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Swiss Issues Real Estate Real Estate Market 2012 Structures and Prospects
Published by Martin Neff, Head Credit Suisse Economic Research Uetlibergstrasse 231, CH-8070 Zurich Contact email@example.com Phone +41 (0)44 334 74 19 Authors Denise Fries Fredy Hasenmaile Philippe Kaufmann Dr. Christian Kraft Martin Neff Thomas Rieder Stefan Roggo Thomas Rühl Jonas Stoll Contribution Viktor Holdener Printing Stämpfli Publikationen AG, Wölflistrasse 1, CH-3001 Berne Cover picture Swissporarena and Hochzwei, Lucerne (Architects: Marques AG & Iwan Bühler GmbH, community of architects, Lucerne) Photographer: Philippe Kaufmann, Zurich Copy deadline 6 February 2012 Orders Directly from your relationship manager or from any branch of Credit Suisse Individual copies can be ordered via EBIC, fax +41 (0)44 333 37 44 or by sending an e-mail to firstname.lastname@example.org Internal orders via MyShop quoting Mat. no. 1511454 Subscriptions quoting Publicode ISE (HOST: WR10) Visit our website at www.credit-suisse.com/immobilienstudie
This document was issued by the Economic Research department of Credit Suisse and is not the result of our/a financial analysis. The document is not subject to the "Directives on the Independence of Financial Research" issued by the Swiss Bankers Association. This publication is for information purposes only. The opinions expressed in this document are those of Credit Suisse’s Economic Research at the time of going to press (subject to change). The publication may be quoted providing the source is indicated. Copyright © 2012 Credit Suisse Group AG and/or its affiliates. All rights reserved.
Table of Contents
Management Summary Residential Property Demand Supply Market Outcome Outlook 2012 Serviced Living Real Estate in the Age of Internet und Social Media Office Property Demand Supply Market Outcome The Five Largest Office Property Markets in Detail Zurich Geneva Berne Basel Lausanne Outlook 2012 Retail Property Demand Supply Market Outcome Outlook 2012 Specialty Stores Real Estate as an Investment Indirect Real Estate Investments Direct Real Estate Investments Outlook 2012 Healthcare Real Estate Cantonal Real Estate Markets in Summary
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24 24 26 29 29 30 32 34 36 38 40 41 41 44 47 49 50 53 53 58 61 63 67
Swiss Issues Real Estate – Real Estate Market 2012
Yet this stable performance has increasingly shifted the Swiss real estate market into the focus of private and institutional investors so that overheating and an investment crisis are now the dominant issues. as only where the opportunity costs to the user exceed the cost of the service does the decision to buy in these services make economic sense. For years. Cost is therefore a key factor. At first glance. there have been warnings of a bubble and many fear that history might repeat itself. Yet the reality is not quite so simple. Residential Property Page 7 Persistent Demand Pressure The effect of interest rates on the housing market is causing price distortions which are increasingly growing at two distinct rates. The result will be increasing vacancy rates in the rental sector and continued price rises in residential property offered for sale. this smooth performance appears likely to continue as fundamental data for the real estate market have changed little over the course of the year. Both forms of people-technology interaction can be exploited by real estate markets. The increasing demands of the world of work as well as the shift in family structures have created the potential for additional services of all sorts. Actors on the real estate market could therefore be tempted to underestimate the impact of these Web-based new technologies. The trend is exacerbated by the fact that the expansion of supply. We hope to make our contribution to this more rounded approach with this study. for one because they make all sorts of information ubiquitously available. other areas face problems in placing rental properties. As things currently stand. in particular new-build and upscale properties. For this reason. given the extraordinary variation in real estate types. and care must be taken not to base judgment on single factors. Real Estate in the Age of Web-based Technologies Real estate and real estate markets have existed for thousands of years without the Internet and social media. Risks are already apparent today. Abnormally low interest rates. is increasingly focused on rented housing. Discussion topic: Serviced living Page 19 Discussion topic: Internet and social media Page 21 Swiss Issues Real Estate – Real Estate Market 2012 4 . Despite marked capital market and cyclical turbulence. signal disruption over the medium-term. the focus has moved to the newly developed solutions in the field of augmented and virtual reality. restricting the supply and so causing a worrying increase in property prices. is the key to greater client profitability regardless of the sector. selling additional products to clients. This does not mean that other services cannot expect to have a rosy future. i. its has slowly but surely seen steady improvements in performance. On the demand side. Close monitoring of individual markets is therefore all the more important. but rather as a result of a overheating of demand. this trend is likely to continue throughout the year as fundamental data remain unchanged. but do harbor reputational risks. driven by the increasing focus of institutional investors on property. Whilst one area experiences a run on condominiums like it has never seen before. though not in 2012. which have already begun to distort the market. and fate generally writes a new script. Thanks to the low share of speculative real estate sales though. In a high-salary country like Switzerland. property prices are not increasing as a result of a speculative price bubble. these risks remain within limits. the relevant target group here is primarily comprised of high-income generating individuals. Innovative.Economic Research Management Summary The Swiss real estate market has been left practically untouched by the crises and economic setbacks of recent years. which up to now have prevented the creation of large Web communities. Yet the virtual revolution – as the current age will be remembered in history – also has an impact on the world of real estate. Social media are playing an increasingly important role in marketing. Falling demand and sharp rises in interest rates are much-feared triggers that could bring about a possible price correction. services such as a concierge can only be provided in exceptional cases. and only find relief in the persistently high rate of immigration. However. especially as the services on offer are so work intensive. but Economically Ambitious Cross selling.e. yet they are different than those experienced by Switzerland in the nineties or by the US more recently. Serviced living is an adaptation of this principle for residential lettings whilst at the same time being a rare innovation in this area of business. but they do need to be standardized and automated so that the work factor is minimized. and for another because they can provide an impression of spaces which have yet to be built.
Driven by architecturaland engineering practices as well as IT companies. Yet the volume of new projects approved for construction increased dramatically in 2011 and is triggering alarm bells. Increasingly. many small companies in growth sectors are likely to welcome the attractive. with most planning to expand their floor space. A Time of Investment Pressure Swiss real estate investments have been virtually a bonanza for investors over recent years. Therefore. These changes provide an insight into overall Swiss trends and developments. the data speak a different language. Different Situation in the Markets of Western Switzerland The five largest office property markets cover over 40% of all office space in Switzerland. Still. This consolidation has contributed to stability in the market for retail property which up to now has been expressed in constant vacancy rates and falling supply ratios. There is hardly any medium-sized or large urban center that does not have a market like this close by. A closer look reveals there are indeed several large projects ready to be launched in the major German-speaking urban centers and their agglomerations.Economic Research Office property Page 24 The Calm before the Storm? The Swiss market for office property remains stable in 2012. Only the falling trend in rental prices does not seem to quite fit the picture here. The coverage of specialist market centers in Switzerland is already well advanced. there are currently 38 specialist market centers in Switzerland. This is also confirmed by the low number of major project approvals. Excessive floor area expansion can be viewed as complete. yet on closer inspection. particularly in light of the fact that no employment surplus has built up in the recent past which is now ready to be reduced. the risk of vacancies should not be overstated. Uninterrupted Growth of Specialty Stores In contrast to shopping centers. and corporate service providers. In particular office property markets in German-speaking Switzerland are being shaped by the decisions of large companies to leave urban centers and move to well-connected yet cheaper to extended or outer business districts. we see that this largely applies to smaller retail outlets which appear to be the losers in the wake of general structural change. These forerunners are then often spontaneously joined by a similar mix of other specialist retailers. akin to striking gold in a gold rush. it is likely that the growth in demand will continue just as unspectacularly in 2012 despite the looming economic slowdown. the structural transformation is likely to be accompanied by a certain amount of pricing pressure at the corresponding city center locations. vacant office space in 2012 in the urban centers. Real estate markets have been buoyed by record-low interest rates. the prevalent topics in both Western Swiss office property markets are now low vacancy rates and limited floor space growth. Although retailers continue to look to the future with optimism. In total. as well as prices for direct and indirect real estate investments. just as important are also the shifts within the individual office property markets and their various business districts. Their common feature is primarily their gradual concentration in areas with particularly good transport links. in particular because these projects are designed as new locations for larger companies. Demand in 2011 grew moderately. with a slight tendency towards oversupply. Cluster benefits and not only the advantages of sharing a well-connected location are obvious reasons for this trend. and extraordinarily high immigration rates. so that the actual cause of the retail sector's woes is primarily shopping tourism. These will test the local markets. Yet the position of consumers appears better than their mood. but at a constant rate. Nevertheless. House prices. which have resulted in the highest prices in Switzerland. we are also seeing a convergence between specialist market centers and shopping centers. and this most strongly in the border regions. Specialist market centers are springing up across the country. which will see no new openings this year. In particular. handsome economic growth by European standards. Caution the Watchword for the Market Retail sees itself confronted with difficult conditions: consumer sentiment has deteriorated and a persistently strong Swiss franc has pushed nominal sales through the floor. not only are the overall trends in these markets interesting. In most locations. Nevertheless. their proximity to classic shopping centers is also striking. Anchor tenants generally recruited from the same few trading sectors such as furniture & furnishings or DIY & hobby. have risen The five largest office property markets in detail Page 29 Retail property Page 41 Discussion topic: Specialty stores Page 50 Real estate as an investment Page 53 Swiss Issues Real Estate – Real Estate Market 2012 5 . specialist markets are experiencing uninterrupted growth. which will free up a corresponding amount of office space in core inner-city areas.
New hospital financing rules offer a number of opportunities to tap into an opening area of real estate with quantifiable risks. despite pressure to invest. risks have still risen slightly over the space of a year. having failed to attract investors. mostly residential and office properties. special purpose real estate is often left languishing in its niche. to which it is intrinsically bound. Regional focus Page 67 Swiss Issues Real Estate – Real Estate Market 2012 6 . and the investment risks are manageable. Are these heights now alarming for real estate investors? In principle no. Swiss real estate investments have paid stable and high dividends. in particular for direct investments. The regional section of this study therefore looks at how specific regional factors influence the structure and development of local real estate markets. By contrast. or the complicated regulatory and legal framework in the case of the education and healthcare sectors. National trends such as immigration and their general effects on the Swiss real estate market can have a very different impact in the regional sub-markets. private and institutional investors have piled into classic investment properties. which have partially offset the potential risk of loss to capital employed. Its defining feature is that it cannot be moved from place to place. supply and demand can be easily monitored.Economic Research sharply. albeit not always smoothly. Though if the basic conditions change. Discussion topic: Healthcare real estate Page 63 The Latent Potential of Healthcare Real Estate Given the lack of alternatives. Location. and the drop height rises. whether due to poor market prospects in the case of the hospitality industry. the affected special real estate segment should be reassessed. Also. as low interest rates are the fundamental cause of such a trend. as is currently the case with the introduction of new hospital financing rules. the regional section allows private and professional investors to compare regional markets and to discover how Switzerland's cantons differ in their core features in an informative double-page outline. thus has a significant influence on its use and value. Nevertheless. Investors have the advantage of experience with such mainstream real estate. Cantonal Real Estate Markets in Summary Real estate is a special asset. Like a real estate manual.
Since 2006. the cost of single family homes has become unaffordable so that demand has been necessarily refocused on condominiums. property prices are not increasing as a result of a speculative price bubble. Baublatt. other areas face problems in placing rental properties.50% 30% . Given the increased interest from institutional investors in investment properties. restricting the supply and so causing a worrying increase in property prices. Compared to the year 2000. when the last official figures were taken. Figure 1 Preference for Home Ownership Estimated share of home ownership in growth of housing stock 2000-2011 as well as the split SFD/Condo Share of owner-occupied property in housing stock growth 90% . in particular new-build and upscale properties. the condominium was preferred over a single family home in six out of ten cases. demand is dominated by a desire to buy (figure 1). The current trend is likely to continue through this year as fundamental data will not change.60% 40% . Outside the centers. Demand Residential property increasing The demand for housing has for some years been shaped by a more pronounced interest in home ownership.80% 60% . Geostat Swiss Issues Real Estate – Real Estate Market 2012 7 .70% 50% .30% Growth shares in owner-occupied segment Condominiums Single-family dwellings Source: Credit Suisse Economic Research.Economic Research Residential Property The effects of interest rates on the housing market are causing price distortions which are increasingly growing at two distinct rates. Whilst one area experiences a run on condominiums like it has never seen before.90% 70% . though not in 2012. This will be expressed in increasing vacancy rates in the rental sector and continued price rises in residential property offered for sale. where residential lettings business still holds sway. around 40% of today's households own their homes. In central residential areas in particular. these problems are only compounded by the fact that supply is currently focused on residential lettings.40% 20% . but rather as a result of a overheating of demand. Thanks to the low share of speculative real estate sales. or in areas which enjoy good public transport links. Falling demand and strong interest rate rises are the triggers of a possible price correction. this corresponds to an increase of more than 280'000 owner-occupied homes (Ratio 2000: 34. and only find relief in the persistently high rate of immigration.100% 80% . The preference for condominiums has risen steadily.6%). According to our estimates.
Figure 2 Affordability of Home Ownership Current mortgage costs on conclusion of a 5-year fix mortgage plus maintenance in % of average household income Homeowners have lower housing costs than tenants 80% 70% 60% 50% 40% 30% 20% 10% 0% SFD: HAI (Composite) Switzerland Condo: HAI (Composite) Switzerland Golden rule of financing Rent: HAI (Composite) Switzerland 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Credit Suisse Economic Research Demand for residential property will remain high in 2012 Last year. Thanks to low inflation and the positive employment trend. the budget impact of an average rental apartment with 4. which we calculate both for condominiums as well as for single family dwellings (figure 2).5 rooms is close to the long-term average and currently above that for the two forms of home ownership. Also obvious is the displacement of many rental tenants from Lake Geneva towards Greyerzerland. Today. in the Weinland region this figure stands at 47%. whilst in the Jura bernois regions this was as low at 14%. mortgage payments and maintenance. This is illustrated by the Housing Affordability Index (HAI) Composite. this is true both for condominiums (17%) as well as for single family dwellings (21%). One of the main reasons driving the buoyant demand for residential property is its cost appeal in comparison to renting. Low inflation resulting from the continued strength of the Swiss franc will also mean a further – when only moderate – increase in real incomes for private households despite only low nominal increases in wages. against household income. If this is below 33%. That home ownership dominates demand for housing in most regions is seen from the map. Whilst in the Glattal and Zimmerberg regions. Thanks to historically low mortgage interest rates. Given the persistence of the crisis and current exchange rates. The trend is unlikely to change much in 2012. In even more rural regions. almost all lights showed green in terms of demand. In our study from last year. In the Canton of Jura only 19% of buyers chose a condominium. the single-family dwellings continues to dominate thanks to more affordable building land. 85% and 83% of new homeowners have bought a condominium over the last eleven years. we forecast net migration to stand at 70'000 for 2011. At 22%. that is.Economic Research Condominiums dominate in central regions Figure 1 shows how the demand for single family dwellings is displaced by that for condominiums with increasing proximity to the center. This looks at ongoing items of expenditure for home ownership. Only in the large conurbation areas do residential lettings gain the upper hand and continue to play a significant role in their immediate environs. Demand for housing benefited from this and was also supported by persistently low interest rates and rising levels of immigration. support from real income trends was slightly stronger than in 2010. In the end. Swiss Issues Real Estate – Real Estate Market 2012 8 . home ownership has become affordable for an increasing number of households and is today cheaper than a tenancy. this figure was surpassed due to the slight acceleration in the rate of immigration that we forecast (figure 3). home ownership is affordable under the so-called golden rule of finance. mortgage rates will remain persistently low.
Economic Research Robust immigration also in 2012 In 2012 demand momentum is likely to be rather low due to depressed consumer sentiment and stagnating employment levels. the strongest support will again come from immigration with 65'000 persons (net) expected to move to Switzerland in 2012. Immigration continues to shape the residential lettings market Swiss Issues Real Estate – Real Estate Market 2012 9 . The key point is that the high number of people coming to Switzerland over recent years are unlikely to see any reason to return to their countries of origin where the macroeconomic prospects are generally worse. someone moving to Switzerland for the first time will generally look for a property within good reach of work and in an area with a social network. Figure 3 Recruitment of Staff and Net Migration Staff difficult or impossible to find: in percent (left scale). Yet the main reason for the solid demand for rental properties comes from immigration. demand on the rental market remains intact. After all. if only because the initial outlay required for home ownership is so high. immigration will remain an important factor in the real estate market. Population growth for 2012 is therefore likely to again come in above the 1% threshold. Credit Suisse Economic Research Population growth 2012 again above the 1% threshold A quick look back shows that even in the depths of the 2009 recession. highly qualified staff continued to be sought. there is still a lack of skills in Switzerland. scale) University degree Higher professional qualification Apprenticeship Obligatory schooling 100'000 90'000 80'000 70'000 60'000 50'000 40'000 30'000 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Swiss Federal Statistical Office. Despite low interest rates and the corresponding market shift from tenancy to home ownership.h. The number of those coming to Switzerland for work purposes will fall on account of the deterioration of the economy. the deterioration of employment prospects – evident from the dwindling number of unfilled positions – is likely to impact on the level of immigration only with some delay. All in all. net migration incl. In these areas. they found it difficult or impossible to find a suitable employee in 21% of cases. Switzerland still remains a land of tenants. the number of people opting to remain in rented accommodation is also high given the shortage of adequate and affordable alternatives. though the contraction will be limited. change of status (right scale) 28% 24% 20% 16% 12% 8% 4% 0% Net immigration/emigration (r. In choosing a home. Although these shifts determine the current picture. On the other hand. The residential lettings market is therefore particularly buoyant in urban centers and in neighboring agglomeration zones. we expect positive net immigration to contract slightly. though with 65'000 people still expected to arrive in Switzerland (including status change). highly qualified staff from outside Switzerland are likely to remain in demand also in 2012. companies indicated that when searching for staff with higher professional qualifications. The picture is similar in the search for university graduates (18%) as well as for those having graduated through a vocational apprenticeship (14%). In the absence of sufficient domestic resource potential. In the last employment survey. Also.
Economic Research Supply Construction industry at full capacity The construction industry is one of the few industries which have remained untouched by the crises and prevailing uncertainty on the markets. The gap between the number of homes under construction and the number of new homes coming on to the market has opened further. the construction industry has been able to gradually increase its house building activity by shifting capacities. This shows that the construction sector. right scale) Dwellings under construction (annual average) Building permits Net additions 85% 80% 75% 70% 65% 60% 55% 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Swiss Federal Statistical Office. We expect a net increase of around 47'000 homes. it continues to operate at full capacity. especially in respect of residential property which is viewed as a stable investment. Since most companies work through construction projects in parallel and not in series. capacity utilization in structural engineering: % Nevertheless. Accordingly. This corresponds to the biggest expansion of the housing stock since 1994/95. building permits: number of homes. institutional investors also play a key role in shaping the landscape here as these are increasingly turning to the real estate market as returns from financial markets deteriorate. Since commercial property construction has weakened since the onset of the financial crisis and has had to jettison more weight last year. twice the level experienced at the end of the nineties (figure 4). this has remained consistently between 77. The backlog of residential construction projects in progress but still incomplete has meanwhile crossed the 70'000 dwellings mark. the number of rented 10 Supply shifts towards rented housing Swiss Issues Real Estate – Real Estate Market 2012 . Alongside high immigration rates and the corresponding impact on demand from this. This explains the shift in the construction sector towards the residential lettings market. Figure 4 Indicators for the Expected Expansion of the Housing Stock Net additions. permits for a total of 51'000 homes were issued (figure 4). In 2011. a fact which can also be seen from the high capacity utilization in structural engineering.7% and 80%. Since measurements began in 2002. Since institutional investors primarily seek to secure steady cash flows. the housing stock will expand in 2012 80'000 70'000 60'000 50'000 40'000 30'000 20'000 Building utilization (annual average. The increasing activity of institutional investors is evident from the growing number of rental housing projects. Baublatt. homes under construction. are increasingly driving institutional investors in the direction of project development. Since 2006. Credit Suisse Economic Research. According to our models. which represents peak values within the construction sector. which is also busy with renovation projects. KOF Building permits at historical high That the pipeline remains full to bursting can be seen from the number of building permits. when net new homes rose to 50'000 per year on the back of government subsidies. their property focus is on rented housing. This corresponds to a similar number of homes at the purported peak of the current cycle at 2006. simply cannot produce any more homes than it is doing. the net new additions stood at 46'000 residential units last year. completion periods have risen over recent years. The sector is currently operating at maximum capacity. 2012 will also see a very high number of new homes come on to the market. Rising property prices and falling initial returns.
there is the low tax March/Höfe region at the upper Lake Zurich. relative to the region as a whole. In 2012. Figure 5 Breakdown of Building Permits by Type of Use Number of homes. In the Zurich area then. Major projects also shape regions close to cities which have in part already assumed certain city functions. development is most pronounced in the Aargau. though can also be seen as a sign that the construction sector has entered a very mature or even late phase of the cycle. 14% of all homes in multi-family dwellings have been built within complexes of more than 100 units. this ratio stood at only 26%. A similar picture is observed – in parts even more pronounced – in other large urban centers as well as in more medium-sized cities such as Winterthur. for instance Glattal or Limmattal. Credit Suisse Economic Research Focus of construction activity is outside urban centers in well connected regions As in previous year. this stands in connection with the increasing number of rented housing projects. In the centers themselves. large complexes account for a significant proportion of all construction activity within urban centers. Since the beginning of 2010. the focus of construction activity in 2012 will be in the Nyon region as well as in the La Broye region north of Lausanne. Swiss Issues Real Estate – Real Estate Market 2012 11 . building land is cheap and in adequate supply. In Western Switzerland. Rather. Increased planning and approval for rented housing has recently brought the dominance of condominiums for the construction sector to an end. Notably the number of major construction projects has increased steadily over recent years.. Zug and Lucerne. Yet home ownership will still hold sway for the time being. On the one hand. the focus of construction activity is in the outer belt and in suburbs which enjoy good transport links and where. 12-month moving total 22'000 20'000 18'000 16'000 14'000 12'000 10'000 8'000 6'000 4'000 2002 2003 2004 2005 Rented homes Single-family dwellings Condominiums 2006 2007 2008 2009 2010 2011 Source: Baublatt. As to be expected. The number of large projects are both an indicator of the construction sector's strength. 23% of all homes approved in the region of Lausanne since the beginning of 2010 will be built as part of a complex with more than 100 residential units and a further 25% as part of a complex with between 50 and 100 homes (figure 6). the focus of construction activity through 2012 will remain in the metropolitan areas of Geneva/Lausanne and Zurich (figure 6). At the beginning of the current construction cycle in 2003. Accordingly. Including single family dwellings. relatively few new homes will be built. In addition. By contrast. 60% of all homes approved in 2011 will be owneroccupied. For instance. there are likely to be as many rental properties built as condominiums. Freiamt and Mutschellen regions.. Brugg/Zurzach. projects comprising more than 50 homes account for almost a third of all homes planned or under construction. A further 18% of approved homes are within complexes with between 50 and 100 units.Economic Research housing approvals has more than tripled from 6'000 homes per year to over 20'000 at present (figure 5). construction activity in the Lower Valais region will be less pronounced than in previous years.
