he says. “If not about the number of floors, then about the height of the building.”
Peter Mettler (center) in conversation with Armin Meier (right) and presenter Mark Dittli.
Image: PD
One thing is clear: Despite the planned simplifications, the construction process is likely to take too long even under the new PBG, at least from the investors’ perspective. Individuals could delay construction projects for years with objections, says Mettler. “An economic nonsense.” However, the new law does not limit these options for complaint. Armin Meier therefore advises developers to approach neighbors and authorities as early as possible. “The registered letter with the building application must not be the first contact.”