Geostat Response times are long and are becoming longer The high number of homes under construction. In terms of risk then.5% . Major projects as share of total of all approved homes in multi-family dwellings Expected expansion 3. Figure 6 Anticipated Expansion of Housing Stock 2012 and Major Projects as Share of Total Approved Homes by Region Anticipated expansion in percent of housing stock.100 units Projects with fewer than 50 units Source: Baublatt. the consolidation in the number of planning applications anticipated this year is desirable. it is still too early to say whether there is a general oversupply in Switzerland.0% .0% 0.0% 2.0. Credit Suisse Economic Research.3. 43% of all new homes built over the last two years were planned within complexes containing more than 100 residential units. However. Only this way could the massive home construction machine reduce the number of new homes within a reasonable period of time.5% Projects with more than 100 units Projects with 50 . Swiss Issues Real Estate – Real Estate Market 2012 12 . Sarganserland and Nidwalden/Engelberg regions.0% 1. Brugg/Zurzach. A similar if not quite so extreme picture can also be seen in the Freiamt.1. In Fricktal.0% .5% . as investors look ever more desperately for returns.1. If the market situation suddenly reverses and excess demand switches to excess supply.2. Werdenberg. With pressure increasing in the project pipeline in this way. the response time for any reduction in home construction to take effect is set to become longer and longer. Yet aside from a few local and regional anomalies.0% 2.5% .0% . the record number of building permits issued and the absence of any sign that the number of planning applications will fall all harbor a risk of overproduction. Though things will not stay this way forever.Economic Research … as well as a warning in certain regions The sizable proportion of major projects in some regions located further away from the centers is also notable. The persistent demand overhang in the centers has made marketing large projects located outside these centers much easier.4. it is likely to become very difficult to market projects located at greater distances to urban centers and it will be hard to hold vacancy rates low. for instance.2.0% .5% 1.5% 0. the question as to whether the brakes could be hit on time in the case of any change in the demand situation has to be asked.
which as per year-end 2010 stood at 4'079'000 units has been revised upwards by 115'000 units over the last two years as new counts have been undertaken.8% 1. It follows then. from an exhaustive survey to a register-supported count. it is clear that the residential lettings market is moving in the opposite direction to the market for condominiums which is suffering under increasing supply bottlenecks. the expected rise in vacancy rates towards the long-term average of around 1% is likely to be attributable to the residential lettings sector.0% 1.6% 1.4% 1.4% 0.8% 0. after only a slight increase in supply from last year (figure 8). Because. The magnitude of the error has caused some concern.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Single-family dwellings (for sale) Condominiums Rented homes 2007 2008 2009 2010 2011 Source: Credit Suisse Economic Research. It turned out that previous census figures from numerous municipalities did not tally with the new data on the register. the units which were not counted were second and holiday homes. Swiss Federal Statistical Office Source: Credit Suisse Economic Research. Accordingly. This would be equivalent of missing out a city the size of Geneva. that the individual municipalities were required to provide detailed information on the homes in their areas. previous surveys had miscounted the number of existing homes leaving 104'000 homes unreported in the statistics. Figure 8 Change in Homes Advertised By market segment. It is also worth noting that this increase in vacancy rate was wholly attributable to a rise in the number of vacant rental properties. It was not until the buildings and homes register was introduced at a federal level.6% 0. that in 2012 as well.0% 0. we expect the markets for owner-occupied condominiums and rented housing to continue to diverge. Market Outcome Divergence of rental and sales markets Thanks to persistently high demand. for instance. properties for sale are advertised from the moment a building permit is granted. There will be an increasing number of vacant rental properties coupled with a greater shortage of condominiums. In many cases. Accordingly.Economic Research Register-based Home Survey Discovers Some Homes Missed by Statistics Through the course of the change in the way home data are collected. This rise took the total vacancy rate from 0. it has been discovered that a number of homes had been missed. has recently fallen again to a new historic low (figure 7). in contrast to residential lettings. the production increase seen in figure 5 was already advertised in 2010/11 and the majority of these properties are likely to have already been sold. In other words.94%.91% to 0. primarily in the Alps and in the urban centers. The high levels of construction activity in the rented housing segment will raise the liquidity of this market. Meta-Sys AG Even more vacant rental properties in 2012 Little will change here in 2012. The housing stock.2% 1. Swiss Issues Real Estate – Real Estate Market 2012 13 .2% 0. the supply of new homes could largely be absorbed by the market in 2011. The vacancy rate for condominiums. year-on-year change 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Rented homes Condominiums Single-family dwellings Total Figure 7 Vacancy Rates by Market Segment Vacant properties expressed as percentage of total stock in relevant segment 2. The rise in the number of vacant properties – 1'704 more than in the previous year – is due to regional and local oversupply and not the result of national overproduction.
Large regional differences in vacancy rates
Across the different regions, there are large differences in the ability of the individual housing markets to absorb changes in supply. In the region around Lake Geneva, vacancy rates are very low in most areas and even in popular residential areas, the tense market situation has changed little (figure 9). By contrast, in regions where vacancy rates were already above average, the number of vacant properties tended to rise further. In the Jura regions as well as along the axis between Biel and Lenzburg, vacancy rates are above the Swiss average, in places vacancy rates are even twice as high as this at over 2%. The picture is similar in parts of the cantons of Thurgau and St. Gallen, though less pronounced. Figure 9 Vacancy Rates and Trends
Vacancy rate as per June 1, 2011; change versus 2010
Vacancy rate 2011 > 2.50% 2.00% - 2.50% 1.50% - 2.00% 1.25% - 1.50% 1.00% - 1.25% 0.75% - 1.00% 0.50% - 0.75% 0.25% - 0.50% < 0.25%
Change 2010/11 Strong increase Slight increase Sideways trend Slight decrease Strong contraction
Source: Swiss Federal Statistical Office, Credit Suisse Economic Research, Geostat
No rent increases in 2012 for upscale and new rental properties
The high vacancy rates in the rental sector are still not reflected in rent price performance (figure 10). Following on from a temporary wobble in 2010, quoted rents have managed to gain traction since the end of 2010, largely due to increased pressure from immigration. Within the space of a year, quoted rents increased by 2.8%. Growth in rents comes largely from cheap and older dwellings. Upscale rental properties face competition from the market for attractive owner-occupied properties and have experienced rent falls of around 1%. For 2012, we expect rents to lose some traction and see less flexibility for rent increases in respect of new-build and upscale properties. In terms of existing properties, price performance primarily depends on inflation and mortgage interest rates. In the current year, inflation will be barely above zero, and mortgage interest rates will remain at a low level. According to our models, the mortgage reference rate will fall in the first half of 2012 to 2.25%, making further rent reductions necessary. In line with our models, and given the inertia of the reference interest rate, which reflects all outstanding mortgages in Switzerland, mortgage reference rate hikes are not expected before the end of 2013. All in all, the rent price index compiled by the Swiss Federal Statistical Office is expected to gain around 1% in 2012, as tenancy changes in some existing properties will still be used to impose rent adjustments. The picture is very different for owner-occupied properties. Prices growth here has accelerated yet again and on a year-on-year basis is now significantly above the average rate of growth since 2000 both for condominiums (+8.6%) as well as for single-family dwellings (+6.4%) (average yoy growth since 2000: 4.7% for condominiums and 3.1% for SFDs). Such a fundamental change – greater supply bottlenecks on the market for condominiums than for rental properSwiss Issues Real Estate – Real Estate Market 2012
Falling rents for existing homes
Worrying price trends for condominiums
ties – can also be seen in price performance. No change is to be expected for this increasingly worrying price trend in 2012. The slight dip in the index seen towards the end of 2011 is likely only to correct the overshoot from the prior quarter and not to signal any change in the underlying price trend. We expect further significant rises in prices both for condominiums as well as for single-family dwellings. These are unlikely to be as pronounced in 2012 as they were in 2011, though should not fall below the average annual growth rate since 2000 (4.7% and 3.1%). On first glance, the increasing divergence between single-family dwellings and condominiums is surprising. Yet most of this is attributable to the fact that regions where house price rises are greatest are also those where the majority of construction focuses on condominiums and that single-family dwellings tend to be built in cheaper regions. This observation is also supported by the fact that in various rural regions price trends for both forms of home ownership run in parallel. Figure 10 Price Performance of Owner-occupied and Rented Properties
Index: 1. quarter 2000 = 100; nominal
170 160 150 140 130 120 110 100 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Figure 11 Density of Buildings and Location as Crucial Factors
Increase in land value necessary to offset building depreciation
Necessary upgrading p.a.
Rent – Quoted rent Rent – Existing and new rents (BFS rent price index) Transaction prices – condominiums Transaction prices – single-family dwellings
14% 12% 10% 8% 6% 4% 2% 0%
Region Glarner Mittel- and Unterland Region Aarau Region Zurich
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 Floor area ratio
1.1 1.2 1.3
Source: Wüest & Partner, Swiss Federal Statistical Office
Source: Credit Suisse Economic Research
Return of the Real Value Myth? Published price trends for residential property generally apply to new-build properties. It is incorrectly often believed that existing properties experience a similar appreciation in value. Every property depreciates as time goes on. Its value can be reinstated by renovation works, though only at the cost of additional investment. What actually appreciates in value is the building plot on which the property stands. The shorter the supply or, alternatively, the greater the demand for building land is, the greater the appreciation in its value. Whether the value of the property increases or not depends on whether the increase in the price of the building plot is able to offset the cost of any age-related depreciation.
The floor area ratio as key metric
In essence, three value-determining factors can be distinguished. Firstly, the increase in land value. Alongside this, the price of construction land is key. The more expensive the land, the less impact the value of the building will have and so also the impact of its depreciation. Thirdly, the relationship between the size of the plot and the permissible floor area, expressed in the floor area ratio, plays a crucial role. In case of a low floor area ratio, as in the case of singlefamily dwellings, the price of the land has greater weight and the impact of any depreciation to the value of the building is less. This opposite is true in the case of condominiums. High floor area ratios mean that the impact of land prices is lower. Depreciation of the building itself therefore has a more pronounced effect on value.
Swiss Issues Real Estate – Real Estate Market 2012
Large differences depending on location
We have modeled the effects of these three factors for the individual regions.1 The result shows just how much land values must appreciate each year in order to offset depreciation (figure 11). We distinguish between various floor area ratios thereby illustrating the differences between single-family dwellings and condominiums. For the purpose of illustration, we have restricted ourselves to three regions which clearly show the differences within Switzerland. In the Aarau region with a floor area ratio of 0.3, it is sufficient for land to appreciate in value by 2.3% per year in order to offset the cost of building renovations. Once the floor area ratio increases to 0.8, land values must rise by 6.2% to do the same. In regions which are located further away from urban centers such as the Glarner Mittel- and Unterland, where building land is significantly cheaper, land values must increase much more in order to be capable of offsetting depreciation in the value of real estate. In the above example, this would be 3.2% and 8.4% respectively. The opposite is true in popular locations such as the City of Zurich. Here, land values must annually increase by only 0.4% and 1.0% respectively in order to offset depreciation. The increases in land values required in certain rural locations are in many cases unrealistic, whilst those required in cities will generally be achieved without a problem. From a purely financial perspective, our estimates show that residential real estate is not profitable in all areas. Such investments are more promising in more densely populated areas where building land is in greater demand and is more expensive. The greater the density of buildings, that is, the higher the floor area ratio, the less probable it is that owning your own home will also pay off as a pure investment property. The low impact of any change in land values on the value of a condominium should not be overlooked if any illusions as to real value are to be avoided. However, floor area ratios are not set in stone, but may be increased in certain areas assuming sufficient political acceptance. Some examples of recently sold condominiums appear to have factored these options into the purchase price – only this way can such high prices be justified as sustainable.
Real value myth in condominium segment?
Overheating: Yes or No?
Real estate prices decoupled from incomes
In previous years, we have used income trends to show that price trends in relation to condominiums are not sustainable in certain areas. With the renewed acceleration in the rate of growth in house prices, one can no longer speak of a healthy trend, even in terms of the Swiss average. All in all, we believe trends in 38 of 106 regions are unsustainable. This includes the region around Lake Geneva and Lower Valais. Gradually, the canton of Fribourg is also being infected by excessive price rises. Large sections of the Canton of Zurich as well as individual tourist regions are also experiencing such trends. Yet in large parts of the Mittelland, in the Jura Arc as well as the foothills of the Alps, the cost of home ownership still remains sustainable. Weighted in accordance with their relevant shares of homes owned, over the last 15 years, the price of real estate has grown 1.2 times as fast as income in 40% of all regions, that is, house prices have outstripped income growth by at least 20% in these regions. In our view, this represents a overvaluation (figure 12). In a further 45% of regions, house prices have risen faster than incomes over this period (price/income ratio > 1). Accordingly, we see that one more factor for overheating – the decoupling of real estate prices from income trends – has been fulfilled (figure 14). In contrast to the situation in the late eighties, today's share of speculative real estate transactions is low in Switzerland. Accordingly, the current trend lacks the key element in any real estate crash. It is appropriate therefore, to talk rather of an increasing overvaluation than of a speculative price bubble. The reason behind this overvaluation is the extraordinarily high demand for residential real estate which has persisted for a number of years. The price trend is nothing more than the logical response to a shortage in supply. As a result, prices cannot be expected to change until demand significantly declines. Yet for the moment, there are no signs of this. From today's perspective, the most likely scenario appears to be that demand for residential real estate will not contract notably until mortgage rates rise sharply.
Demand-related overvaluation not speculative bubble
Our model assumes construction costs of CHF 4'000 per square meter and depreciation of 1% per year for existing properties.
Swiss Issues Real Estate – Real Estate Market 2012
6 Figure 13 Extent and Form of Mortgage Debt In percent Up to 66% .5 1.1. which were not launched until the eighties. hefty interest rate hikes in Switzerland will have a direct impact on far fewer people through increases to their mortgage rates today than was the case in the past.fixed interest 66% .4 . as today's share of variable rate mortgages is less than 20% compared to 57% in 1996 (figure 13). Accordingly.5 .4 1.3 1. Also.1.fixed interest Up to 66% .fixed interest More than 80% .1.1.variable interest 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1996 1998 2000 2002 2004 2006 2008 2010 Source: Credit Suisse Economic Research Source: Swiss National Bank Such a rise in interest rates is likely to have less serious consequences than in the nineties.1 .1. In 1996.80 % .3 .5% respectively. as was the case in the nineties. these figures stood at 9.5% and 7. Figure 14 Factors in a Real Estate Price Bubble Agree ~ Insufficiently pronounced X Disagree – Impossible to say Excess liquidity X Excessive risk appetite Lengthy period of rising real estate prices Real estate prices decoupled from incomes X High proportion of speculative real estate transactions High / excessive growth in mortgage volumes given margin pressure on mortgage lenders Inadequate credit checks for mortgage approvals (due to false incentives) Construction activity overshooting and supply overhang ~ – X Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 17 .6 11% 28% > 1.2 . Today's mortgage structures should therefore also not compound any fall in house prices. The majority of households are now also aware and appreciate the insurance component included in Fix mortgages.2 1.80% . only 6% of mortgage volumes have a loan-to-value ratio of between 66 to 80%. the volume of mortgages issued by banks with very high loan-to-value ratios has also significantly declined.Economic Research Figure 12 Regional Overview of Price of Condominiums Share of regions weighted by their share of residential property 6% 8% 5% 15% Price trend in relation to income trends <1 1 .variable interest More than 80 % .variable interest 66% . and less than 2% have a loan-to-value ratio of more than 80%. Today.1 10% 17% 1. The reason for this development is found primarily in improved risk management within the banks in the wake of the last real estate crisis.1.
the trend is not one of a (speculative) price bubble. Expansion planned in the medium-term: The number of submitted planning applications reached a new record high at the end of 2011. On the supply side. Income trends: No major triggers are expected in 2012 as was the case in the previous year. but rather one driven by an overheating of demand. Accordingly. Against the backdrop of a large number of incomplete residential units. house prices will continue to rise sharply in 2012. However. interest rates will remain at extraordinarily low levels through 2012. Although owner-occupied properties will account for the lion's share of construction. even more new additions would be seen. The trend is not expected to change until demand is eroded or interest rates are raised sharply. a high number of new homes is also to be expected for 2013. slightly more than in the previous year. though there is an increasing shift towards rental properties. real incomes are expected to increase only marginally. Demand. This will remain the case despite further deterioration in the economy. we expect investment property prices to continue to rise. the Swiss National Bank will continue to focus on exchange rate trends over the months to come and will maintain its low interest rate policy. Demand will continue to focus on condominiums close to urban centers as people continue to move away from rented housing. Immigration will remain the main determinant of increasing demand. again supporting above-average population growth of around 1%. Given the deterioration of the economy. Market Outcome Vacancy rates: Vacancy rates will continue to increase towards the 1% threshold in 2012. as in the previous year. There are no signs of this changing in 2012. population growth is still likely to pass the 1% mark. Interest rate trends: Given the persistence of the euro crisis. The number of regions in which we see price levels as no longer sustainable has (owner-occupied) (owner-occupied) increased to over a third. an interest which is expressed in record numbers of planning approvals. increasing unemployment and falling employment rates. The increase in vacancy rates is likely only to affect residential lettings. If the construction industry wasn't already working at full tilt. which will remain at a similar level to that of last year. A loss in price momentum in the residential lettings sector is therefore to be expected. By contrast. We expect a net increase of around 47'000 homes in 2012. however. Real income increases will still remain positive though. Prices: No change is to be expected for this increasingly worrying price trend in housing in 2012. Although this is expected to slow slightly in 2012. are likely to stay flat or even fall slightly on account of the limited potential for rent increases and growing vacancy rates so that total returns are likely to remain largely unchanged. We now see price levels in 38 of 106 regions as no longer sustainable. (rented) (rented) Performance: Given the persistent pressure to invest. By contrast. Cash flow returns. construction activity will remain high in 2013 and will ensure a considerable expansion of the housing stock. thanks to low inflation. Supply and Market Outcome Demand Population trends: Population growth has accelerated somewhat over the course of the past year. investors are increasingly attracted by the persistently high demand for housing. Whilst the additional supply of owner-occupied properties will be absorbed by the market without much of a problem. The in. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 18 . but rather reflects a growing oversupply in certain regions and a continued un(rented) (rented) dersupply in other regions. Such numbers were last seen in the middle of the 1990s thanks to government subsidies. Yet residential lettings will continue to be buoyed by immigration.(owner-occupied) (owner-occupied) creasing number of vacant apartments cannot be interpreted as a general alleviation of tension. the high number of apartments coming on to the residential lettings market is likely to raise vacancy rates slightly. we expect to see easing price momentum in the residential lettings market. The focus of construction activity will remain on owner-occupied properties. Given such a backlog of projects.Economic Research Outlook for Residential Property in 2012: Persistent Demand Pressure Demand for residential property will remain extraordinarily high in 2012 thanks to robust immigration and the persistence of low mortgage interest rates. residential lettings will account for an ever growing share. Background Outlook Supply Development of housing stock 2012: We expect a net addition of 47'000 residential units.
Accordingly. Depending on the service. Up to now. This can be explained.Economic Research Serviced Living: Innovative. Swiss Federal Statistical Office Target groups The target group for serviced living includes those tenants whose opportunity costs exceed the costs of external service provision. In 2010. on the one hand. with reference to their dislike of outsourcing traditional domestic and family work. Figure 16 shows the distribution of full-time employees by net hourly pay. but Economically Ambitious Cross selling. The higher the tenant's income is. Another important driver is social change. is the key to greater client profitability regardless of the sector. the target group for serviced apartments is primarily comprised of HIGIs (high income generating individuals). In modern times. Only conclusive evidence of the exact form of such services and identifying which ones would find the greatest acceptance on the market is still to come. As a result of increasing academization. the small suburban family ideal seems to be moving increasingly further from the reality. Credit Suisse Economic Research Source: Credit Suisse Economic Research. Drivers of demand: Increasing work commitments and social change One of the drivers of the demand for serviced apartments comes from the steadily increasing professional commitments now faced by employees. The change in family structures is expressed in a shrinking of the size of the household and an increase in female employment rates. approximately 23% of fulltime employees earned at least CHF 42. A cumulative frequency of 40% and net hourly pay of CHF 25 means that 40% of full-time employees earn less than CHF 25 per hour and that 60% earn more than this. Serviced living is an adaptation of this principle for residential lettings and is a rare innovation in an area of business which in the past has been shaped more by regulation than by trailblazing new ideas. the more rational it is to buy in such services and invest the time saved in additional work. Yet the principle can only work if it also satisfies a real demand from clients. Figure 16 Employees by Hourly Pay Based on full-time employees. and on the other Swiss Issues Real Estate – Real Estate Market 2012 19 . These professional responsibilities can only be fulfilled if employees are allowed to concentrate all their energy on core competencies so giving rise to a demand for support in other areas of their lives.e. their share of the population is rising. i. the services provided to serviced living have not been limited to additional services such as classic domestic work. but have been spread across a broad range of services relieving some of the burden of everyday chores on the tenant or even taking these away entirely. Various signals are pointing to the fact that such demand is increasingly apparent and that the time is right for such products. we use an average of CHF 42. selling additional products to clients. the actual price may be above or below this value. Figure 15 shows that the average size of a household fell steadily from 1980 to 2009. Older generations tend to be more reticent in taking advantage of such additional services. 2010 100% 700'000 560'000 Figure 15 Size of Household In percent 1980 80% 1990 60% 2000 40% Full-time employees (right-hand scale) Cumulative frequency 420'000 280'000 2009 20% Net hourly pay in CHF 0% 1 person 20% 2 people 40% 3 people 60% 4 people 80% 100% 0% 3 14 25 36 47 58 69 81 92 103 >111 140'000 0 >= 5 people Source: Swiss Federal Statistical Office. The number of potential consumers therefore corresponds to the number of employees whose net hourly pay exceeds the cost of the service range. As a benchmark for the cost of externally provided services.
Figure 17 Cost-covering Flat-fee for Concierge Services Assumptions: Gross salary/month: CHF 4'600. Only this way does the user achieve the reduction in burden that they desire. with a concierge cost of only CHF 281 per month per apartment for a property with 100 apartments. This does not mean that other services cannot expect to have a rosy future. The service is generally provided by specialist suppliers that are coordinated. using three options with different duty hours for the concierge and for different property sizes. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 20 . looking after pets.9 p.m.Economic Research hand in relation to opportunity costs. One example is the planned Hardturm Hochhaus in Zurich with 121 apartments or the Zoelly Hochhaus with 130 apartments. 7 a. . Not every additional service. restaurant reservations.m. These other services may include chauffeuring. Only when frailty prevents this age group carrying out their own domestic chores do does this target group become willing to take an apartment with services.m. He ensures the security of the building. running errands. provides usual caretaker services and arranges other services for tenants when he is on duty in the building.m. which is hardly sufficient to provide the concierge's intended purpose. Closed 1'560 1'792 87% 4'649 2'000 6'649 301 151 100 133 66 44 Source: Swiss Federal Statistical Office. New means of communication provide a good basis for this. 7 days/week) is too expensive. Figure 17 presents the direct monthly costs per tenant. Properties with more than 100 apartments are very much the exception in Switzerland. timed and monitored by the service provider. Both this responsibility as facilitator as well as the services themselves are work intensive. Option A with a round-the-clock concierge presence (24 hours. even in larger properties.m.-7 p. however successful abroad. As a result. .m. rubbish disposal etc. working week: 42h. Even option C with a concierge presence of only six hours per day costs CHF 66 per month per apartment for a property with 100 apartments. though these must be so standardized and automatic than the work involved is very much kept to a minimum.m. shopping. all social contributions included Concierge: An example calculation Option A Duty hours Monday-Friday Duty hours Saturday-Sunday Duty hours/year (h) Working hours per worker and year (net) Necessary percent by position Wage costs/month (CHF) Operating and material costs/month (CHF) Total costs/month (CHF) Flat-fee in CHF/month for: 50 Units 100 Units 150 Units 562 281 187 24h 24h 8'760 1'792 489% 26'105 2'000 28'105 Option B 7 a.9 a.8 p. which on retirement are of course lower. . This is illustrated by the concierge service. A concierge is a person who is employed in service of the tenants of a property. can be transferred to Switzerland and be just as successful under local conditions. Federal Social Insurance Office. 4'380 1'792 244% 13'053 2'000 15'053 Option C 6 a. the cost of the overall service in a high-salary country like Switzerland can quickly exceed the readiness of the user to pay.m. Cost as key factor Buying in additional services must be comfortable for the user and demands a high degree of flexibility and precision from the service provider. The example shows that a concierge service is only viable for luxury apartments and then only with very limited duty hours. 5 p.
Google. as wobbly video films and ill-functioning platforms and other unfortunate additions can have the opposite effect and scare users away. negative comments follow swiftly. discounts. Increased price transparency and the improved ability to filter desired properties from what is effectively the entire supply are only two of the Internet's well-known beneficial achievements. Companies therefore aim to sell themselves as best as possible on social media platforms so as to ensure clients return. histories and information as well as customer service. Images spread through social media in the wake of the scandal resulted in enormous damage to the company's reputation. The benefits of the Internet are obvious for search-and-find transactions. Ebay and Amazon are the names of today's middle men and Homegate. In exchange. thereby also generating costs. The reward for companies is largely virtual. It is not the news content of this information which is important. What makes social media what it is. for instance in the form of sales-promoting recommendations. With the use of these media. Through the course of this general convenience trend. they need to be present where their clients are. but rather its origin. The first real estate actors have also now discovered the advantages of social media platforms such as Facebook. For instance. the prospective buyer must be quick off the mark as he is but one of thousands all armed with the same information. Companies and clients communicate here at eye level. Siemens recently experienced such a case in China where what initially began as an apparently harmless case of insufficient customer service turned from a momentary flash-in-thepan to a full blown wildfire ending in the public burning of Siemens refrigerators. companies lose some of their control over communication. and the thin-skinned decision to delete such comments on the company blog without first responding to them often sets a negative train in motion. YouTube as well as general blogs and forums. Actors on the real estate market may therefore be tempted to underestimate the impact of new technologies. Originally it was thought that the internet would simply render the agent redundant. Having found a suitable property. After all. the full force of these media can quickly turn on manufacturers. We trust the opinions of others in a shared network – and in particular the opinions of friends – much more than we do an impression conveyed by an advertisement. The result is the democratization of the Internet as not only manufacturers but also users generate content. competitions. new technologies are being particularly well received and are spreading rapidly. or if a company outsources elements of its customer service to internet forums which allow customers to help customers. it need only be remembered how online search portals have fundamentally changed how buyers and sellers come together on the real estate market. Immoscout and Immoclick are their counterparts on the Swiss real estate market. is the mutual exchange of information and recommendations. monitored and managed. in the case of defect. What awaits the real estate market in the future? Today there is already a gamut of information available on potential properties. In order to appreciate the effect of these new technologies on the real estate market. In particular. though these can quickly translate to profits. Yet it soon became clear that one set of players were simply replaced by another. What next? Importance of social media grows Risks not reduced through the Internet and social media Swiss Issues Real Estate – Real Estate Market 2012 21 . Twitter. Anyone not on board – whether provider or consumer – is soon left behind. The result is a marked increase in the speed of trade. A presence on the Internet and in social media is therefore not to be take lightly and particular reputational risks need to be considered. Channels must also be continually supplied with contents. Yet the virtual revolution – as the present era will go down in history – has simplified modern living considerably. they offer exclusive offers. Defects are immediately discovered. with e-mail and e-banking already a significant convenience in everyday business. if the manufacturer gains important information through these channels on client wishes. Online services have fundamentally changed the real estate marketplace The revolutionary effect of the Internet has not stopped at the real estate market. as the virtual village allows everyone to enter into contact with everyone else.Economic Research Real Estate in the Age of Internet and Social Media Real estate and real estate markets have existed for thousands of years without the Internet and social media. however. A professional impression is compulsory. Information on locational quality is already accessible through online maps and blanket land registry data should also soon be made available.
principal and construction companies in the Cloud Augmented reality Marketing Buy / Sell / Rental Administration and Facility Management Electronic contracts Complaint management Complete electronic monitoring of real estate Automatically compiled location analyses Comprehensive provision of location information Display minimum selling price Inclusion of social media Virtual Reality for new buildings At the touch of a button. and not only in relation to contact with the end consumer. The market penetration of Internet-based services and the use of social media is much more advanced in the US than it is here in Switzerland. According to the National Association of Realtors. Thanks to the Internet. As a result. The consequences were catastrophic. but also between companies (figure 18). but so also is the potential for damage. the reservation and management of holiday homes and other temporary forms of accommodation will in future more often than not be completed online. For instance. Clever applications will increasingly be used across the entire life-cycle of everything to do with real estate. After all. Large platforms established by telecommunications providers already set out the path of the future here.Economic Research Social media threat small in the real estate sector Yet real estate actors need not be too concerned about the new-found power of the consumer thanks to social media. replacing the telephone or hand-written documents such as the handover inventory. Social media is only one of many trends which will change the face of real estate over the years to come. investors and principals with a dominating market share dedicated to a set objective. use of the Internet is becoming increasingly professional in Switzerland. companies need to be prepared today for the competitive challenges of tomorrow. This can be by way of a special pair of glasses or via a mobile device such as a Smartphone or iPad. construction zones. as in share dealing Further improvement of real estate valuation on screen Source: Credit Suisse Economic Research Augmented reality Somewhat more impressive are future innovations in the field of augmented reality. This would allow all properties advertised for rent or sale in a particular area to be seen. Yet only when the sale of apartments becomes more difficult is the next stage in the use of digital technologies likely to be set in train. today would therefore be ideal to start looking at these technical innovations. 33% of all realtors in the US used social media in 2009. real estate spans an incredibly broad area. also in respect of very familiar applications. This fundamental feature of real estate prevents the creation of a large Web community exchanging information on this product. After all. the degree of technologization will steadily increase. A streamlined version of this technology is already available as an Swiss Issues Real Estate – Real Estate Market 2012 22 . this is already 84%. In addition. This new form of person-technology interaction augments reality by supplementing it with additional information. Just 15 years ago many companies believed that all they needed was an internet page with their telephone number. One year later. In particular in relation to the sale of new-build properties. Each property is unique in a certain way. The entire spectrum of support services in relation to real estate (in particular administration and facility management) will increasingly be provided via the Internet and in structured forums. technical innovations US once again sets the rhythm Ideas are boundless Search Construction (Planning and Implementation) Interaction of planners. the heterogeneous nature of real estate and its high capital intensity also prevent the evolution of planners. This would be supplemented by various statistics and information on noise pollution. Figure 18 Real Estate Value Chain Link for Web-based. the opportunities are lower. plot sizes and nearby points of interest. Even if their use is uncertain. or show future or long-since demolished properties.
This technology is particularly useful for new and renovation projects. through data available on the Internet? Visualization would then also be made much simpler than with plans alone and could be by way of 3D television. Why should not construction principals communicate with architects in the Cloud – that is. here is another idea for the property owner: Why not use the roof of a property as an advertising space? In the Google Earth era. These are mostly "make-me-move" prices at which a property owner that is not currently planning a move would be prepared to hand over his home to a buyer. Virtual reality and working in the Cloud In contrast to augmented reality. The US is one step further. Augmented reality can also be used in the construction process. And since we are on the subject of 3D. Interested users can visit a real estate project in the virtual world and can even choose furnishings and paint walls. various cities show homes with asking prices.Economic Research application for Smartphones which shows a map of currently advertised properties in a certain area in conjunction with other information drawn from Wikipedia. non-visible elements included on construction plans or notes and instructions can be placed virtually. There. A 3D model of your own home could also be successfully marketed on social media platforms. For instance. Further technological developments are conceivable in construction planning. this free advertising is not only visible to balloon passengers. as it can make rooms and spaces accessible which have still to be constructed. virtual reality submerges the user completely in the virtual world. Swiss Issues Real Estate – Real Estate Market 2012 23 .
The combined sector for corporate services has proven to be a reliable source of demand for office property in both good. despite the fundamental recovery in economic performance (figure 19). These will test the local markets. you would expect there to be a significant increase in employment based on the positive economic performance of the last two years. In relation to the muted economic forecasts. Demand Growth in demand in 2011: moderate but solid 2011 was a solid. with a slight tendency towards oversupply.and bad times Swiss Issues Real Estate – Real Estate Market 2012 . because these projects are designed as new locations for larger companies. that would still be an increase in employment at the end of the year of just under 8'000 full-time-equivalent posts. Demand in 2011 grew moderately. for which we see no meaningful slowdown until the end of 2012 due to the high levels of immigration and low interest rates.and engineering practices. In the third quarter of 2011. which is composed of expected growth in construction-related employment of architects and engineers. In the last ten years. this represents an incremental need for office space of almost 190'000 m2. but not outstanding year for demand in office property. If you take into account the delayed reaction in the past of demand for office space to economic growth. architectural-. Despite the economic slowdown. Driven by architectural.6% over the course of 2011. If the economy is booming. particularly in light of the fact that no employment surplus was built up in the recent past that now needs to be reduced. It is likely that employment in the office sectors increased by 1. In addition. Assuming a generous net floor area of 18 m2 per workplace. anticyclical legal.and bad times. those service sectors whose staff are traditionally and primarily office employees registered an increase of 10'540 full-time equivalent positions over the same period last year. the growth in employment and the associated demand for office space have not really ignited as yet. this is a positive outlook. the sector benefits from outsourcing that is only rarely ever reversed during a slowdown. but it is still positive. The civil engineering department of the city of Zurich even announced at the end of 2011 that several public projects may be delayed because of this. it is likely that the growth in demand will continue just as unspectacularly in 2012 despite the looming economic slowdown. vacant office space in 2012 in the urban centers. Architects benefit from high volumes in building construction. which will free up a corresponding amount of office space in the core zones of the cities. And because the build-up in employment in the corporate services sector in 2010/11 was limited. it is almost possible to count on one hand the number of quarters in which a headcount reduction occurred. the increasing regulation in the financial sector is leading to a growing need for certified public accountants and legal advisors. The structural transformation is likely to be accompanied by a certain amount of pricing pressure at the corresponding city center locations. Still.6% versus 2009) was exceeded. A closer look reveals there are indeed several large projects ready to be launched in the major German-speaking urban centers and their agglomerations. the risk of vacancies should not be overstated because many small companies in growth sectors are likely to welcome the attractive. IT companies. and corporate services providers. From a supply perspective. Unfortunately. The volume of new projects approved for construction increased dramatically in 2011 and is triggering alarm bells. but consistently. the growth potential of architects and engineers may indeed be limited in 2012. this has been thwarted by the effects of the economic slowdown. That means that although the sluggish growth in 2010 (0. almost 60% of this growth can be attributed to IT companies.and management consultancies. We therefore expect a mixed year in 2012 in which office-based employment growth is likely to diminish to just over 1%. a catch-up effect is to be expected this 24 2012: economic uncertainties cost growth Architects and engineers support demand Corporate services providers: high demand in both good. and emerging IT companies. and the higher costs for international companies resulting from the strength of the franc. the ongoing uncertainties due to the bad news both in and from the eurozone. and engineering practices. Engineers are increasingly difficult to find and are becoming the epitome of the skilled worker shortage.Economic Research Office Property The Swiss market for office property remains stable in 2012.
Figure 19 Employment in Classic Office-Based Sectors and GDP Growth Growth rates with contributions to growth and forecast. In 2011. 155 m2 (Zurich) and 167 m2 (Geneva). This sector is increasingly being streamlined. we are relying on the IT sector this year. Process optimization – and hence rationalization in the classical sense – requires ever more complex. and government agencies in Berne. Swiss Federal Statistical Office. the pharmaceutical companies in Basel. future projects are set to be driven by insurance. in Geneva's CBD only 30% of the offices advertised for rent were larger than 244 m2. which is likely to have an overall negative employment balance in 2012 because of the financial market instability. which last year was strongly characterized by location consolidations by large companies in the outer commercial regions of large urban centers. That ensures that a base level of demand for office property exists that tends to be larger than when you consider just employment trends in classic office-based sectors. particularly in the financial services sector. Berne. In the central business districts (CBD) of Zurich. There are two reasons why we see this risk of vacancies as only temporary and consider it to be limited in the medium term.Economic Research year. the structure of the office spaces becoming vacant matches the needs of many generally small but growing companies. and the SBB. In this respect. State Secretariat for Economic Affairs Automation and process optimization enable the IT sector to grow Ultimately. as well as developments such as E-health and telemedicine in health care. These systems include general invoicing. Examples of this include the major banks in Zurich and Geneva. First. higher investments in IT automation should be expected this year. As part of the tertiarization process. The trend towards a service economy should also not be ignored. whereas this value in the outer business district was 517 m2 (figure 20). the median of the office spaces in the outer business districts was higher in each case. which is ultimately likely to trigger moderate demand for office property. Demand structure 2012: office space consolidation by large companies is continuing Swiss Issues Real Estate – Real Estate Market 2012 25 . In contrast. The structure of demand. this trend is providing a growing number of office-related activities in many business sectors.and logistics systems in retail and industry. The office spaces in the urban centers are mostly small.and complex IT solutions. But other sectors are also increasingly dependent on customized. For example. Swiss Post. thus providing orders for the IT sector. is likely to be similar this year.and IT companies. year-on-year 10% 8% 6% 4% 2% 0% -2% -4% Research and development Finance and insurance Information technology Corporate services Employment agencies Employment (annual growth) Architects and engineers Real estate activities GDP (annual growth) Forecasts 1999 2001 2003 2005 2007 2009 2011 Source: Credit Suisse Economic Research. Meanwhile. everyone was talking about the risk of vacant office space at the abandoned locations in the urban centers. yet efficient IT solutions. and Geneva. it benefits more than most other sectors from the growing flow of information and the automation efforts by service companies and government agencies. including ones outside the classic office-based sectors. 50% of the office spaces advertised for rent in 2011 were smaller than 107 m2 (Berne).
and more is being planned 26 Swiss Issues Real Estate – Real Estate Market 2012 . which is highly desired in the urban centers because of the trend towards reurbanization. and the run on condominiums. 2011 500 Median Between 30% and 70% of values Median for Switzerland 400 300 200 100 0 CBD Ext. which costs CHF 550 mn. extended. and engineering practices. Outer CBD Geneva Ext. Numerous examples throughout Switzerland demonstrate that attractive housing can be created out of commercial buildings. At the same time. about 80% of the employees in 2008 worked in large companies with more than 250 employees. Outer Lausanne Source: Meta-Sys AG. Zurich Outer CBD Ext. Credit Suisse Economic Research Office space becoming vacant offers an opportunity for SMEs in urban centers Growth in 2012 is likely to be more strongly focused on small companies because they originate disproportionately from sectors which we expect will have growth opportunities this year. suggested a significant increase can be expected in the investments in office. Outer CBD Berne Ext. If an older office building cannot be marketed. the high demand for housing and the trend towards reurbanization offer plausible worst-case options. Relocation by large employers away from city center locations therefore offers growth sectors and SMEs an opportunity to obtain office property in attractive locations. the planned volume of construction is still 36% above prior year levels and even above the peak reached in 2001. which were mentioned as part of the survey about construction investments already being made. pricing pressure must be expected in central business districts.Economic Research Figure 20 Distribution of Advertised Office Space Sizes By business district (central (CBD). and outer) of the five major urban centers in m2. In contrast. This represents a huge increase of 53% over 2010. the risk of vacancies will be reduced by the shortage of building land. 90% of IT companies. meaning that their need for office space is even more limited thanks to desksharing. In other words: A significant amount of office property was already under construction last year. The universe of suitable companies as tenants for larger office spaces in central locations is thus much smaller than that for micro. there is ultimately also the alternative of conversion. building permits for office property throughout Switzerland totaled about CHF 3. 91% of all architect-. only 55% of banks and insurance companies were micro companies. In 2008. 94% of legal advisors and 95% of management consulting agencies were micro companies with less than nine full-time-equivalent employees. since their ability to pay is less than the ability of the companies who are relocating – the relocating companies are generally financially stronger –. Business consultants and IT professionals often work directly at client sites. the planned construction projects for 2011. which then revitalizes the associated districts. In the medium term. Outer CBD Basel Ext. However. Last resort: conversion Supply High office space expansion can also be expected outside the large markets Last year. Even without the approval of the Roche Tower in Basel. ongoing immigration. In these branches.and administrative buildings (figure 21). besides the options to modernize or rebuild. Accordingly. The rent of larger office spaces could be particularly difficult because there are only about one thousand medium-sized companies with 50-250 employees in the classic office-based sectors throughout Switzerland.and small companies or for that of large companies with their numerous employees.4 bn.
but the continuous increase in planned construction volume outside the major urban centers and their agglomerations since 2006 is the primary factor driving the strong expansion. Private use dominates the office market outside the urban centers Despite the dynamic level of planning in the periphery. the screw manufacturer Würth is having an administrativeand training center built at a cost of CHF 96 mn in the economic region St. Either a company builds by itself. only to be pulled out again just as quickly in the wake of the economic recovery. projects are more strongly dominated by commercial own-use needs. far more office property is being planned in Switzerland's five largest office property markets – specifically outside the CBD –. Disproportionately large. a building with 16'000 m2 of office space is being constructed as the headquarters for an information technology firm. That means the new construction of office buildings in many regions follows the course of business of the industry located there and should ultimately be understood as the result of the aforementioned trend towards a service Swiss Issues Real Estate – Real Estate Market 2012 27 . Outside the larger office property markets. The list of completed.or an above-average number of office properties are also being planned in some regions of eastern Switzerland. 2011 = survey of construction projects 2'000 1'600 Construction investment: Five largest office markets Construction investment: Other regions Building permits: Five largest office markets Building permits: Other regions 1'200 800 400 0 1995 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 Source: Baublatt. a new office complex from Nestlé for CHF 71 mn was approved for construction in June 2011. Office buildings are being constructed at other locations with direct links to production sites. Undoubtedly. Figure 21 Building Permits. Credit Suisse Economic Research Figure 22 shows in which regions office property planning rose sharply last year compared to the long-term average. from Aargau towards the South through parts of central Switzerland to Upper Valais. annual basis. For example. … can also be expected outside the large markets The focus on large projects in major urban centers distorts the view of the geographic distribution of planning. where office space is often built as investment property for rental purposes. and Office Property Construction Projects In CHF mn. Swiss Federal Statistical Office. The building permit was obtained in December 2010. or it contracts directly with a general contractor/turnkey contractor who builds the property based on the individual needs of the contracting company. through the Mittelland to Lake Geneva and. on the other hand.and construction activity. or planned projects is long. it will be completed by the end of 2012 at a cost of CHF 54 mn. In the economic region Sursee/Seetal in the northern part of Lucerne. Gallen/Rorschach. The focus of planning extends along two axes: on the one hand. the risk of oversupply there is limited. In contrast to the expansion phase in 2001-2003. In the municipality La Tour-de-Peilz in the economic region Vevey/Lavaux on the east shore of Lake Geneva. This increase was interrupted only temporarily when a whole series of projects were initially shelved following the Lehman bankruptcy.Economic Research that will be realized in the coming years. under-construction. The office property market in peripheral locations and/or in industrial regions functions differently to major urban centers. these planned office spaces are not as concentrated in the Zurich metropolitan area. and the expansion of office space is clearly likely to remain high in the coming two to four years. Construction Investment.
Figure 22 Building Permits for Office Property Variance: approved construction volume 2011 vs. Geostat Decreasing supply of office space just before the turnaround The substantial share of office space for own-use purposes also explains why the amount of advertised office space has not risen more strongly given the dynamic planning outside of the major urban centers. As soon as tenants have been found for the new office space.30% -9% . its decline last year has reflected the previous positive demand trend.Gall en Her isau Ap pe nze ll Zug Schwy z Alt dorf Gla rus Chu r Fr ibourg Lau sa nn e Genè ve Sion Bellinzon a 0 20 40 km Source: Baublatt. this is likely to play a lesser role. totaling approximately 100'000 m2 since 2006 (figure 23).60% 11% . regions with construction volumes > CHF 5 mn > 61% 31% .-10% -59% . which also requires office property in the periphery. however. Credit Suisse Economic Research Source: Meta-Sys AG. the supply of new office property declined further over the course of last year. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 28 . but the abrupt rebound at the end of the year is likely to be a harbinger of the next expansion wave.10% -29% . 10-year avg. To date.-30% < -60% Neuc hâte l Schaffhausen Basel Liest al Delémont Solot hurn Luzern Be rn Stan s Sarnen Aa rau Zür ich Fr auen feld St.Economic Research economy. Figure 24 Advertised Office Space Stock Advertised office space stock in 1'000 m2 1'400 Key. it is likely that the falling stock will immediately begin to grow again (figure 24). in %. Of course. the risk of vacancies cannot be completely ruled out because new construction can mean that space at other locations is vacated. Credit Suisse Economic Research. see diagram on the left 1'200 1'000 Figure 23 Advertised New-Building Space Advertised office space from new projects in 1'000 m2 500 Other regions Office markets of large mid-sized centers Office markets in large centers Total surface on offer 400 300 800 600 400 200 100 200 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2005 Source: Meta-Sys AG. Overall. The decline in advertised space has therefore come to a halt in the major urban centers and is experiencing a turnaround in the regional urban centers and in the other regions.
. how well this office space can be absorbed in the coming years will likely be put to the test in the north of Zurich. but it is probable that these structural changes will involve price concessions. Meta-Sys AG The Five Largest Office Property Markets in Detail The five largest office property markets cover over 40% of the entire office property in Switzerland. Still. The fact that much of the office space in the periphery is being built for ownuse purposes does limit the risk of vacancies.8% 3. 2 In contrast to the average calculation of recent years. albeit positive.3% 2. Swiss Issues Real Estate – Real Estate Market 2012 29 .7% 2. office space was advertised in 2011 for an average rent of CHF 266 per m2 p.a. in Berne.0% 2. Therefore.1% 2.6% 1. not only are the trends in these markets interesting.6% 6. and the view of prices is representative of the entire supply.2 That represents growth of 2.3% 5.4% 3. Gallen/Rorschach Aarau Lorzenebene/Ennetsee Lugano Lower Baselbiet Winterthur City Baden Neuchâtel La Sarine Olten/Gösgen/Gau Oberland-West Limmattal Upper Baselbiet Switzerland Existing office space 6'177'000 3'902'000 3'185'000 2'140'000 2'091'000 1'638'000 1'385'000 1'344'000 1'277'000 1'172'000 1'133'000 902'000 699'000 666'000 615'000 599'000 556'000 555'000 553'000 541'000 49'076'000 Advertised office space 165'000 179'000 64'000 46'000 75'000 98'000 32'000 36'000 17'000 63'000 33'000 35'000 12'000 17'000 10'000 13'000 14'000 8'000 21'000 17'000 1'333'000 Supply rate 2.a.2% 3.0% 2. the calculation of advertised rents is now performed as an area-weighted average value. Figure 25 Overview of the 20 Largest Office Property Markets Office space in m2 as of Q4 2011.6% 1.9% 3.9% 1. average rent (gross) 2011 area-weighted in CHF per m2 p. expected increase in employment this year. and the level now reached is likely to be maintained in 2012. The challenges for the Swiss office property market beyond 2012 are growing due to the only moderate. Such changes provide an insight into overall Swiss trends and developments.6% compared to 2010 and a breakout from the longstanding price range of CHF 231 to CHF 254. The price of large office spaces is therefore important.7% 4. and in Basel.Economic Research Market Outcome Figure 25 summarizes the trends of the 20 largest Swiss office property markets. just as important are also the shifts within the individual office property markets and their various business districts.2% 2.6% 2. In Switzerland overall. This price growth has been a long time coming.6% 2.7% Supply trend Average rent 304 393 233 285 331 262 217 217 203 214 338 192 211 199 186 243 247 194 198 259 262 Price trend Source: Credit Suisse Economic Research. trends for 2012 Economic regions Zurich City Geneva Berne Basel City Lausanne Glattal Lucerne St.4% 2. due to larger projects and the ongoing relocation strategies of larger companies. One positive effect is that there will be more room in the urban centers for small-business based growth sectors.5% 1. in combination with the strong office space planning that has already been described.
Figure 26 Advertised Rents (Gross) of the Zurich Office Property Market
In CHF per m2 p.a. per 25 hectares for 2010/11; area-weighted average market rent = CHF 292
Ba d en Wet ting en
Outer business district
Klote n 7 Opf ik on Diet lik on 6 Obereng s tring en 5 Wa llis ellen 8 9 Schlieren Urd orf 4 Dü bend orf Volket s wil 1 3 Ba s se rsd orf Illna u- Ef fret iko n
Reg ensd orf Sp reitenb a ch Diet iko n
Zür i ch
2 Us t er
Extended business district
Central business district (CBD)
Küs na cht
> 500 401 - 500 351 - 400 293 - 350 251 - 292 201 - 250 101 - 200 < 100
1 1 2 3 4 5 6 7 8 9
Rüs chli kon
Löwenbräu-Areal Hardt urm-Areal Geschäftshaus Rosau Europaallee Westlink Muri Leutschenbachquartier Glattpark The Circle Richti-Areal Zw icky-Areal
Tha lwil Aff olter n Meile n Horg en Mä nnedo rf St ä fa 0 2.5 5 km W äd ens wil
Source: Meta-Sys AG, Credit Suisse Economic Research, Swiss National Survey Office, Geostat
Polycentric development with high importance of the micro-location
The office property market in Zurich is developing in an increasingly polycentric manner. Priorities regarding locations are shifting from geographic centrality to accessibility. As a result, a site in the CBD is no longer an absolute priority for many companies. To be sure, the highest rents in Zurich are still achieved in locations where the parameters centrality, accessibility, and/or proximity to the lake can be maximized in a combined manner. The average rent for office property south of the main train station is CHF 525 per m2 p.a. – just like in parts of the neighborhood Enge, which is located further southwest and has very good transport links. In Zurich's Seefeld, office property was and is offered on average for about CHF 450, with rents tending towards CHF 400 as the distance increases from the city center and from the Stadelhofen train station. Along the main development axes towards the north, high-quality and easily accessible office space is increasingly being offered. As regards amenities and the micro-location here, there is little to choose between the two extremes available. Besides the location, companies that choose office space outside the city center have high demands in terms of the size and functionality of the property. For instance, the offers for new projects in the Leutschenbach district vary between CHF 300 per m2 and CHF 400 per m2. Only several hundred meters farther west, prices fall along the Thurgauerstrasse to between CHF 200 and CHF 250. Last year, public attention was often directed towards the growing satellite markets in the north and west of the city in connection with the outsourcing of back office functions and the consolidation of facilities by large corporations.3 But in the not too distant future, the new service districts will be able to offer more than just providing large amounts of office space at cheap prices. Zurich-West plays an important role in this regard. The locations of this up-and-coming district with good transport links are becoming more prestigious. At the same time, Zurich-West offers large, interconnected, modern, and representative office space, thereby combining the advantages of both peripheral- and central locations at comparatively moderate prices. The recent large expansion in office space in Zurich-West has subsided. The landlords were able to market the new office space at the Maag- and Coop sites in 2010/11 at an economically advanta-
The important role of Zurich-West: good locations and growing prestige at moderate prices
Refer also to Swiss Issues Real Estate – Real Estate Market 2011, Facts and Trends, page 34 f.
Swiss Issues Real Estate – Real Estate Market 2012
geous point in time. Based on the upgrading of the former industrial district, there are unlikely to be any difficulties in marketing the approximately 20'000 m2 of office space in the Löwenbräu site and in the Hard Turm Park, which will be ready to occupy starting in 2013.
Modest office space expansion in the city
Based on our current knowledge about planned projects, we estimate that office property space will expand by just over 200'000 m2 by 2017 in the city of Zurich, from the business premises Rosau (10'000 m2 starting 2014) in the city district Enge via Europa-Allee at the main train station to the Westlink project in Altstetten. That represents a 3.2% increase in the stock of office space, a growth rate that is below the estimated growth in office space of just over 4% between 2008 and 2011. That means oversupply within the city limits is not foreseeable in the medium term. In contrast, there is stronger planning in the area from the Leutschenbach district (approx. 67'000 m2 by 2014) via Glattpark (approx. 54'000 m2 by 2013) through to the airport region (85'000 m2 starting 2017). Office space farther east in Wallisellen (Richti site/Zwicky site) can be included as well. These development areas mark the cornerstones of a dynamic service region that are increasingly merging into one. This trend is most clearly visible between the district Leutschenbach and Glattpark, where the gap between the city of Zurich and the municipality Opfikon will be largely eliminated by 2013 with the buildings Aquatikon (16'000 m2) and Wright Place (12'000 m2). In the east in Wallisellen, on the edge of the Zwicky site, where primarily housing complexes are planned, 4'500 m2 of new office space will become available this year in the business premises Seidenstrasse. Moreover, starting this summer this property will house the Swiss International School, which is consolidating several of its locations in Zurich, thereby further increasing the appeal of the airport region Glattal for international companies. International company relocations will be a cornerstone of the future market equilibrium in Glattal because overall a high level of expansion is expected. According to our estimates, the supply of office property in the Glattal region, including the project "The Circle am Flughafen", will grow just as much as the city of Zurich, adding just over 200'000 m2 in the next five years. That, however, represents growth in Glattal of just over 12% of the office space stock. The competition between new construction projects will therefore be high, and the risk of vacancies for older properties will grow. Overall, it is likely that new office property totaling about 430'000 m2 will be created in the Zurich market by 2017, provided that all projects currently in the planning stage are, in fact, realized. This new office space will join a high existing supply of office space (figure 27). Based on the generous assumption that the average office space per employee is 18 m2, this new office space would offer room for 23'900 office jobs. This is by far more than the growth in officebased employment of the years 2001 to 2008 in the city of Zurich and the Glattal region. Due to the progressive tertiarization and high attractiveness of the region, it will not be impossible, per se, to fill this office space. However, it would require strong economic growth in the coming years, which can not be expected to this degree. Figure 28 Trend in Advertised Rents
Area-weighted average rents in CHF per m2 p.a.
500 450 400 350 300 250 200 150 Zurich CBD Zurich outer business district Zurich extended business district Switzerland
Rental market in the north: strong expansion puts old properties under pressure
Oversupply is in sight
Figure 27 Trend in Advertised Office Space
Advertised office space stock: quarterly totals in m2
450'000 400'000 350'000 300'000 250'000 200'000 150'000 100'000 50'000 0 2006 2006 2007 2007 2008 2009 2009 2008 2010 2011 2011 2010 Zurich CBD Zurich: Extended business district Zurich: Outer business district Supply Total
2005 2005 20062006 20072007 20082008 20092009 2010 2010 2011 2011
Source: Meta-Sys AG, Credit Suisse Economic Research
Source: Meta-Sys AG, Credit Suisse Economic Research
Swiss Issues Real Estate – Real Estate Market 2012
Figure 29 Advertised Rents (Gross) of the Geneva Office Property Market
In CHF per m2 p.a. per 25 hectares for 2010/11; area-weighted average market rent = CHF 385
> 550 501 - 550 451 - 500 386 - 450 301 - 385 201 - 300 151 - 200 < 150
Outer business district Extended business district
Le Grand-Saco nnex
4 2 1 3
Central business district (CBD)
1 Maison de la pai x 2 OMPI/WIPO 3 OMC/WTO 4 Le Fonds Mondial 5 PAV 6 Communaux d'Ambilly
7 Les Cherpines Onex Lancy Carouge
8 Bernex 9 Chêne-Bourg 10 Eaux -Vives
0 1.5 3 km
Source: Meta-Sys AG, Credit Suisse Economic Research, Swiss National Survey Office, Geostat
Tight supply and generally high prices with distortions from slow-moving properties
The level of rents for office properties in the overall Geneva market is generally high. The differences are sometimes quite dramatic in such a small area. On the one hand, office space around the dock area has been advertised at gross annual rents of between CHF 600 per m2 and CHF 700 per m2 – two-and-a-half times more than the area-weighted average price in Switzerland. On the other hand, there have been and continue to be many small- and qualitatively inferior office spaces in between, where the prices drop, dragging down the level of rents locally. The tight market makes it difficult to determine price levels because sought-after office space is often not advertised due to the high demand or landlords do not provide price information in order to negotiate conditions on an individual basis. As a result, the picture presented above is not representative of the rents actually being paid, particularly in the city center. Moreover, larger offerings of office space with information about prices in the extended business district were also rare during 2010/11. Over the past two years, larger office spaces have only been available in the international district, with rents of CHF 400 per m2 to CHF 800 per m2. In the outer business district, larger offerings of office space with a similar high price range were limited mostly to Vernier and the region around the airport. Overall, the influence of both the micro- and the macro-location on the rent is nowhere as low as in Geneva. Instead, the more decisive factors are the structure and age of the office spaces, as well as their accessibility. Building your own property because of a lack of vacant rented area is hardly an alternative in Geneva for someone in a hurry because in no other market does the process of submitting a planning application until receiving actual approval take as long as it does in Geneva. An exception is the planned House of Peace in direct proximity to the train station Geneva-Sécheron. After submitting the planning application in March 2011, the approval followed just one month later. In the future, the 22'000 m2 of office space in that building will house Geneva's three federal centers: the Geneva Center for Security Policy (GCSP), the Geneva Center for Humanitarian Demining (GICHD), and the Geneva Center for Democratic Control of Armed Forces (DCAF), together with the Graduate Institute of International and Development Studies (IHEID). This project with a total volume of CHF 137 mn will receive subsidies of CHF 34.5 mn from the Swiss federal government and CHF 43 mn from the canton of Geneva. The international district is also growing further in other locations. The new building for the World Intellectual Property Organization (WIPO) was completed in the autumn of 2011. The last phase of the WTO buildSwiss Issues Real Estate – Real Estate Market 2012
Growth is focused on the district with international organizations
The train station projects Chêne-Bourg and Eaux-Vives. Including the approved House of Peace. there are almost no large projects by private investors with only a few exceptions. the total of all advertised office space in Geneva was 160'000 m2 (figure 30). building regulations are high. However. The tight market is reflected in the correspondingly low level of vacancies. Prices of advertised office space are stabilizing in the expanded business district at about CHF 450 per m2 p. Figure 31 Trend in Advertised Rents Area-weighted average rents in CHF per m2 p. prices have fallen In the CBD and in the outer business district (figure 31). Renovation instead of new construction: necessity is the mother of invention According to planning applications and building approvals.a.a. Available building land for private investors is becoming increasingly scarce. is complex. Communaux d'Ambilly in Thônex. These projects strengthen Geneva as a location for international organizations. Recently.Economic Research ing is currently underway with the help of an interest-free loan from the Swiss federal government of over CHF 40 mn. vacancies fell from a total of 39'121 m2 in 2009 to 8'581 m2 in 2011. The fact that advertised office space is rapidly rented can be seen in the high volatility over the course of time. There is a danger that companies seeking a location will be deterred by these factors and will move to the neighboring regions on Lake Geneva. This probably corresponds to around 0. from the submission of the application to the groundbreaking ceremony. The international organizations will be strengthened with the new Global Fund to Fight AIDS. will also offer office property. In addition. In Geneva and Carouge. 600 550 500 450 400 350 300 Geneva CBD Geneva outer business district Geneva extended business district Switzerland Price distortions due to very tight markets Figure 30 Trend in Advertised Office Space Advertised office space stock: quarterly totals in m2 180'000 150'000 120'000 90'000 60'000 30'000 0 2006 2006 2007 2007 2008 2009 2009 2008 2010 2011 2011 2010 Geneva CBD Geneva: Extended business district Geneva: Outer business district Supply Total 250 200 2005 2005 20062006 20072007 20082008 20092009 2010 2010 2011 2011 Source: Meta-Sys AG. Credit Suisse Economic Research Source: Meta-Sys AG. representing a record-low value not only for Switzerland but also internationally. there will be an unavoidable conflict of goals resulting from the further expansion of the international district. and the planning process. and services at the same pace in the future as it has in the past. corporate headquarters. On average during the last 10 years. which are scheduled for completion by 2017 in parallel with the new rail line Cornavin–Eaux-Vives–Annemasse (CEVA). which are an important economic factor and which enhance the city's international reputation. The largest renovation projects involve properties of the banks HSBC. However. and the major project in Bernex. prices are rising. if Geneva is also expected to grow as a location for banks. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 33 . the planned volume of construction of office property in the canton of Geneva accounts for just 15% of the overall volume of the five largest office property markets. this trend is probably partially attributable to the fact that slow moving properties in an illiquid market like Geneva distort the price structure downward. The generally rising level is attributable to the fact that office space is increasingly advertised far in advance of its actual completion for early marketing purposes. This project with 25'000 m2 of planned office space is scheduled to be completed in 2015. UBS and Credit Suisse. Given the limited level of new construction activity.3% of the office property stock in Geneva and Carouge. Relief will only come in the long term with the completion of larger development projects such as Praille-Acacias-Vernets (PAV) in Carouge. Les Cherpines in Plan-les-Ouates. some companies are proceeding instead to modernize their properties. Tuberculosis and Malaria building that is located not far from the airport on the edge of the international district. In the fourth quarter of 2011. 43% of the planned office investments in the canton of Geneva were renovation-related projects – in comparison to just 22% in Switzerland overall. it is becoming increasingly difficult for companies to find affordable housing for their employees because of the overheated housing market.
Farther east and northeast towards Ostermundigen and Ittigen. fluctuated between CHF 180 per m2 and CHF 250 per m2.. However. that the consolidation of government. The Federal Office for Buildings and Logistics set a good example in 2010 and relocated to Bümpliz.320 261 . As a result. the groundbreaking ceremony was held in November 2011 for the new government centers in Zollikofen (Federal Office of Information Technology and Systems) and Köniz (Swiss Federal Office of Public Health). The Federal Administration remains particularly active in this field. The facility management department of the Federal Office for Buildings and Logistics is still working on its real estate strategy for civil federal government buildings. there are.5 3 km Muri 4 8 Köniz Wor b Müns in gen Source: Meta-Sys AG. differences locally. This value falls to CHF 300 to CHF 320 as you move towards the eastern and southwestern CBD. savings in rental costs. not only in a local comparison but also when compared to all of Switzerland.e. in fact. i. most of the advertised offers for office space in the extended business district.160 < 100 0 1. Depending on the size of the office space. office space was offered at a two year average price of just under CHF 350 per m2.4 The process of consolidating locations in Ittigen (UVEK) is at an advanced stage.243 161 . Swiss National Survey Office. Office spaces were even significantly more affordable in the extended business district. Credit Suisse Economic Research. It is not surprising. rents are extremely attractive.a. As can be seen in the strategy paper "Accommodation Concept 2024.Economic Research Berne Figure 32 Advertised Rents (Gross) of the Office Property Market in Berne In CHF per m2 p.. its primary goal is improved cost effectiveness. in the central business district (CBD) directly east of the train station. Overall. area-weighted average market rent = CHF 243 Projects 1 Itti gen 2 Zol likofen 3 Wankdorf-Cit y 4 Bahnhof Güml igen 5 Guisanplatz 6 Schanzenpost 7 Europaplatz 8 Köniz Liebefeld 1 Itt igen Münchenb uchs ee 2 Zollik of en Outer business district Extended business district Central business district (CBD) 3 5 Ost erm und ig en Ber n 6 7 > 320 281 . the advertised rents fell to below CHF 200 in an area-weighted average.a. with few exceptions. mainly due to the micro-location. page 38 f.. especially because it anticipates a growing demand for office space. Swiss Issues Real Estate – Real Estate Market 2012 34 . The average rent for advertised office property in both years was CHF 243 per m2 p.220 101 . The capacities that became vacant in Berne's Monbijou district will be gradually occupied by the State Secretariat for Economic Affairs (Seco) as part of the effort to consolidate its locations. the location and the amenities.and corporate locations continues to progress in the outer business district in Berne.260 221 ." this initiative is serious and geared towards the long term. For example. Berne is the most affordable of the five largest Swiss office property markets in terms of the advertised office space during the years 2010/11. Facts and Trends. per 25 hectares for 2010/11. there are plans to distribute 14'000 jobs in the Federal Ad- … potential savings lie dormant in the outer business district 4 Refer also to Swiss Issues Real Estate – Real Estate Market 2011.280 244 . particularly in the outer business district. then. The potential savings are immense. Geostat Despite a homogeneous price structure and moderate rental price levels .
shows that the upheavals are already occurring (figure 33). These expansions in office space are likely to breathe life into the office property market in Berne in the next few years. Although the public sector dominates Berne's CBD and this area is set to remain stable in the coming years. Nevertheless. the moving-in date is scheduled for 2014. it is unlikely that severe negative consequences in the form of overcapacity will result from the current expansion. further office space in Wankdorf City is likely to be available for occupancy as early as 2013. At the same time and at the same location.and private companies are also attracted to the edge of the extended business district and even beyond. In addition to the projects already mentioned. Swisscom has announced the start of construction for a new business park in March 2012. Not far north of the newly created district Wankdorf City. After all.and outer business regions will be impacted by such upheaval. because the new locations are designed not just for consolidation of existing facilities but also to absorb the anticipated growth in employment in the Federal Administration. particularly in the extended business district. Figure 34 Trend in Advertised Rents Area-weighted average rents in CHF per m2 p. 34'000 m2 will be built for Swiss Post. Second. six of these locations are outside the CBD. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 35 . Wankdorf City is progressing and Swisscom will become a neighbor of the Federal Administration in Ittigen Semi-public. the share of federal employees in the CBD is expected to remain constant at 10% until 2024. Credit Suisse has now moved to its new property in Gümligen and PostFinance will relocate to near Guisanplatz. to put it positively: Berne's office property market is awakening from its long slumber. That means the extended business district in particular will suffer from relocations.Economic Research ministration to eight locations by 2024. it is likely that the influence of these efforts on the office property market will be held in check. From that point on. That is where the corporation's central functions and the divisions Infrastructure and Real Estate are to be consolidated starting 2014 on 35'000 m2 of office space. as well as the volatile trend for advertised rents compared to the stable situation in the CBD and in the outer business district (figure 34). companies strengthen Berne as a business location with the new properties. the challenges in the surrounding areas are set to grow – or. not every company is willing to pay the associated price premium for new. Nevertheless. 350 Berne CBD Berne extended business district Berne outer business district Switzerland The office property market in Berne is showing signs of life Figure 33 Trend in Advertised Office Space Advertised office space stock: quarterly totals in m2 90'000 Berne CBD Berne: Extended business district Berne: Outer business district Supply Total 300 60'000 250 30'000 200 0 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 150 2005 2005 20062006 20072007 20082008 20092009 2010 2010 2011 2011 Source: Meta-Sys AG. In February 2011. the SBB submitted the planning application for its new property in the north of Berne. which will be used by 2'000 Swisscom employees based on flexible use of office space (desksharing). According to the Accommodation Concept. In contrast. First. as well as the sharp jump in supply. in Ittigen. modern office space with excellent transport links. The recent expansion in supply in the third quarter of 2011. It is likely that primarily older and suboptimally developed stock properties from the extended. the Federal Administration would like to reduce the share of employment in the outer districts of the city from 49% to 44% and increase the share in the agglomeration of Berne accordingly to 23%. the fluctuations create opportunities for smaller companies to obtain office property in attractive locations at moderate prices. The planning for Wankdorf City is progressing. Last year's increase in vacancies following a three-year decline.a. For office property in the extended business district. As with the Swiss Post and the SBB. 1'700 workspaces will be available in 22'000 m2 of office space. has created disruption. the sandwich location between an attractive city center and the easily accessible periphery will thus become a problem because it forces tenants to make compromises in both respects. Credit Suisse Economic Research Source: Meta-Sys AG.
area-weighted average market rent = CHF 260 Extended business district > 400 351 .300 201 . In the future. Aeschenplatz and the SBB train station was advertised at CHF 310 to CHF 340. The new office property of this project will be home to the Basler Kantonalbank with 5'500 m2 of office space. The first portion of the Basler Südpark (Baufeld D) is also ready to be occupied.a. the eastern portion of the CBD in the Aeschenvorstadt area offers larger and more modern office spaces. The canton's government will use BKB's relocation from Spiegelgasse to continue the process of concentrating its locations.260 151 . which has resided in the Jacob Burckhardt House since 2009. In addition. for example. page 40 f. Office property in the eastern part of the CBD on the axis Wettsteinbrücke. Credit Suisse Economic Research. Relocation of the Basler Kantonalbank (BKB) to the Südpark enables its administration to consolidate locations 5 Refer also to Swiss Issues Real Estate – Real Estate Market 2011. Swiss National Survey Office.a. In this way the canton's government is strengthening the Spiegelgasse location. Other buildings on the Spiegelgasse should make way for replacement new buildings for additional workspaces from other government agencies. The canton purchased the property back in 2008 together with the former property of Sympany Insurance.a. Although Basel's Old Town offers central locations in an attractive urban environment. However. A red band of disproportionately expensive rental properties extends from Wettsteinplatz northeast of the CBD through the city center to the SBB train station and further along the tram line to Binningen. which offers up to 30'000 m2 of office space in total. employees of the canton's Finance Department will occupy BKB's offices. Geostat East-West price differential in Basel's CBD The area-weighted average rent in 2010/11 for office property in the Basel market was CHF 260 per m2 p. the municipality located southwest of the extended business district.5 The Stücki Business Park. they suffer somewhat from comparatively poor accessibility due to the increased distance to the SBB train station and the access to the freeway. more expensive than in the western part of the Old Town. Facts and Trends. the renovated Markthalle will offer a further 4'000 m2 of office space for private tenants.150 4 Allsc hwil Birsfelde n < 100 2 1 Binn ingen 7 6 5 Mu tte nz Central business district (CBD) Obe rwil Mü nc he nstein 9 Pr atte ln Th er wil Reina ch Ar lesh eim Outer business district Lie stal Do rna ch Ae sch 0 1.Economic Research Basel Figure 35 Advertised Rents (Gross) of the Office Property Market in Basel In CHF per m2 p. have a stronger influence on the analysis than the generally smaller offices in the Old Town. per 25 hectares for 2010/11. where the advertised rents for office property were in line with the area-weighted average of CHF 280 per m2 p.350 Riehe n Projects 1 Süd-Park 2 Martkhalle 3 Areal St. which. was completed just prior to the end of 2011.200 101 .400 301 . In the spring. Johann: Novartis 4 Wettst einquartier: Roche 5 Transit lager 6 Cit yGate 7 Grosspeter Tower 8 Areal E rlenmatt 9 Helveti a/Ceres Tower Rhein felden Basel 3 8 261 . the current expansion in office space is not a threat because there are no more major projects in the next one to two years. Office space for just-completed projects outside the CBD is currently being marketed. Swiss Issues Real Estate – Real Estate Market 2012 36 . because of the area-based weighting approach.5 3 km Source: Meta-Sys AG.
That represents 4. well-known development projects are announcing expansion plans. In two further buildings about 18'000 m2 of incremental office space is planned in the medium term. However. and the Roche Tower is set to house 2'000 of the corporation's employees starting at the end of 2015. the supply in the CBD is declining (figure 36). The Novartis campus is growing continuously.and outer business districts keeps the price disparity low between the three regions (figure 37).2% of the estimated office space stock of the economic region Basel City and exactly the annual growth rate of the annual stock expansion during the last three years. Credit Suisse Economic Research Source: Meta-Sys AG. the pharmaceutical sector's building plans hang over the office property market like the sword of Damocles. 350 Basel CBD Basel outer business district Basel extended business district Switzerland Average office space expansion of the last three years is likely to continue at a similar pace Slight correction of rent prices is likely to stabilize in 2012 Figure 36 Trend in Advertised Office Space Advertised office space stock: quarterly totals in m2 100'000 Basel CBD Basel: Extended business district Basel: Outer business district Supply Total 80'000 300 60'000 250 40'000 20'000 200 0 2006 2006 2007 2008 2008 2009 2009 2010 2010 2011 2011 2007 150 2005 20062006 20072007 20082008 20092009 2010 2010 2011 2011 2005 Source: Meta-Sys AG. The increased supply of office space since the second quarter of 2011 is mostly the result of the still vacant and advertised office spaces at the Stücki Business Park. provided that the planning for further projects is held in check and the pharmaceutical companies retain their commitment to Basel as a business location.a. about 90'000 m2 of office space is likely to enter the market by 2017. The additional building code framework conditions are in place for the further development of the City Gate project now that the building-zone plan has been changed. and Huningue have initiated a partnership for the long-term development of Basel's port site and are outlining the development of new residential and working districts on 175 hectares on both sides of the Rhine over the coming decades. For example. Second. about one third of the planned 28'500 m2 of useful floor area will be office space.and long term. According to the SBB. It is likely this is only a slight correction of advertised rents that had previously risen considerably.and the medium-term expansion of office space that is reflected in the planned projects. In 2012. new office property is also set to be built by 2015 together with the renovation of the transit site in the newly planned district of the Dreispitz Industrial area. slightly less concern is necessary from a supply perspective. The problem of Basel is therefore less the expansion of supply than the weak demand. which is the primary usage for the site. Accordingly. The relative increase in attractiveness of the larger and newer office spaces in the extended. the trend for advertised rents in the centraland extended business districts has been in decline since the middle of 2010. In contrast. The specifically designated total office space at the moment amounts to 50'000 to 60'000 m2 without the Roche Tower over the next five years. A further 11'000 m2 are likely to be created in a high-rise at the Grosspeter site. and by 2020 the zoning plan Erlenmatt will provide 64'000 m2 of office space for offices and businesses. Figure 37 Trend in Advertised Rents Area-weighted average rents in CHF per m2 p.Economic Research Big plans in the mediumand long term following the limited short-term expansion Basel has big plans in the medium. Weil am Rhein. this office space will be in addition to housing.a. Basel is likely to master both the current. Basel has recently demonstrated its strong will to change and grow with its published visionary master plan "3Land". Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 37 . in addition. If you assume. that 30'000 m2 of office space will become vacant during this time period through the concentration of locations by the pharmaceutical companies. The new home of BKB – the Basler Südpark – will be supplemented by 2017 with an 81 meter tall high-rise. The cities Basel. First. with a planning horizon until 2030. rents in the CBD and in the extended business district will probably fluctuate just below CHF 300 and in the outer district between CHF 200 per m2 and CHF 250 per m2 p.
Given the only vague planning for new projects in these municipalities. Two further stages are awaiting the start of construction until a higher pre-lease rate has been achieved. the decline in 2011 to 21'000 m2 shows that this was a temporary problem.Economic Research Lausanne Figure 38 Advertised Rents (Gross) of the Office Property Market in Lausanne In CHF per m2 p. this scarcity in the market is reflected by the vacancies that have practically fallen by half. Geostat Comparatively low rents attract jobs from the CBD to the west Lausanne's office property market is now the second most expensive market after Geneva. After the vacancies in the district Ouest lausannois rose from 12'000 m2 to just under 50'000 m2 in 2010. and they were lower further towards the west in the district Sébeillon/Malley at between CHF 200 to CHF 250. Of the planned office space totaling just over 30'000 m2 in the Business Village in Bussigny-près-Lausanne.470 331 .400 261 .5 3 km Extended business district Central business district (CBD) Source: Meta-Sys AG.a. to which investors reacted with cautious planning. are attributable to expensive individual office spaces that do not adequately reflect the local price structure.570 401 . are considerably higher than this average value.a. In the emerging Flon district that borders in the west. Facts and Trends. rents in the CBD. where offices were advertised for just below CHF 400 up to CHF 460. However.200 < 100 Projects 1 Business Village 2 Champagny Business Center 3 Malley Centre 4 Delta 6 Lake Geneva Park 1 4 Outer business district Renens Ecublens Prilly 3 Morges 2 6 Pully Lausann e 0 1. Given these significant price differences in a small area.6 The isolated cases of higher price levels. Bussigny-près-Lausanne or far in the north in Villars-Ste-Croix. Just like in Geneva. per 25 hectares for 2010/11. 9'600 m2 has been realized until now. as in the north. The approximately 5'000 m2 of office space is expected to be completed in 2013. Swiss National Survey Office. proximity to the train station has no identifiable effect on rents. Credit Suisse Economic Research. including the Champagny Business Center in the lakeside municipality St-Sulpice between Lausanne and Morges. the average office space rent in 2010/11 across all business districts was CHF 330 per m2 p. The suburban municipalities in the outer business district are also the exception in the otherwise generally tight office property market.330 201 .260 101 . rents were lower. Higher vacancies reveal temporary and isolated selling problems only in the district Ouest lausannois 6 Refer also to Swiss Issues Real Estate – Real Estate Market 2011. area-weighted average market rent = CHF 330 > 570 471 . and their spread is also high. page 42 f. it is likely that further expansions in office space will be limited in the near future. Sometimes the advertised rents even varied over the two-year time period within an individual building between CHF 350 and CHF 700. it is not surprising that the employment dynamics of the western extended business district outshine those of the CBD. There are only a few specific new projects. at an average CHF 320 per m2. According to advertised rents. The groundbreaking ceremony took place in December 2011. Swiss Issues Real Estate – Real Estate Market 2012 38 . for example in Crissier.
In contrast. the possibility that advertised rents in Lausanne's CBD will rise rapidly and permanently above the square meter price of over CHF 450 per year appears just as unlikely as a permanent price level in Geneva below CHF 450. Since the second half of 2010. In order that growth towards the west does not end up as ill-thought-out overdevelopment of the extended agglomeration. Accordingly. and Prilly – is being carried out on a large scale and for the long term. where the likewise limited and stable supply of office space. 450 400 350 300 250 200 150 Lausanne CBD Lausanne extended business district Lausanne outer business district Switzerland CBD-rent: buoyancy in Lausanne is leading to price convergence on the lake Figure 39 Trend in Advertised Office Space Advertised office space stock: quarterly totals in m2 120'000 100'000 80'000 60'000 40'000 20'000 0 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 Lausanne CBD Lausanne: Extended business district Lausanne: Outer business district Supply Total 2005 2005 20062006 20072007 20082008 20092009 2010 2010 2011 2011 Source: Meta-Sys AG. Credit Suisse Economic Research Source: Meta-Sys AG. this represents new office property totaling 180'000 m2 in a sought-after location.a. particularly in the CBD (figure 40). Generally it is the prices of larger office spaces that continue to accelerate throughout the entire office property market in Lausanne because the price trend flattens out somewhat without the effects of area-weighting. These are interesting in many respects. the supply of office space in the outer business district almost doubled from 2009 to 2010. With this increase in office space. They offer significant space and good transport links. Given the economic slowdown in 2012. Figure 40 Trend in Advertised Rents Area-weighted average rents in CHF per m2 p. reflects the intact demand amid limited construction activity. it is probable that prices in both CBDs will fluctuate around the CHF 450 level on an area-weighted basis. Assuming an average office workspace size of 18 m2. Malley Centre is intended to become the core of a new future part of the city. advertised office space has varied between 60'000 m2 and 90'000 m2 with an overall sideways trend (figure 39). these municipalities are also more affordable from a housing perspective. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 39 . The price trend in Lausanne is continuing its upward movement. Such municipalities themselves have been active. Renens. Since 2006. particularly for large companies. The shifts in supply between the business districts is an accurate reflection of the market situation in Lausanne: As with the vacancy trend in the district Ouest lausannois. office space in the extended business district is in demand. Area-weighted rents have risen sharply since 2008. The location between Geneva and Lausanne enables employees from both major urban areas to commute against the rush-hour traffic. Lausanne and the neighboring municipalities could pit themselves against the competition along the lakeside towards Geneva. in some cases at locations near the lake. an international competition for urban development was announced as part of the development plan for Lausanne-West. there is less being advertised than in the CBD. Furthermore.Economic Research Long-term district development can ease pressure on the CBD In contrast. the Businesspark Terre-Bonne in the municipality Eysins near Nyon is expanding to 43'000 m2 by 2013. For example. where 10'000 jobs are expected to be created in 83 hectares across five districts by 2030. with further service areas springing up between the office property markets of Lausanne and Geneva along Lake Geneva. That shows that large office spaces in the CBD are in demand and that they have their price. This trend means that advertised rents along Lake Geneva continue to move more into line with one another. The opposite price trend has been seen in Geneva's CBD since 2009. together with the rising prices. planning in the development district Malley Centre – the tri-municipality area of Lausanne. The marketing of this office space is explicitly aimed at multinational companies seeking a location on Lake Geneva. the locations are easier to reach than the central areas in Geneva and Lausanne for many of the municipalities located away from the lake.
Rents: The area-weighted average quoted rent for office property in Switzerland has been around CHF 250 per m2 p. Moreover. Projects such as Wankdorf City (Bern). who are prepared to pay high prices. Overall. meaning it is likely to empty all the more fiercely in 2013 and lead to major challenges.and engineering practices.Economic Research Outlook for Office Property 2012: The Calm Before the Storm? The Swiss office property market has coped well with the economic turbulence of the past three years. particularly in the larger urban centers in the German-speaking part of Switzerland. or ones that are already in progress. Vacancies in innercity locations are meanwhile unlikely to be avoided without price concessions. Accordingly. In 2013 in particular. when lots of space will come on to the market. The locations and sizes of office space being vacated are aligned in many places with the small-business-based structure and requirements of growth sectors. if only for the lack of alternatives. Rents. are likely to be dampened again by the expansion of supply. IT companies benefit across the board from process optimization and automation efforts. particularly in the German-speaking part of Switzerland. Support for growth will come from construction-related service providers. even if not quite as sharply as it has been rumored. and business service providers that are on catch up. the overhang risk is expected to increase. in particular in older spaces. Crisis specialists in the sub-sectors legal. Performance: The flat-lining of rents and the increasing risk of vacancies. which broke out of a narrow range and rose in 2011 for the first time in seven years. (gross) for the past seven years. that fact that no meaningful oversupply developed during 2010/11 can be seen as evidence of sound planning. vacancies will occur in 2012 in the major urban centers of German-speaking Switzerland. In corporate services. By contrast. as well as the relocation strategies of large companies. Supply structure: Challenges are growing in the medium term in the north of Zurich and in the markets of Berne and Basel due to planned projects. thanks to higher value returns. The relocation of workspaces by large companies will increasingly lead to upheavals in the city centers. In the 4th quarter of 2011. Given the modest employment trends in the classic office sectors. but can also be attributed to the fact that tertiarization within industry is progressing and that demand from industrial companies is growing.a. Growth in employment in the classic office sectors will be moderate once again. Demand. By contrast. Supply and Market Outcome Demand Development of office-based employment: The overall delayed reaction of office employment in the economic cycle and the structural growth of office based jobs in industry sectors provide for modest growth in employment of 8'000 positions in this year's subdued economic environment. IT companies. In contrast. are likely to exert moderate pressure on net cash flow returns. There are unlikely to be any seismic shifts on the office property market in 2012. total returns will remain flat. there is a backlog of work to be accomplished because of caution in the past. the pipeline. the supply on the arc around Lake Geneva continues to be tighter. It is unlikely that these vacancies will be rapidly filled again by smaller companies from growth sectors without price concessions. which is well-stocked with large projects. office properties remain in the focus of foreign investors as well as domestic institutional investors. is targeted across most of 2012. Market Outcome Vacancy rates: Because of relocation strategies. the risk of vacancies in German-speaking Switzerland is growing in the medium term due to large projects.and management consultancies are also stabilizing the employment trend in an anti-cyclical fashion. Background Outlook Supply Planning activity: The high expected growth in stock is sustaining the tendency towards oversupply. Yet these relocation strategies are likely to have less of a negative impact than feared. Roche Tower (Basel). employment figures in the financial services sector are likely to fall. average rent at CHF 269 distanced itself from this mark for the first time and is likely to remain stable at this level in 2012. Situation in individual sectors: The strong construction market continues to provide orders to architect. and Glattpark (Zurich) are proceeding and will lead to noticeable growth in the stock of office space starting in 2013. Source: Credit Suisse Economic Research (Germanspeaking-CH) (West-CH) Swiss Issues Real Estate – Real Estate Market 2012 40 .
demoralized from the steady stream of bad news from abroad. the economy was growing and the crisis appeared to have been overcome. Numerous crisis reports and negative economic expectations unsettled Swiss consumers.1 standard deviation (consumer sentiment. Between August and December 2011.Economic Research Retail Property The retail landscape is facing difficult conditions – gloomy consumer sentiment and the ongoing strength of the franc – that have pushed nominal sales through the floor. The expansion of floor space can be considered over. Credit Suisse Economic Research Are consumers too pessimistic? But is the situation really that bad or are consumers. Although consumer sentiment is in negative territory. more than any other time over the past 20 years. Another sign that the situation is not that bad are the figures for new auto registrations. negative news started to build up and the exchange rate environment worsened. Only the falling trend for rents does not really fit into this picture. with consumer tourism the main factor affecting retail. The only blot on the landscape was weak retail sales.5% 0% -1. until we find that the falling trend generally impacts smaller properties as the losers of structural change. Figure 41 Retail Sales and Consumer Sentiment Consumer sentiment: index. the actual data tells a different story. even though the employment market remained robust almost until the end of 2011 thanks to a solid domestic economy (figure 41). consumers believe that now. retail sales: year-on-year change in % 3 2 1 0 -1 -2 -3 1995 +/. consumer sentiment began to deteriorate. Swiss Federal Statistical Office. Yet the situation for consumers appears to be better than their mood suggests. being overly pessimistic. left scale) Consumer sentiment: old index (standardized.5% -3% 1997 1999 2001 2003 2005 2007 2009 2011 Source: State Secretariat for Economic Affairs. During the course of the year. left scale) Consumer sentiment: new index (standardized. left scale) Retail sales real (three-quarter average) 6% 4. On average for the Swiss Issues Real Estate – Real Estate Market 2012 41 . It was unclear for some time whether consumer tourism was already starting to leave its mark or whether the different timing of public holidays was responsible.2% more new cars were registered than in the same period last year. is the best time to make major purchases. Despite the strength of the franc. on average 12. This is also reflected in the small number of approved large projects. Such consolidation has contributed to a stabilization in the retail property market that is reflected in constant vacancies and declining supply. Although retailers are looking to the future with their usual optimism and most intend to expand their floor space.5% 3% 1. At the same time. particularly in the regions near the borders. the Swiss economy was still in excellent shape. Demand Uncertainty dampens consumer confidence At the start of 2011. when asked.
and mopeds) was considered. stores in Switzerland located near the border complained of a collapse in the number of clients.e. consumer tourism increased sharply last year. motorcycle.55 on average. It is important to note that the survey data was collected in 2005. In addition. For example. This rises to 15 minutes (median travel time) for the purchase of non-food items. nominal sales and operating profits came under pressure. According to various calculations. This is likely to suggest that the volume of purchases during shopping trips abroad is significantly higher than for trips within Switzerland. that consumers tolerate even longer travel times for shopping trips abroad. even more expensive compared with abroad.. Since 2006. it is equally possible to conclude that the economic situation of the population is not nearly as bad as consumer sentiment would suggest. Domestic retail stores located in the regions close to the borders are being particularly hard hit by consumer tourism. as well as transport vehicles. As a result. If the shopping destination is abroad. the SNB's initiatives probably slowed the growth in consumer tourism somewhat. the amount of tolerated travel time doubles. The median travel time abroad is 20 minutes for food purchases. Price reductions by retailers have been insufficient to counter the shopping trips abroad. the number of approved export certificates has risen by 77%. the strong franc boosted consumer tourism. The results of this accessibility analysis are shown in figure 42. The strong franc hit retail sales on two fronts. To be sure. Thanks to the intervention by the SNB in September. the increased number of new auto registrations. It is difficult to quantify the impact of this phenomenon. meaning that a portion of sales went abroad. and 30 minutes for other purchases.4% in the third quarter. On these roads it is likely that you can reach shops on the other side of the border within a short period of time. Retail sales suffer from the strength of the franc The moving average of retail sales in real terms was 0. there were 10. but have been unable to fully contain it. In order to illustrate the threat of consumer tourism for retail properties at regional level. from 25% to about 33%. However. we estimate that the flow of purchasing power abroad as a result of consumer tourism is at least CHF 4 to 5 bn. the exchange rate situation reached near-dramatic proportions.9%. Yet. But sales figures in nominal terms were in negative territory (-1. the border region was divided based on how quickly the available border crossings can be reached with private motorized transport (without traffic jams or waiting time). Secondly. The uncertainty in the markets was so high that investors rushed headlong to the safety of the franc. i. This indicates that consumers accept a considerably longer travel time or have a higher travel tolerance for shopping trips abroad. and Migros reacted to the downturn in sales by cutting 45 jobs in Ticino and 125 in the Geneva region. depending upon the product and the sector. the reported share of Swiss clients in Constance has risen by one third.Economic Research year (January to December 2011). According to the NAVTEQ street classification: border crossings on streets with the function class 1 and 2 (highest and second highest level). Consumer tourism hits domestic retail sales Travel time tolerance at least twice as high for shopping trips abroad Accessibility of border crossings with private motorized transport 7 8 The 2005 traffic microcensus is a survey of the Swiss Federal Statistical Office and contains information on the purchasing behavior of the Swiss population. the potential for savings has risen considerably. There can be no doubting this trend if we look at the number of approved value-added tax forms in cross-border trade with Germany. given today's exchange rates. Still. The analysis was limited to the accessibility of these crossings due to a lack of data about retail stores in regions abroad that are located near the border. or about 20% higher than in 2011. Last year. Firstly. According to the 2005 traffic microcensus survey from the Swiss Federal Statistical Office7. in a year when the EUR/CHF exchange rate was 1. but the anecdotal evidence is striking. Indeed. having already grown in 2010. the franc stabilized against the euro. with annual growth of 0. the median travel time spent by the Swiss in private motorized transport for the purchase of food is 10 minutes. which was already a high-price location. In calculating the median travel time for a shopping trip.6% more than last year. retailers were forced to reduce their prices so much that negative inflation of 2. Swiss Issues Real Estate – Real Estate Market 2012 42 . As a result.7%). which grew by 36% in the first three quarters of 2011. the franc remains overvalued on a long-term basis. only travel time (excluding waiting time) with private motorized transport (automobile. after all. motorbike. making shopping in Switzerland. its influence is likely to cause sales to collapse well into the Mittelland. It can therefore be assumed. Despite a mixed Christmas business sales in real terms ended 2011 in positive territory. only the main border crossings8 were considered. Based on older studies and the findings mentioned above. should not be overestimated because price reductions due to the strength of the franc could have meant that certain purchases have been brought forward.6% resulted – a figure that is unprecedented in the history of Swiss retailing. it is likely that consumer tourism increased by an estimated 20% to 30% compared to 2010.
and especially the northern border from Ajoie via Basel City to Schaffhausen. Taken together.30 minutes 30 . are the main casualties of the increased outflows of purchasing power. The hefty price differential is enticing for consumers from this zone more for occasional large shopping trips on Saturdays or for day shopping trips in nearby foreign countries. the Kreuzlingen area and the entire Rheintal are included as well. other regions are being heavily squeezed by the border. From these locations it is hardly likely that daily shopping trips are taken abroad. it can be assumed that the travel time beyond the border to the next retail store is considerably longer than in the rest of Switzerland.60 minutes Source: Credit Suisse Economic Research.Economic Research Primarily the populous northern Mittelland.45 minutes 45 . you can say that 17%. Due to their topography. or about one-sixth of all Swiss retailing. Basel Land. meaning that the effects tend to be overestimated. and Thurgau. Figure 42 Regions Threatened by Shopping Tourism Accessibility of important border crossings with private motorized transport by travel time < 10 minutes 10 . The range between ten and twenty minutes extends far into numerous other cantons such as Jura. Farther east. a trip abroad is gladly undertaken in these regions near the border for daily errands such as grocery shopping. the entire canton of Geneva. NAVTEQ. which is severely threatened by consumer tourism. these shopping trips occur less frequently. The need for non-food items is probably covered abroad given that the willingness to tolerate travel time for shopping trips abroad for non-food items is 30 minutes on average. Only a few municipalities are affected in the cantons Graubünden and Valais. The share of large retailers and non-food specialty stores that is affected in this range is about 11%. occasionally a weekly trip to a hypermarket might be made. including Sottoceneri. as well as Geneva and Sottoceneri. The phenomenon is not equally prevalent in all parts of the country for topographical reasons. are threatened by consumer tourism The dark blue border designates all the regions that are located less than ten minutes from the next border crossing. To be sure. In contrast. Geostat Put back consumption also threatens retailers further away from borders Regions located more than 20 minutes from the next major border crossing have adequate distance protection with regard to the purchase of daily essentials. The results for the cantons of Valais and Graubünden need to be treated with caution.20 minutes 20 . Swiss Federal Statistical Office. Swiss Issues Real Estate – Real Estate Market 2012 43 . Around 15% of all Swiss food retailers are located in this area. but they still can be painful for retailing because many errands are put back until when the larger shopping trip/shopping purchases take place. which is entirely located in this area. Assuming that a retail store can be found within ten minutes of crossing the border.
a continued fall in retail prices should be expected in the current year. Figure 43 Building Permits/Applications for Retail Properties In CHF mn. growth would have been an estimated 0. Immigration. For the time being.50 mn 1 . As in 2011. Whereas the threat from consumer tourism is not likely to increase further due to the SNB's intervention. Without the immigration of about net 75'000 people last year. several more applications were submitted than were actually approved – they are now moving in a more-or-less synchronous manner at levels that are below the long-term average (figure 43). Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 44 . But the trends abroad show us where we are heading. the phase of floor space expansion can be regarded as over. retail sales performance will be held back by poor consumer sentiment. contributed to this trend. a decline in demand for retail property must be expected. This development is likely to leave its mark on the retail property market gradually over the next few years. whether domestically or abroad. in CHF mn. promises to provide some relief. moving twelve-month total 1'600 1'400 1'200 1'000 800 600 400 200 1995 1997 1999 2001 2003 2005 2007 2009 2011 Permits Applications Average value of permits Average value of applications Figure 44 Building Permits by Project Size New buildings by project size. regardless of the distance to the border.3 percentage points lower just in food retailing alone. albeit to a lesser extent than in 2011. its impact was not enough to counter the effects of the strong franc. But this decline is likely to affect primarily the regions near the border that are suffering from the effects of consumer tourism. Despite the stabilization of the exchange rate situation. After planning applications and construction approvals moved in opposite directions in 2009 due to the financial crisis – because of changes to projects.10 mn 20 . Other areas are still impacted primarily by the effects of structural change and the shift in demand for floor space towards larger units and locations with economies of scope and/or higher-quality visitor traffic. shopping online. such as those reported by the large retailers Coop and Migros reported last year. We now forecast only moderate growth in retail sales in real terms for 2012 because as long as uncertainty about the outcome of the euro crisis persists and unemployment climbs. It is likely that falling floor space sales. is another channel that is affecting retail property. Given these assumptions. but following the massive increases seen in 2010 and 2011 is unlikely to become even more acute.Economic Research E-commerce is an additional threat to retail property Besides a physical trip abroad. which remains high and has a strong effect on consumption.20 mn > 50 mn Source: Baublatt. The sharp increase in consumer tourism will also continue to weigh on Swiss retailers in 2012. Immigration proved to be a welcome support for retailing. However. online shopping is competition that is becoming increasingly prevalent and which has received an additional tailwind from the attractive exchange rate. the forecasted nominal decline in sales will primarily be due to falling prices. Immigration is providing some relief Supply We have seen the situation with regard to the expected expansion of retail property return to normal in the past two years. Shopping online is not yet that common in Switzerland. Credit Suisse Economic Research Source: Baublatt.5 mn 10 . moving 12-month total 1'400 1'200 1'000 800 600 400 200 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 < 1 mn 5 .
particularly for businesses with entertainment devices or with perfumes. Areas of business that avoid the competition typically include retail stores that have a very specialized selection. laundries. planning changes. even though the chances of these plans being realized are not equally likely in all locations. we should not write off the chances of new floor space just yet because there is still a gradual shift towards larger units. shoes. Such centers arise because economies of scope and density benefit all participants. the management of existing retail properties and the search for new locations is and remains a decisive factor for success. eyewear. or other delays by investors or builder-owners. the presence of other stores that attract the crowds also creates agglomeration benefits. accessories. The pause in the permits for new construction and the rapid overcoming of the crisis has seen the supply of retail property recede once again. Outside of such centers. it is not just the micro-location that is decisive for the quality of the location. we are seeing a more cautious attitude toward project planning. The trend since 1995 shows that approval activity moves in cycles. However. is likely to be responsible for this lack of major projects. After the financial crisis led to a sharp increase in advertised retail property. a recovery started in the middle of 2010 based on a level of just under 280'000 m2 of advertised existing and new construction property. The uncertain economic environment. This can be attributed to withdrawals. hairdressers. in 2009/10 the major shopping centers with floor space above 10'000 m2 registered a sales performance of between 4% and 5%. a visit to a store is Proximity to competitors can increase sales 9 Only businesses in Swiss agglomerations and only stores with a minimum of 1. ice cream. as well as perfumeries and jewelry. bicycles. Swiss Issues Real Estate – Real Estate Market 2012 45 .6 full-time equivalent positions were considered. the supply of retail property. far more than smaller shopping centers with 1. this level has continued until today. More than half intend to expand their retail property within the next year through expansion. the demand for retail property appears to have remained intact up the end of 2011.2% and overall retail with approximately 1%. 10 These are travel agencies.to medium-sized retail properties of under CHF 20 mn. we analyzed the situation of 32'000 retail businesses9 regarding their direct neighbors within a linear radius of 150 meters. repair shops for shoes or leather. clothing. For example. Moreover. on average by 5. has fallen below precrisis levels. entertainment devices. seafood. and all involve investments at the lower end of the range. and beauty salons. Businesses that seek proximity to competitors can be found primarily in clothing. Not a single major project has been approved since the end of 2009. design is more important for eyewear. there were phases when not a single large project was approved. for example. musical instruments. Price comparison is likely to play a central role. Currently. What is interesting here is primarily which retail sectors. The leading retail representatives showed their usual optimism in a survey conducted in the fall of 2011.4%. at about 127'000 m2.Economic Research The period of major projects appears to be over The dwindling number of approvals for large projects with a construction volume of more than CHF 50 mn is a further indicator (figure 44). renovation. permits for large projects have practically come to a standstill. during the recent crisis in 2009 or following the bursting of the dotcom bubble in 2000). the list of planned shopping centers is long. as well as a degree of saturation in the Swiss shopping center landscape. the number of approved projects can be counted on one hand. Accordingly. To shed some light on this area. but also the design and/or the price of the goods. Currently. dry cleaning shops. In times of economic uncertainty (like. such as fruits/vegetables. and shoe makers. These are all nonfood specialty businesses in which the focus lies not only on functionality. Only larger formats such as shopping centers and specialty markets earn a longer honeymoon because these formats are able to divert streams of visitors over the course of time. or branches of trade10 also with leased facilities in retail property. Nevertheless: size pays off Declining supply of retail property Agglomeration Benefits in Retailing What types of stores in retail and commerce attract each other? In difficult times. Retailing is constantly in transition. and shoe stores. In the range of CHF 20-50 mn. and more by the new discounters and the specialty markets springing up. sought proximity to each other. In these areas of business. Whereas there has been a generally stable trend recently regarding building permits for small. or new construction. Unprofitable locations are abandoned quickly. That means a further expansion should be expected that will be driven less by shopping centers.
travel agency. Other such "loners" include beverage dealers. these gas station shops are located on easily accessible and conveniently located roads and are thus usually found away from the locations of other stores. The geographic concentration in retailing tends to increase just for this reason alone (figure 45). Figure 45 Importance of Agglomeration Benefits by Retail Sector Geographic proximity of retailers to competitors from own sector and non-sector retailers (y axis) Forerunners/followers Tobacco Shoemaker Leather and travel goods Furs Babies' and children's clothing Games and toys Men's clothing Perfume stores Women's clothing Hypermarkets Avoiding competitors Drugstores Footwear Books Gifts and souvenirs Glasses Textiles Audio and video eq. jewelry stores. Because of their primary purpose. It is different for non-food specialty stores. Clothing accessories Department stores Travel agencies Writing materials Beauty salons Dispensing chemist Sporting goods Bakeries Furniture Hairdresser Watches/jewellery Large supermarkets Newspapers/magaz ines Dry-cleaning Electrical household appl. iron dealers. If shopping center managers are occasionally accused of having a stereotypical tenant mix. The stores that attract the crowds include hypermarkets. the loss of sales outweighs the benefits of higher footfall. perfumeries. It is not clear from the outset which of these businesses plays the role of anchor and which are the followers. One such example is gas station shops. and computer shops. and travel agencies. if your bicycle needs to be repaired.Economic Research for very a specific purpose. Loners versus followers Swiss Issues Real Estate – Real Estate Market 2012 46 . there are also retail stores which are rarely found near another store. gift shops. department stores. this is because they are geared towards the market. The followers tend to include newspaper shops/kiosks. Fish/crustaceans/molluscs Musical instruments Pets Curtains/carpets Fruit/vegetables Bicycles Hardware goods Proximity to competitors Automotive fuel in spec. While many shops seek the proximity to competitors or complementary businesses. or clothing) or complement the selection (e. shoes.. Swiss Federal Statistical Office Shopping centers follow the pattern of the market structure Hypermarkets avoid the competition just as much because the broad selection in a hypermarket means it makes less sense to be located near another hypermarket. We were also able to use the analysis to determine the stores with a range of other retailers or service providers located in the vicinity.g. hairdressing salon. bicycle shops. Beverages stores Grain/fodder/agricultural Washing of textiles products Loners Source: Credit Suisse Economic Research. For example. tobacco shops. shoe and clothing stores. and electronics markets. entertainment devices. Our analysis shows that the tenant mix that has developed in a spontaneous and evolutionary manner on the retail property market in many locations around the "hypermarket" anchor tenant largely corresponds to the pattern that is consciously created in most shopping centers. In this case. a comparison of design or price is therefore a secondary matter. etc. or pharmacy) are often found close to the latter. Such stores have gradually disappeared in the wake of structural change because their products and services have increasingly been offered by larger rivals and at even more affordable prices. Specialty stores that compete with a portion of the selection at a hypermarket (e. you go to the next bike shop and do not first go to several dealers to compare prices..g. Medical goods Flowers/plants Small supermarkets Large stores Small stores Computers. book stores.
various cantonal agencies Basel City has higher vacancies While vacancies in most cities have declined – for example in Geneva. which represented the lower limit for the whole of 2009. asking prices weakened again and broke through the limit of 240 CHF/m2 in the middle of the year. as well as the retail spaces that were built in and around Basel in the near past. The financial crisis has left its mark on advertised retail property in the form of falling rents. rents recovered again (figure 47). Accordingly. The negative price growth in the previous quarters is hardly attributable to top locations in the city center. as we can see from the most recent price trend. are probably the reason for the higher vacancies. Such retail properties are rarely advertised publicly and are therefore not considered in the statistics on asking prices. which shows no signs of letting up despite a subdued consumer climate and meager retail sales. The proximity to affordable neighboring countries. vacant retail properties are known for only a few cities and cantons (figure 46). Properties that were nevertheless advertised experienced in terms of prices a steep climb until the financial crisis and have fluctuated sideways thereafter amid high volatility. Last year. Falling rents for over a year Swiss Issues Real Estate – Real Estate Market 2012 47 . points to an ongoing robust rent trend in the top locations. this equals a slight increase year-on-year of 2'500 m2 or 3. In the five cantons and three cities where vacancies were tracked. the recovery in 2010 was only temporary in nature.Economic Research Market Outcome Stable trend in vacancies While vacant residential units are registered throughout Switzerland. However. the median rent for retail property ended up at exactly 240 CHF/m2. The volume of vacant retail property has changed in the last three years only minimally and has stabilized at a historically low level (average value 2001-2011= 77'000 m2). and Zurich – Basel City is the exception. 2011. equivalent to a 5% decline over twelve months. In the fourth quarter of 2011. about 71'000 m2 of retail floor space was vacant as of June 1. Lausanne. The 7'600 m2 of floor space or about 40% higher vacancies in the canton of Vaud are predominantly attributable to the municipalities Villeneuve (+10'000 m2 compared to last year) and Bussigny-près-Lausanne (+4'800 m2 compared to last year). In step with the rapid recovery of the Swiss economy. Figure 46 Vacant Retail Properties by Region Regional vacancies in 1'000 m2 120 100 80 60 40 20 0 2001 Canton of Geneva Lausanne – City Zurich – City Canton of Basel Land Switzerland average 2001-2011 Canton of Vaud (w/o Lausanne) Canton of Neuchâtel Canton of Basel City Berne – City 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Credit Suisse Economic Research.7%. The demand for such top locations. Vacancies in the city have risen by about 20%. there is no reason to describe the situation in the canton of Vaud as an across-the-board increase in vacancies.
This rather low average floor size reflects the fact that primarily small properties are advertised.e. The subtle disappearance of these smaller properties in the wake of a shift in demand towards larger stores puts the expansion of floor space in a somewhat different light. they continually lost ground and were only usually able to survive by positioning themselves as convenience offerings with longer opening hours or in cooperation with other stores at good shopping locations. The smaller properties stood and continue to stand clearly on the loser's side. this price differential has diminished in recent years because the asking prices for larger properties have developed in a very stable manner.and other properties 50th percentile Four-quarter moving average 340 320 300 2 Small spaces (<= 90 90 Flächen kleiner gleichm ) m2 Four-quarter moving average (<= 90 m2 Gleitendes Mittel über 4 Quartale (<= 90 )m2) Other spaces (> 90 m2 Flächen grösser 90 m2) Gleitendes Mittel über 4 Quartale 90 90 )m2) Four-quarter moving average (> (> m2 Small properties are the losers of structural change Figure 47 Rent Trend in the Medium Price Category Average asking price in CHF/m2 (median) 300 280 260 240 280 260 240 220 200 2005 2006 2007 2008 2009 2010 2011 220 200 2005 2006 2007 2008 2009 2010 2011 Source: Meta-Sys AG. asking prices for smaller retail properties fluctuate above the asking prices of other floor spaces (larger than 90 m2). was used as the threshold for the allocation. i. On the basis of this negative trend of rent prices. which is 90 m2.Economic Research Declining rents particularly for smaller properties When dividing the advertised rents into two floor size categories. (figure 48). However. we can see that a crowding-out process has been underway on the retail property market for many years driven by the expansion in floor space since the turn of the century. it has indeed occurred in the wake of a dramatic structural adjustment at the expense of small properties. which then moved up another level in 2005. The trend towards falling asking prices is therefore attributable to the smaller retail properties. The difference has now almost disappeared. In principle. a clear distinction can be made between two price paths.. Figure 48 Rent Trend by Floor Space Size Average asking price in CHF/m2 (median) for small. Credit Suisse Economic Research Source: Meta-Sys AG. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 48 . The median floor size of advertised retail property since 2004.
demand for retail floor space has proved solid over 2011. In particular. Given the anticipated modest demand. uncertainty about the economy is high. The low number of large project approvals is also an indication of a degree of caution from investors. demand for retail space has proved solid over the past year. After all. Nevertheless. Planning applications and approvals have returned to normal and both have now come to rest below their long-term average level. The growing number of specialty store centers provides sufficient evidence of this. This is particularly the case for the border regions where the effects of consumer tourism are especially acute. the main casualties of structural change have been the small retail spaces. Demand. The strong Swiss franc has weighed on revenues to such an extent that even the extraordinarily high immigration rates were unable to hold off a fall in nominal revenues. Market Outcome (Prices) After a brief recovery in 2010. Background Outlook Supply The phase of excessive floor space expansion can be viewed as complete for the time being.Economic Research Outlook for Retail Property 2012: Caution the Watchword for the Market Despite the worsening consumer climate and the strong Swiss franc. Demand will also shift more towards large formats as well as locations with economies of scope and/or with high numbers of visitors. Above all. we expect the floor space supply to remain flat. Source: Credit Suisse Economic Research (prime locations) (prime locations) (other) (other) Swiss Issues Real Estate – Real Estate Market 2012 49 . Insofar. The phase of excessive floor space expansion can therefore now be seen as over. whereas other spaces have experienced stable prices. a return to high levels of project planning are not to be expected. For as long as the structural background remains so poor. Although numerous shopping centers are still being planned. As long as the uncertainty with regard to the economy persists. Nevertheless. quoted rents weakened again over the past year and by the middle of the year fell below 240 CHF/m2. something which hasn't escaped the retailers' attention. project planning has normalized at a below-average level. we expect a rising degree of caution. real growth in retail revenues is expected to be only slightly positive this year. the low number of major project approvals is an indication of a degree of caution among investors. Although numerous shopping centers are still being planned. This shows that smaller spaces have been the losers in the structural shift which has gripped the retail floor space market for years. Supply and Market Outcome Demand Negative news flows and exchange rates have resulted in a collapse in consumer confidence and retail revenues through the course of 2011. The current level is now below the pre-crisis level. Overall. particularly in border regions. there is unlikely to be any further shortage of advertised retail floor space. On the supply side. demand for retail space is expected to deteriorate. which was the lower limit in 2009. Over the course of the current year. There is still a certain amount of pressure on rent prices. In nominal terms. The sharp rise in advertised retail floor space over the course of the financial crisis has quickly fallen back after the reduction in new construction approvals as well as the rapid recovery from the crisis. most are putting back their openings into the future. Persistent uncertainty with regard to the economy and the negative impact of consumer tourism are likely to dampen expansion plans. most are postponing their openings. The actual situation of consumers appears to be better than their mood. we do not expect any change in the negative price trend for smaller retail spaces. further price reductions and the impact of consumer tourism will cause revenues to fall. The falling quoted rent trend is largely attributable to smaller spaces (smaller than 90 m2). The strong franc and high purchasing power in Switzerland is only likely to provide sufficient incentive to expand for foreign chains.
50% of consumers therefore travel more than 15 minutes to the next specialty store. Other stores that can have anchor tenant status include pet supplies retailers (Qualipet. Specialty stores have a comparatively wide catchment area. SportXX. Whereas Swiss consumers generally have a median journey time of ten minutes one-way by car to make normal food purchases. for which the trip by the consumer is still worthwhile because of the broad selection of goods to choose from. melectronics). however. specialty store centers developed around such furniture suppliers or in 87% of the cases around building and hobby/do-it-yourself suppliers (figure 49). below the average of the last decade. These primarily refer to those stores whose goods can be transported by car. Only in years to come will we know whether 2012 was simply a year to pause for breath or if. the current year will be a time of relative calm. computers.or industrial areas. also include stores from other sectors. As with shopping centers. There are signs there will be an expansion in 2013 of around 3%. Specialty stores are rarely alone at preferable locations. Generally a collection of several medium. there are on average more than two furniture stores in a specialty store center. it heralded a genuine trend reversal. 18% even travel longer than 30 minutes. By far the most common types of stores in a specialty store center are furniture stores (Ikea. Athleticum). they travel for an extra five minutes for typical shopping trips to specialty stores. Migros Do it + Garden. That means there is no mall. These are the stores for which the consumer makes a conscious decision to go to the specialty store center. and operations functions are not performed centrally. benefit from higher visitor numbers. Advice is generally limited or practically non-existent. sporting goods (Ochsner Sport. In order to identify the specialty store centers. In contrast. there is less coverage of them than the shopping centers. meaning that consumers are largely on their own. Conforama. Specialty stores are typically built outside of city centers in commercial. Fressnapf). the tenant mix at specialty store centers is dominated for the most part by identical retailers or retail chains. baby products. there is at least one supplier from this retail segment in almost two-thirds of all specialty store centers in Switzerland.to large-area specialty stores or specialty-store type businesses from different retail sectors can be found. this then attracts further retailers. food offerings are more focused on shopping centers and do not play an anchor tenant role at specialty store centers.e. a good that the consumer would typically like to choose from a large selection. which are also located in the city center. Swiss Issues Real Estate – Real Estate Market 2012 Agglomeration effects lead to the development of specialty store centers Anchor tenant of specialty store centers Tenant mix 50 . the traditional symbol and connecting element of shopping centers. building. generally with one retailer located in each of the one or two-floor properties. Not a single temple of consumption will open its doors in 2012. The individual stores. and pet supplies. Möbel Pfister. In 93% of all cases. Although food retailers also seek locations near specialty store centers. And the organization. Micasa) or retailers for building and do-it-yourself products (Coop bau+hobby. and consumer electronics retailers (Media Markt. in fact.and do-it-yourself products. especially with private motorized transport. which then gains transparency and appeal for consumers. such specialty store centers usually extend over several buildings. administration. The concentration of specialty stores creates a common marketplace. Interio. we have identified their typical anchor tenants.. The locations are very accessible. consumer electronics. i. sporting goods. They may. Jumbo. Definition of specialty stores and their catchment area A widely accepted definition of a specialty store is a large-area retail store from the non-food segment that specializes in goods from a specific sector. specialty stores are experiencing uninterrupted growth. but instead are handled by each retailer individually because most specialty store centers developed in a spontaneous or evolutionary manner. Obi). Interdiscount. in contrast to the deliberately planned arrangement of stores in shopping centers. furnishings. These are predominately stores from the following sectors: furniture. Because furniture is a shopping good. Specialty stores are characterized by a broad selection of goods. In contrast to traditional shopping centers. office supplies. in contrast to a convenience good. home appliances. and are therefore preferably located near highway junctions with large parking areas. in turn.Economic Research Uninterrupted Growth of Specialty Stores Following a ten-year period that saw a succession of new shopping centers celebrate their grand openings. where building land and square meter prices are relatively affordable.
However. Building specialty stores are ready to open in Affoltern am Albis. suppliers of baby products and home furnishings. the other large Swiss urban centers. as well as most major regional centers. Aldi or Lidl. Switzerland is already well supplied with specialty store centers. There is only one specialty store center that is located more than 4 km from a highway junction. Gallen. highlighting the importance of excellent links to the national highway network. then in the extended radius of the A1/A2 highway intersection in Oftringen. Frequently. as well as between Geneva and Lausanne (figure 50). Swiss Federal Statistical Office Specialty store landscape in Switzerland On the basis of this anchor-tenant selection. Swiss Issues Real Estate – Real Estate Market 2012 51 . Because shopping makes you hungry and the trip is made almost exclusively via car.(Office World. McPaper Land). In most cases. which are frequently located in the immediate vicinity. However. The beginnings of specialty store centers can be seen at other locations as well.5 Source: Credit Suisse Economic Research.Economic Research Office supplies. have a specialty store center in their direct catchment area. convenient locations. The next highway junction is less than 600 meters away for half of all specialty store centers. Figure 49 Anchor Tenants of Specialty Store Centers Probability of the presence of the corresponding retailer and the number of stores per specialty store center 0% Furniture Construction and fitter requirements Pet and pet accessories Sports equipment Entertainment electronics Office and stationary Electric household appliances Computer Baby and toddler clothing Furnishings and contents 0 20% 40% 60% 80% 100% Average number of stores (lower scale) Probability (upper scale) 0. (Dipl. Fust). Berne and Basel. There is hardly any highway junction that does not already have a specialty store center in the vicinity. Examples of these include. fast-food restaurants and gas stations are also frequently found at specialty store centers.0 2. and computer specialty stores (Steg) are other stores that attract the crowds. the convenient location must be shared with traditional shopping centers.5 2. St.5 1. That means the search for new locations is thus reduced to a narrow strip along the national highway network. we excluded the retailers from specialty store sectors that are located in the shopping centers when we determined the definition of a specialty store center. in particular. household appliances-.0 1. Ing. such as Winterthur. 38 specialty store centers can be identified in Switzerland. As figure 50 illustrates. These are usually not located within the city limits but rather in commercial. The highest concentration by far can be found in the Zurich metropolitan area. they will also be joined by one of the two new food discounters. and the existing specialty stores in Freienbach and Amriswil could be extended one day into specialty store centers. or Sion for example. although it is difficult to determine precisely whether they are seeking the proximity to the specialty stores or if they are just selecting the same.and industrial zones of neighboring municipalities. Lucerne. Stores from other sectors like to base themselves around these retail magnets.
the new discounters Aldi and Lidl are moving in close to specialty store centers. Wüest & Partner. are now taking the opportunity to occupy large floor spaces in newly opened shopping centers. This convergence that we are seeing will continue over the next few years. not only from the sharing of a convenient location. which is occurring at many locations. not to mention the conscious buildup of specialty store centers by Coop and Migros with their own brands. Large consumer electronics specialty stores. with these two forms of retail property concentration set to grow more alike. Appearing under one name. for example. the first attempts are being made by specialty store centers to come together under one roof and to appear in public under a single center name. On the one hand. which makes it easier to survive in the increasingly difficult.Economic Research Figure 50 Specialty Store Centers in Switzerland Specialty store agglomerations with at least three specialty stores from the typical specialty store sectors Specialty store centers Shopping centers Main traffic arteries Source: Credit Suisse Economic Research. Traditional specialty stores can be found more and more in shopping centers. is also interesting. Swiss Issues Real Estate – Real Estate Market 2012 52 . thereby shifting the tenant mix towards a shopping center. GfK. Here. Geostat Increasing convergence between specialty store centers and shopping centers The differences between specialty store centers and shopping centers have declined in recent years. cut-throat competition between specialty store centers. There are clear agglomeration benefits from this approach. we are increasingly seeing a convergence of specialty store centers and shopping centers. Meanwhile. is likely to become more important in the future. The symbiosis of shopping centers and specialty stores or specialty store centers.
Over a four-year comparison. which we consider to be the same as for 10-year Swiss government note.2 percentage points.2005 =100 200 180 160 140 120 100 80 2005 2006 2007 2008 2009 2010 2011 2012 -15% -20% 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Source: SIX Swiss Exchange. as this is fundamentally due to low interest rates. and extraordinarily high levels of immigration. Given the low volatility of real estate funds. the risks have grown slightly again over the course of the year. Indirect Real Estate Investments Indirect real estate investments leave Swiss equities trailing Indirect Swiss real estate investments have had a good track record in terms of their total returns (figure 51). real estate funds have always been able to beat risk-free investments. Nevertheless. as well as direct and indirect real estate investments. in times in which the Swiss domestic market performed better than the global economy. the Swiss equity market was outperformed by 11. In recent years. Even the Swiss Bond Index trumped this with 8. House prices. Real estate markets were buoyed by record-low interest rates. particularly direct ones. real estate companies have also clearly outperformed the share index. relatively low share price fluctuations and intact fundamental data.Economic Research Real Estate as an Investment Over recent years. Also Swiss real estate investments often pay steady and high dividends which go some way to offsetting the risk of losing capital employed.8% and 6. Wüest & Partner Source: SIX Swiss Exchange. And in all except very few cases. Yet can the heights achieved by real estate investments properly be described as head spinning? In principle. The real estate companies now have three years of positive total returns behind them. Swiss real estate investments almost turned out to be a veritable bonanza for investors – akin to striking gold in a gold rush.9% up to the end of 2011. and real estate funds have four. This is 5. albeit not always smoothly. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 53 . and investments have much further to fall. real estate funds have been able to beat equity investments whose performance is linked strongly to international trends. such a wide difference in returns has been seen only very rarely since 1960 (figure 52). have therefore risen sharply.1% for real estate companies.9 percentage points higher than for a risk-free investment. Figure 52 Excess Return of Real Estate Investments Rolling annualized four-year excess return Swiss Performance Index SXI Real Estate Shares Swiss Bond Index KGAST Immo-Index SXI Real Estate Funds 20% 15% 10% 5% 0% -5% -10% Excess return on real estate funds versus risk-free investment Excess return on real estate funds versus equities Excess return on real estate joint stock companies versus equities Figure 51 Performance Index Total returns. SNB. funds and companies have impressed investors with stable dividends. index: 1. a solid rate of economic growth compared to that of other European nations. An investor placing capital in real estate funds at the beginning of 2008 would have been rewarded with an average annual return of 7. no. For years. the total return on real estate funds has been 6.9% thanks to the strong appeal of Swiss government bonds. Over the same period.1. In particular.
Realstone. fund management is faced with an exhausted investment property market. In recent years. fund companies have successfully launched various theme funds. predominantly in the fields of sustainability. The average premium remains high in the long-term comparison. which reduces average net returns. Focus is therefore increasingly moving to real estate which does not form part of this core. but just like private and institutional investors. This list does not replace a comprehensive analysis of a fund before the decision to buy. Rothschild SICAV and Residentia) and several capital increases (Immo Helvetic. Figure 53 therefore shows a selection of key ratios for real estate funds listed on the SIX Swiss Exchange. Swissinvest. Prices in the core segment have risen so sharply in Switzerland that.3%). Swisscanto Swiss Commercial. CS REF International. was not unwelcome. there is no one single ratio for real estate funds which investors can use as the sole guide. Numerous capital increases and IPOs have shaped the performance of Swiss real estate funds this year. are attracting more and more attention. new inflows are likely to fall.3% versus 22. Because there is little room for interest rates to fall further. figure 54 gives some statistics for the fund landscape. Our basic economic scenario assumes that total returns from real estate funds will average 4.Economic Research Real Estate Funds Premiums are likely to have reached ceiling There was another slight year-on-year increase in the premium for real estate funds listed on the SIX Swiss Exchange as of year-end 2011 (24. Over the last year. though is currently justified by fundamental data thanks to very low interest rates. Just as in the selection of a particular share. Fundamenta Real Estate and the Sustainable Property Fund. serviced living.5-5% over the next five years – somewhat lower than the extraordinary return of 7. the SIX Swiss Exchange has seen three newly listed real estate funds (CS REF Global. Espace Real Estate. From an investor perspective. There has also been substantial movement beyond the dealing floor of the SIX Swiss Exchange – and not only in respect of the real estate funds. hotels as well as funds which focus on foreign real estate. Rather. As soon as interest rates begin to increase and the relative appeal of bonds increases. slightly diluting the return on equity employed. No significant cash outflows are expected though. premiums are likely to come under pressure. for instance CS REF Green Property. Investments in non-residential property or outside the major centers/not in the best micro-locations. which in light of the high premium. For the purposes of comparison. the only downside is that the investment vehicles must now buy property at high prices. Procimmo. UBS Swissreal and UBS Anfos). Professional management of the real estate funds is therefore particularly important here and is prized by private investors.9% over the past four years. Renowned issuers and smaller companies have exploited the favor of investors and increased their capital. Even older properties or vacant properties may come into question. the premium is likely to have reached a ceiling. In order to appreciate the absolute value of a ratio. after adjustment for risk. Capital increases and IPOs soak up new money Creativity as response to investment pressure Real estate funds compared Swiss Issues Real Estate – Real Estate Market 2012 54 . it is near on impossible to generate the returns to which investors are accustomed. the necessary know-how and risks involved in the investment decision are all the greater. Good Buildings. Money is cheap. though does provide an overview of the characteristics of the following publicly listed funds for which at least one annual report has been produced. the deviation from the average for a particular fund (dark gray area) is represented by standard deviations. Here in particular. where the competition is not quite so intense. The premium is equal to the amount by which the market price exceeds net asset value (NAV) per unit. or once investors regain some of their appetite for risk. These corporate fund raising activities have tied up a lot of capital and real estate fund performance has been limited as a result. Values above the average for all funds are not to be judged either positive or negative. Comparing real estate funds is a complex business for the investor.
Credit Suisse Swiss Issues Real Estate – Real Estate Market 2012 55 . expenses for administration and appraisal etc.9. 3) TR Bonhôte-Immobilier: -2.1 Source: Annual reports for real estate funds. as these funds were not listed in 2009 RP: Residential property as share of total market value of properties 1) DY Schroder ImmoPLUS: -2. no information for UBS Direct Residential. 2) P/D Solvalor 61: -2. 2011 RLR: Rental loss rate: Share of rent lost due to vacancy and collection losses on net budgeted rental income (inverted scale) TER: Total expense ratio: Operating expenses (payment to fund management. Patrimonium and Realstone.) as share of fund assets (inverted scale) MV: Market value of properties TR: Total return 2009-2011: Change in market price assuming gross earnings are reinvested. 2011. inverted scale (below average values further away) CY: Compound yield over last three years: Change to NAV assuming that gross earnings are reinvested DY: Direct yield: Gross payout in percent of market price as per December 31.6 standard deviations. Datastream. sequence in accordance with market capitalization UBS Sima 2 RP 1 0 -1 TR -2 DY TR P/D CY CS REF LivingPlus 2 RP 1 0 -1 -2 DY TR P/D CY RP CS REF Siat 2 1 0 -1 -2 DY TR P/D CY RP UBS Anfos 2 1 0 -1 -2 DY P/D CY MV TER RLR MV TER RLR MV TER RLR MV TER RLR CS REF Interswiss 2 RP 1 0 -1 TR -2 DY TR P/D CY CS REF PropertyPlus 2 RP 1 0 -1 -2 DY TR P/D CY RP Immofonds 2 1 0 -1 -2 DY TR P/D CY RP Swisscanto IFCA 2 1 0 -1 -2 DY P/D CY MV TER RLR MV TER RLR MV TER RLR MV TER RLR UBS Swissreal 2 RP 1 0 -1 TR -2 DY TR P/D CY Schroder ImmoPLUS1) 2 RP 1 0 -1 -2 DY TR P/D CY RP Solvalor 612) 2 1 0 -1 -2 DY TR P/D CY RP La Foncière 2 1 0 -1 -2 DY P/D CY MV TER RLR MV TER RLR MV TER RLR MV TER RLR FIR 2 RP 1 0 -1 TR -2 DY TR P/D CY RP UBS Foncipars 2 1 0 -1 -2 DY TR P/D CY Bonhôte-Immobilier3) 2 RP 1 0 -1 -2 DY TR P/D CY RP Swissinvest Real 2 1 0 -1 -2 DY P/D CY MV TER RLR MV TER RLR MV TER RLR MV TER RLR Immo Helvetic 2 RP 1 0 -1 TR -2 DY TR P/D CY RP Procimmo 2 1 0 -1 -2 DY TR P/D CY UBS Direct Residential 2 RP 1 0 -1 -2 DY TR P/D CY RP Patrimonium 2 1 0 -1 -2 DY P/D CY MV TER RLR MV TER RLR MV TER RLR MV TER RLR Realstone 2 RP 1 0 -1 TR -2 DY P/D CY MV TER RLR Key: Figures from the most recent annual report P/D: Premium/Discount: Difference between market price and net asset value (NAV) per unit as per December 31.Economic Research Figure 53 Comparison of Indicators of Publicly Listed Swiss Real Estate Funds Difference to weighted average for real estate funds expressed in standard deviations.
Given the low interest rates. Credit Suisse Economic Research Leverage not at the fore The debt ratios for real estate funds.3%. Also.Economic Research Not all real estate funds are the same As the statistics in figure 54 show. Trump card: Tax-exempt dividends Swiss Issues Real Estate – Real Estate Market 2012 56 . In this case. there is some considerable diversity between the individual funds.3% 49. Despite extremely cheap money. Taking tax into account. The reason for this is not fewer debt financed properties.7% 7.9% Source: Annual reports for real estate funds. nine real estate funds listed in Switzerland hold their properties directly.7% 0.8% 6. The distribution yield is a real estate fund's biggest trump card.5% 0.4% 30.6% to 18. varies strongly with a standard deviation of 8. it should not be forgotten that real estate funds which hold property directly are exempt from wealth tax.6% 87. a highly leveraged fund does not sit well as part of the real estate fund's image as a secure investment. For the investor. this trump card may well decide the match. the largest fund (UBS Sima) is almost 23 times bigger than the smallest (Realstone). On the one hand. investing in a fund which holds property directly makes even more sense in communes which impose a high tax burden and for persons on high income.1% 5'743 14. Datastream.6% 2.3% 0.5%. which makes the fund liable for tax. funds are keen to ensure their debt ratios remain moderate. their marginal tax rate stands at 28. using debt through periods of low new money inflows to continue buying property and is one reason for the stable returns of fund companies. With this in mind. In terms of the market value of properties owned.1% 1'135 2. Legislation governing collective investment schemes allows the fund to hold properties directly. which is a striking representation of how profitable and well positioned real estate funds are at present. This would be equivalent to a pre-tax yield of 4. the direct yield from a real estate fund which holds property directly is 3% after tax.9% 6.6% 1. at least in respect the share of their capital tied up in property.8%. Last year. Even the premium. there are material taxation consequences depending on whether the real estate fund holds property directly or indirectly through subsidiaries. Accordingly. Income generated from property and paid to the investor as dividends are then tax-exempt for the investor.8% 1.6% 0.4% 0.8% 3. the debt ratios recorded by the real estate funds.0% 8.2%.5% 52. Figure 56 shows the equivalent pre-tax yields for alternative investments for the Frauenfeld example and real estate funds which hold property directly.4% 0. Figure 54 Statistics on All Publicly Listed Swiss Real Estate Funds Average: weighted by market capitalization Average Standard deviation Maximum Minimum Premium/Discount Compound yield (last three fiscal years) Direct yield Rental loss rate Total expense ratio (TER) Market value of properties (in CHF mn) Total return 2009-2011 Share of residential property 24.4% 1.2% for an alternative investment for which tax is still to be applied (figure 55). have not increased over the past year. there must be other factors deterring the funds from increasing their debt ratios.6% 252 5. but rather a result of property price appreciation.2% 3. Also impressive is that average compound yield stands at 5. it averaged 3. Comparing ratios from previous years.0% across all funds. For the purpose of illustration.7% 1. With a joint gross household income of CHF 200'000.0% 3. which have traditionally been low. At present. which is high on average across all the funds. they have even fallen slightly from 19. which automatically reduces debt ratios.8% 1'231 10. On the other hand. funds tend to act counter-cyclically. let us take a married couple with two children living in Frauenfeld. otherwise referred to as their leverage.3% 5. are not shown in figure 54.
the range of fluctuation in 2011 was above the average since 2003 (12%). though those of the SPI share index were again higher (23%).5% Neuchâtel 5.5% Figure 56 Required Pre-tax Yield for an Alternative Investment* By gross earnings in CHF in Frauenfeld 5.0% * in respect of 3% yield from real estate fund holding property directly (yield before and after tax identical) Source: Federal Finance Administration. real estate stocks took their correct position last year. The annualized standard deviation of weekly returns included in the bond index (4%) and the real estate fund index (6%) were lower as usual. premiums have fallen/discounts have increased over the course of the year (figure 57). attractive investment opportunities repeatedly present themselves for the taking. and vacancy rates are likely to increase over the medium term. The slip at the beginning of August 2011 as well as the weak phase of the Swiss share index in November of last year were replicated by the corresponding index for real estate companies.0% Basel 4. Credit Suisse Economic Research * in respect of 3% yield from real estate fund holding property directly (yield before and after tax identical) Source: Federal Finance Administration. although slightly lower than in the previous year.5% 1. investors have again been given an impressive illustration of this effect. the SXI Real Estate Shares index (figure 51). As a result.5% 3. the index has quite rightly been able to recover losses quickly. Measured against other asset classes. On the office real estate market. The turbulent past year could also be seen from annualized volatilities of weekly total returns. For large companies.0% 3. Over the past year. vacancy rates have fallen only slightly in Switzerland and in the retail sector they have even increased a little. a slight reduction in the capital-weighted average premium to 12. Only Züblin did not to pay a dividend last year.5% 3.5% 4. Insofar. With a standard deviation of 14%. the effects of this should remain within limits. Credit Suisse Economic Research Real Estate Companies Real estate companies as hybrids between cash equity and real estate The share price of real estate companies which primarily invest in office and commercial real estate is influenced on the one hand by the company's fundamental data and property market trends and on the other by movements on equity markets.0% as per year-end 2011 fits well in the picture (yearend 2010: 14. The volatility of real estate stocks is high compared to the steady returns and the slow moving real estate markets. Since publicly listed companies have their main focus in popular centers.Economic Research Figure 55 Required Pre-tax Yield for an Alternative Investment* By gross earnings in CHF in cantonal capital 5. dividends remain attractive and a reason to buy. The outlook for the current year is a little gloomier though.0% 4.3%).0% Delémont Lausanne 4.0% Schwyz Zug Zurich Sarnen Frauenfeld 2. This is meanwhile no bad thing. Lower premiums reflect slightly darker horizon Swiss Issues Real Estate – Real Estate Market 2012 57 . Fundamental data for real estate companies. yet thanks to completely different fundamental data. which are by and large invested in the commercial sector. The economic downturn will not leave the markets for office and retail space unscathed. This synchronicity has meanwhile resulted in increased nervousness among investors. On an individual company level. with the exception of Mobimo and Intershop.0% 1.0% 0 100'000 200'000 300'000 400'000 500'000 0 100'000 CS REF LivingPlus Solvalor 61 Procimmo Patrimonium 200'000 300'000 CS REF PropertyPlus Bonhôte-Immobilier UBS Direct Residential Realstone 400'000 500'000 3. have changed little over the course of the year.5% 2.
Faced with this prospect.8% across Switzerland since 2004 (figure 58). which in Lake Geneva and surrounding regions have risen by a good 3% since 2004. pension funds must see real estate investments with their strong dividend yields. and returns on low risk bonds are also close to zero in real terms. prices of investment properties have seen an annual increase of 3. upwards of CHF 10 mn. Direct yield: Dividend measured in terms of share price at the end of the year 40% 2011 2010 Warteck Allreal Intershop Premium/Discount as per year-end 20% PSP 0% -1% -20% 0% 1% PAX-Anlage 2% 3% 4% Mobimo BFW Liegenschaften 5% 6% Swiss Prime Site 7% -40% Züblin Dividend yield -60% Source: Annual reports from companies. net initial yields (indicated as a ratio of net rental income and transaction price) are likely to have slipped by 0. a particularly unenviable task at the moment. institutional investors. as the capital market as third contributor is presently on strike. averaged CHF +19. Pressure to invest and the reduced expectations of return have resulted in a decoupling of investment property prices from new rents. In the 4th quarter of 2002. Datastream. total income minus expenditure.3% to 5. According to Acanthe. private and institutional investors have piled into property over recent years as this asset class has been able to provide the stable dividends and the security they seek. the gross initial yield (indicated as a ratio of gross rental income and transaction price) for residential and mixed-use properties in the Canton of Geneva has slipped from 6. The longer low interest rates stay. long investment horizon and total returns of 4%-5% as a panacea. Credit Suisse Direct Real Estate Investments Further jump in prices for investment properties Against a backdrop of volatile financial markets.Economic Research Figure 57 Premium/Discount and Direct Yield for Real Estate Companies Size of bubble: Market value of properties. Investment properties around Lake Geneva and surrounding areas have seen even stronger price increases than this. pension funds.a. These price rises have placed initial returns under pressure.9% of total assets held by the pension funds included on the CS Real estate as solution to the investment problem faced by pension funds? Swiss Issues Real Estate – Real Estate Market 2012 58 . Over time. They currently take in much more money than they pay out in pension benefits. outperformed only slightly by single-family dwellings (+8. their account balances.1 bn. that is. diversification benefits. the longer low capital returns will eat into pension funds' portfolios. a real estate consultancy in Geneva. The latter indeed face enormous pressure to invest. Accordingly.9% between 2009 and 2011. We estimate that residential properties have appreciated in value at a rate of between 7 and 8% per annum over the last seven years in the Canton of Geneva.4% in the space of only two years. Who or what is ultimately driving the price of direct investments? The main suspects since the financial crisis when volumes have been smaller are increasingly private investors on the look out for stable returns and. Returns from equities markets are currently low.6% p. Many have also restructured their holdings and are increasingly invested. This money must be gainfully invested at low risk. both directly and indirectly. in real estate and will continue to be so. According to IAZI. in particular.). As indicated in published annual statements over the last five years. real estate investment accounted for 7. these institutes will find it increasingly hard to cover their liabilities.
also as a result of the steady price rises experienced by condominiums and investment properties. plus a certain risk premium set specifically in relation to the property in question.0% 1. but these can easily be borne by sufficiently large pension funds. The question as to whether pension funds do not seek to play a role earlier on in the value chain remains unanswered. According to guidelines set down by the Swiss Funds Association (SFA). IAZI. this was only CHF 268 mn or 1. Ultimately though. No wonder then that the market for direct investment is so exhausted. provided that the risk taken is not excessive and not too much capital is tied in. The high market prices present appraisers with a dilemma which begins with the choice of the correct discount rate. Switzerland Trend new rents. For consistency. Following the text book. but should rather correspond to the average rate paid by the Swiss government bond to more adequately reflect the future. By the 4th quarter of 2011.Economic Research Pension Fund Index. residential and mixed-use properties 15 12 New-build investment. Swiss Issues Real Estate – Real Estate Market 2012 59 . Canton of Geneva (right scale) Price trends. In Switzerland. the basic interest rate of a risk-free investment may not simply be taken from a specific date. the discount rate is constructed from the bottom up and is equal to the risk-free rate.0% 10. residential and mixed-use properties 170 160 150 140 130 120 110 100 2004 2005 2006 2007 2008 2009 2010 2011 Initial return. this has been a very lucrative business. Yet using the current interest rate would also be too short-sighted as the estimated free cash flows in the DCF method are based on a forecast for the future. Naef & Cie. Yet the statistics show a different picture (figure 59).5% 9 6 3 0 Source: Acanthe. though not until after construction has completed. Institutional investors (right scale) 10% 8% 6% 4% 2% 0% 1994 1996 1998 2000 2002 2004 2006 2008 2010 Figure 58 Investment Properties Initial return = gross rental income/price. but also as a result of inflationary pressures on property values stemming from low interest rates. that is the yield from a risk-free alternative investment.4%. From a legal perspective. it is also necessary to estimate future capital market conditions. Credit Suisse Economic Research Source: Swiss Federal Statistical Office.. the appraisal is made using the DCF model.5% 0. pension funds are free to take this path. appraisers are bound to value the investment "at a price that would probably be obtained in a diligent sale at the time of valuation". pension funds have invested an average of CHF 313 mn per year in new construction for residential and mixed-use real estate.0% 7. Lake Geneva 9. Credit Suisse Economic Research Appraisers find themselves in a dilemma due to inflated market prices The prices for real estate investments have not only increased in the wake of increased pressure to invest. Total New-build investment. many residential properties do end up in the portfolios of institutional investors. the pension funds did not follow the trend so that today their share is far below the long-term average of 3. Canton of Geneva Price trends. Pension funds Share. Fierce competition for every direct investment property has also meant that real estate investment is currently an expensive business. Wüest & Partner. Since 1994. in determining the right discount rate. Figure 59 Investment in New Construction In CHF bn.0% 4. Over recent years. Increasingly. Pension funds (right scale) Share.5% 6. the basic interest rate for a risk-free investment is generally taken to be the fixed rate for a 10-year federal note. This is relatively little when you consider that the pension funds' total real estate holdings increased by almost CHF 5 bn in Switzerland in 2010 (including appreciation of existing properties).5% 3. Should pension funds expand further into project development? It is to be expected that pension funds increasingly look to project development. Project development does harbor a certain level of risk. As nominal investment in residential property increased from 2003. this had increased to 21.9% of total new-build investment in housing. In the last year for which records exist (2010). This means.1%.
.9%. Source: Credit Suisse Economic Research Prices for investment properties appear slightly overvalued The interest scenario that results in a discount rate of 4..85 mn for our model multi-family 11 Cf. In 2007.3 mn. In order to answer this question. Adding a property-specific risk premium of 2% gave a discount rate of 5. The first free cash flow from the end of 2007 is CHF 225'000 and grows every year by 1%.2 i1. After all. the long-term average rate will not be reached for another 15 years.3 i0. Accordingly.2%. we determine the interest rates that the market implicitly assumes based on the current price of the property.3 i2.3 i3. that is.2% to 4.. the discount rate has a strong influence on estimated value. Since then. we would have an average discount rate of 4.11 At the time.2 Year 3 Free cash flow Year 4 Free cash flow etc. Taking a more realistic assumption.. We continue to assume that this estimate corresponds with the market value of the property in 2007. we can work out the future interest rate scenario that corresponds exactly to this discount rate of 4. which would give an estimated value of CHF 5. Figure 60 Discount at the Spot Rate and Forward Rate Year 1 Free cash flow i0.4 Discounting with forward interest rates . as we showed in last year's real estate study.. Facts and Trends. free cash flows have grown by 1% per year. not with the respective interest rates of the same term. This shows that current real estate prices imply a very low. The question is only.3 mn12. page 61 ff.6%. Reducing the discount rate from 5. Swiss Issues Real Estate – Real Estate Market 2011.Economic Research Are future interest rate movements properly factored in? Just how high this smoothed discount rate should be is a topic of hot debate..1 i1.2 i2. We assume here. Discounting with interest rates for same term to expiry i0. its value was estimated at CHF 5. in the long run.2 i1. Here. the market price of a typical multi-family dwelling has increased by 19% to CHF 6. Swiss Issues Real Estate – Real Estate Market 2012 60 . The time horizon is 100 years. that the one-year forward rate will remain low only over the next 24 months before then moving gradually towards the long-term average since 2000 over the next five years.1 Translation of current prices to implied interest rate expectations Year 2 Free cash flow i0. we return to our hypothetical multi-family dwelling from last year. There have been suggestions that the price rises experienced by investment properties are not justified on a fundamental level and that the assessors have used discount rates which were too low in order to model these market prices which. The key question now is whether a discount rate derived in this way is appropriate.1 i0.4 . gives same estimated value of property i0. In other words. whereas according to our estimates. appraisers based the risk-free rate on the average yield from Swiss government bonds with a maturity of around 15 years since 2000. that interest rates will sooner or later return to the historic average. but with the underlying oneyear forward rates so that ultimately we have the same estimated value for the property (figure 60).6% and thereby make an assessment of just how realistic such a scenario is. even excessively low interest rate scenario.6% implicitly assumes that the one-year forward rates remain persistently low over the next eight years before then moving towards the historical average for one-year forward rates over a further six year period. when this will happen and how the adjustment process runs up to that point. 12 The 19% increase is in line with the price increase of investment properties as determined by IAZI between 3Q 2007 and 3Q 2011. we do nothing more than discount the future free cash flows from our model multi-family dwelling.. are not sustainable.9%. In order to illustrate this point.1 i0.1 i0. The price of the property today implies a discount rate of 4.
6% would be around 5 to 10% too high in our example. though are not excessive. will remain popular this year too. Their knowledge of real estate lifecycles and property-related maintenance costs is unlikely to match that of experienced institutional investors. The text book method is to construct this value from the bottom from a smooth risk-free rate based on the risk-free yield from an appropriate alternative investment and adding to this a suitable property-specific risk premium. this means that the price which implies an underlying discount rate of 4. i. from this perspective. seems right. which is why now is the suitable time to prepare and adjust portfolios for potentially more difficult times. in particular in respect of new investment. and the sustainable value of a property. The only difference here would be in the discount rate. we see no sign of a trigger for the beginning of a decline. Some private investors see a good opportunity to invest in property and are prepared to pay very high prices relative to rental income.e. The worry at the moment is for the direct investment market. for the time being. Interest rates are likely to stay below-average for the foreseeable future. it would be advisable this year for investors to no longer to think in terms of differences in yield. but to also be mindful of the worst case scenarios. Creative solutions such as theme funds.Economic Research dwelling. The investments should face no significant obstacles over the course of this year. increased caution is to be advised. and on the other hand the sustainable intrinsic value of the property. steady rental income. or their implied discount rates in the "mark-to-market" sense. international real estate investments and generally investments from outside the core segment continue to offer attractive opportunities for investment and. in particular because Swiss real estate markets continue to have the benefit of stability. but less for institutional investors than for private investors. This would have the advantage that assessors would not constantly have to juggle between the prices currently being paid. Risk group private investors Outlook for Real Estate Investments in 2012 Intact real estate markets provide good environment for real estate investment The prospects for Swiss real estate investments have changed little within the space of a year. Investors should be aware of the downside potential. Price or value? The debate as to the choice of the right discount rate can also be understood as an argument between the current market price of a property and its sustainable long-term value. Institutional investors are well aware that they are buying dearly. Nevertheless. Still no trigger on the horizon to mark the beginning of a decline Ideal time for portfolio adjustments Swiss Issues Real Estate – Real Estate Market 2012 61 . Recordlow interest rates and an expectation of further appreciation in value have pushed the prices for direct and indirect real estate investors to considerable heights. In order to bring more transparency into real estate appraisals. Nevertheless. For this reason. Since the market for core real estate is currently a seller's market. Our example can not be applied to all investment properties as a whole. The only conclusion that can be drawn is that investment properties currently tend to be slightly overvalued. leading to the risk that they pay too high a price for their real estate purchase. or in other words. At the same time. In boom phases in particular. uncertainty in the euro zone will tend to strengthen the appeal of Swiss real estate investments – especially as Switzerland continues to grow in its appeal for immigrants and because the franc is not likely to appreciate further. the fair market price. and should not be blinded by handsome dividend yields. the risks have grown year-on-year. as the low interest rates expected over the near future have a substantial impact on the average discount rate. first and foremost. the calculation would have to be performed on a top-down basis in accordance with currently observed market transactions. In determining fair market value. the gap between the two widens considerably. In particular. and that means. reflect an expectation of very low interest rates. Is the location and the substance of the property good? Structural adjustments have only just begun in residential and commercial property. on the other hand. assessors would have to report two ratios: on the one hand the fair market value in the sense of SFA guidelines. whereas this is not necessarily the case for private investors. The values of Swiss real estate investments are generally high.
Economic Research Swiss Issues Real Estate – Real Estate Market 2012 62 .
The challenges facing the hospitals in respect of real estate management have grown in two respects under the new financing system. mostly residential and office properties. In the healthcare sector. Yet in order to secure this increase in patients discharged. As the number of patients discharged increases. They are realigning their strategies to take account of the new hospital financing rules which entered into force in January. It's here that the snake bites its own tail: in order to cover costs. most cantons are striving to secure greater entrepreneurial freedoms for their hospital operators and are increasingly – though to varying degrees – transferring them powers to dispose of their real estate. Investors have the advantage of experience with such mainstream real estate. Given the lack of alternatives. Essentially. the canton will no longer pay for the maintenance. and the investment risks are quantifiable. irrespective of whether funds are applied to real estate or required for other investments. the process of concentration and specialization will continue. Firstly. particularly for public general hospitals. This provides an opportunity for the private investor to step in to satisfy this demand. The details are complicated and given the enormous social relevance of medical care. but rather that the hospitals will receive investment grants from their case-based lump sum payments with which they must pay for such investments themselves. the majority of leasehold properties were transferred to the cantonal hospital. major changes are being implemented with respect to hospitals. this will certainly place a greater emphasis on entrepreneurial thinking and action. most real estate is owned by the cantons themselves. As competition for patients intensifies. the demands placed on real estate will continue to grow. In the case of cantonal hospitals. repair. on January 1. also in relation to their real estate management. specializations and logistics optimization require renovation and extension works for optimum coordination of operational requirements and the services provided by the real estate. Yet new financing rules will mean that construction work must in future be paid for from the hospitals' own funds. private and institutional investors have piled into classic investment properties. special purpose real estate is often left languishing in its niche. so too does the share of money for real estate investment from the case-based lump sum payments received. Hospital companies are increasingly looking to investors to provide the solution to this problem. demands for finance arise. financed through flat-rate investment allocations from within the DRG system.Economic Research The Latent Potential of Healthcare Real Estate Healthcare properties languish in their niche from investor perspective There is an investment crisis in the Swiss real estate market. ownership of real estate will often change hands by way of lease. Investments in new buildings and maintenance were previously approved and financed by the canton as required. hospitals must in future maximize the number of patient discharges through a higher number of patients treated. By contrast. there is uncertainty as to whether necessary measures can be financed. But if general conditions change. whether due to poor market prospects in the case of the hospitality industry. Mergers. Secondly. even if only a by a crack for the time being. Although the cantons will generally remain sole proprietors of the hospital company. Irrespective of the systemic advantages or disadvantages and the policy objectives of the new financial framework. 2011 in Lucerne. or the complicated regulatory and legal framework in the case of the education and healthcare sectors. supply and demand can easily be monitored. any changes are the subject of controversy. Depending on just how serious the cantons really are about granting their hospitals entrepreneurial freedom. This means that in future. The Canton of Aargau has gone one step further in terms of the freedoms it has granted and transferred all real estate necessary for operations in- New hospital financing: the market is opening up Dual challenge for hospitals: growing competition and uncertain financing Hybrid owner structures instead of privatization Swiss Issues Real Estate – Real Estate Market 2012 63 . the opportunities offered by the affected real estate should be reassessed. extension or construction of buildings. the move opens the door to a previously completely closed segment of the real estate market. the new rules represent a transition from object-based to payments according to diagnosis related groups (DRG). Since investment is concentrated at a single point in time. In order that cantonal hospital companies are able to invest efficiently and unbureaucratically. investments must be made today. acquisition of medical equipment. whereas the grants are received on an ongoing basis in line with patient flows. Most cantons therefore retain influence on hospital real estate management in two ways: both as sole proprietor of the hospital company as well as a landlord under a lease agreement. For instance. for instance.
specialist care agreed depending on/with local hospitals Out-patient: Medical service center with resident medics Rehabilitation Medical services Administration: Costs-/ efficiency control. Firstly. Instead. Yet moving early into this new 64 Example of privatization: patient hotel Opportunities despite new ground thanks to demographic trends Swiss Issues Real Estate – Real Estate Market 2012 . e. Figure 61 illustrates how a healthcare center. One example of a service provided separately is patient hotels. DRG invoicing Private provision Private provision Patient and personnel requirements Private provision Accommodation: Additional services for patients and families. is considerable. Secondly. hairdressers. Regulatory changes. Depending on real estate structure. investments which could otherwise only be made later through the share of money for investment from the case-based lump sum payments received. Selling these nonessential properties to investors. Figure 61 From Hospital to Healthcare Center Hypothetical hospital with hybrid ownership structure and additional services t en em ag an M Real estate company: independent property management.: Seniors fitness. care costs are reduced as the accommodation costs are lower due to reduced intensity of care and the streamlined medical infrastructure in the patient hotel. kiosk. medical products Business: Office space and infrastructure for conferences Source: Credit Suisse Economic Research Sale of non-essential property as an opportunity Even if we must realistically assume that entrepreneurial flexibility will remain limited in the field of core services in light of the canton's mandate. we can expect to see an increasing number of hybrid ownership structures in relation to public hospitals. the hospital's competitive appeal increases as it places patient requirements at the forefront of its service and by increasing case numbers by indirectly increasing bed capacity. uncertainty as to how far hospitals will be able to cover their costs through income from case-based lump sum payments in the future. In the short-term. the scope for additional services. The advantages of a private patient hotel to a hospital are three-fold. the sale of non-essential real estate will help the hospital to fund investments to raise its competitiveness. weight reduction. even where there is no existing property available for conversion and where a new building would be required. Nevertheless. Thirdly. personnel apartments Consumption: Wellness. FM Prevention. may be structured in the future. thereby enabling them to implement a capital increase. and increasing competition.g. gastronomic variety Services: Pharmacies. thereby reducing the average length of hospital stay and increasing the profitability without having to leave patients to care for themselves prematurely.Economic Research cluding land to the cantonal hospitals in the form of a contribution in kind. certain patients will also wish to be transferred for comfort reasons to a patient hotel at their own cost. whose core consists of a listed hospital providing acute and basic care. These can accommodate patients who no longer require the intensive care of a hospital ward but still need a certain level of medical observation. Because the cantons have a public mandate to provide basic medical care. including possibility of sale to third parties Support: IT. subject of course to the right terms. it is unlikely that they will hand over complete control in relation to hospital real estate required for operations. harbors potential for both parties. which will result in both winners and losers among public and private hospitals alike. Aargau still safeguards the financial future of its hospitals by reserving the right to provide financial support for construction investment over a 12-year period. a distinction could be drawn between real estate essential for acute and basic care owned by the hospital company and non-essential real estate in which additional services could be offered. which could be provided privately. support quitting smoking Private provision Core services (canton): Acute and basic care. all contribute toward private investors shying away from healthcare real estate. as well as their relatives.
and microsituation as well as the structural condition of the building. If these hospitals are easily accessible to a large catchment area due to their geographic location. without significant competition. a dialog must also be sought with the canton as owner and the hospital administration as operator. a hospital. reservations and anxieties. Aside from identifying promising hospitals. are profitable and offer a broad spectrum of high quality basic medical services. then they are an integral part of meeting the canton's mandate to provide basic public healthcare services and their position on the cantonal hospital register is almost guaranteed. provided the potential and the risks of the real estate are properly judged. Swiss Issues Real Estate – Real Estate Market 2012 65 . there are bound to be conflicts of interest. Political components. Because the issue is so politically sensitive. must also be considered. For their part. In other words. which can today already be identified as a winner under current structural changes will certainly not stand empty tomorrow. which are closely intertwined with the macrosituation and market conditions and are particularly relevant for general hospitals and basic healthcare. PPP: learning from mistakes It's a rocky road to market access. These growth prospects are. Communication is key here. depending on the case. It is also clear that healthcare costs will increase as the population ages so that efficiency savings on all non-medical levels – including the provision of real estate – will have to be made so as to limit the extent of any restriction on medical services. able to completely offset the low fungibility of healthcare real estate which rests in the specific structure of hospital properties. it is important to make a thorough assessment of market conditions. the cantons must clearly define the entrepreneurial freedoms of their hospital companies both in relation to real estate management as well as supplementary private services and must then take these seriously. demographic ageing means there is almost no other market in which growth can be expected to be so steady and so certain as in the healthcare sector. What is required of investors in this new market is creativity and a pioneering spirit.Economic Research line of business promises competitive advantages and will inevitably also offer opportunities. Numerous public private partnership projects (PPP) have failed due to the unclear division of responsibilities. In addition. conflicting objectives and the prohibitive cost of coordination. Just as with standard real estate investments. the macro.
Economic Research Swiss Issues Real Estate – Real Estate Market 2012 66 .
Economic Research Cantonal Real Estate Markets in Summary Table of Contents Location Factors and Real Estate Facts Aargau Appenzell Ausserrhoden Appenzell Innerrhoden Basel City Basel Land Berne Fribourg Geneva Glarus Graubünden Jura Lucerne Neuchâtel Nidwalden Obwalden Schaffhausen Schwyz Solothurn St. Gallen Thurgau Ticino Uri Valais Vaud Zug Zurich Explanations 68 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112 114 116 118 121 Swiss Issues Real Estate – Real Estate Market 2012 67 .
8 Basel 0. High value-creating cutting-edge industry has grown to the detriment of traditional industry.Economic Research Canton of Aargau: Location Factors Locational Quality to CH Average +/++ Advantage. Berne and Zurich. but also from the shortage of housing in the canton of Zug which has prompted many households to move to nearby Aargau communes. positioning Aargau considerably above average. though is right in the middle of catchment area for Basel. in particular for legal persons. The Zofingen region mainly serves Berne.2 0. -/-.5 Lausanne 0. the canton of Aargau experienced a significant structural shift in its industry.7 1. around one hour from the next conurbation area and are thus less attractive to commuters. Cutting-edge industry is particularly strongly represented in Fricktal (pharmaceuticals). Industry Canton Between 1995 and 2008. As well as these three major centers. In the Brugg/Zurzach region. Mutschellen.5 Lugano 0.3 0.0% 0.8 1. Areas in the southwest and in the north are. Compared to the canton of Zurich.5% -1. Sector Specialization of Economic Regions Synthetic indicator 2008. By contrast.7 Berne 0. and are thus within good commuting distance. Baden. The growth is attributable to its central location between Basel. While Fricktal is primarily in Basel's catchment area. = CH average AG Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + ++ = = ++ + ZH ++ = + + ++ ++ LU + ++ = = = = BL = + + + + Third Most Attractive Canton The canton of Aargau ranks third in the ranking of cantons in terms of locational quality.0% – 0. The Zurzach region as well as the Suhre and Wyna valleys reveal below-average population growth with individual communes even experiencing a contraction.5 Zurich 0.0% 0 5 10 km So lot hurn Li esta l Aar au Source: Swiss Federal Statistical Office Attractive Canton to Live in Population growth in the canton of Aargau was the fourth highest of all cantons in the five years between 2005 and 2010.0% -2. Catchment Areas of the Major Swiss Conurbations Population of the catchment area. Population has grown most strongly along the transportation axes. individual transportation 40min 20 min 40 min 60 min 2.0% – 0. Central Location Between Conurbations The canton of Aargau does not have any large center of its own. Freiamt and sections of the Aarau region primarily serve Zurich. communications.1 3. Aargau scores less well in terms of education and the tax burden on natural persons.0% 1. hotels and catering Administrative and social services 0 5 10 km Source: Swiss Federal Statistical Office. in the Baden region (electronics and electrical engineering) and in Freiamt (plastics).2 2.5 1.0% – 3. travel times: mot.7% – -3. Basel and Zurich can be reached from most sections of Aargau within 40 minutes.5% – 10. Horizontal line = Swiss average Canton of Aargau Traditional industry High-tech industry Construction Energy supply Trading and sales Transportation.5 1.1% 0. the energy sector accounts for an above-average share of employment on account of the presence of nuclear power plants. employment in the high value-creating service sector is below the Swiss average.Disadvantage.0% – 4. however.5% – 1.1% – 2.3 Geneva 0.4 0.6% Base l 3. in particular in Fricktal and in the Mutschellen region. The secondary sector is also a key element in Aargau's economy.0% -8. the regions of Brugg/Zurzach.5% 2.0% -3.5 Canton of Aargau 0 10 20 km Bas el Liesta l Aar au Züri ch Del émo nt So lo thurn Zug Luzer n Neuc hâtel Bern Sa rne n Schwyz Sta ns Altdo rf Source: Credit Suisse Economic Research Population Growth 2005-2010 Average annual population growth in percent Canton AG 4. IT Financial services Corporate services Entertainment. Lucerne and Zug are also a close drive away.0% – -1.0% – -2. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 68 . Berne and Zurich as well as its high financial appeal as a place to live. Freiamt in the south benefits not only from the newly opened A4 motorway running through Knonaueramt and from the Uetliberg tunnel. The ace up its sleeve comes in the form of its accessibility to transportation and the favorable tax burden.1 1.7 1. postal services Information.
4% 1.7% 6. Price Levels in the Largest Municipalities Transaction prices in CHF/m2.83 Canton of 2009 600 1.93 2008 7'702 1.48% 2.3% -0.4% 7.0% 0.0% 1. In the case of an accentuated economic slowdown.1%* 2012 8'042* 1.1% 1.6% 1.4% 0. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.0% 0. In the Frick Valley.2% 3'950 1. It is also alarming that the number of vacant properties in the ownership segment is also comparatively high.0% 1.8% 6.1% 0.8% 1.94% 9.9% 1.7% 1.e.95 Switzerland 2009 2010 7'786 7'864 1. which is struggling with structurally higher levels of vacant properties in comparison to both the overall Swiss average as well as to the long-term average in Fricktal and the Aargau region. Wüest & Partner.1% 1.2% 278 1.8% 0.47% 4. residential units were approved for construction in 2011 representing more than 2% of the total regional housing stock. Oversupply cannot be ruled out.1%* 0. regions: total 6'000 5'000 4'000 3'000 2'000 1'000 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Aarau Baden MFD Brugg/Zurzach SFD Fricktal Freiamt Mutschellen Source: Baublatt.2% 0.9% 274 1.8% 1.6% 2. A similar effect can be seen in Rheinfelden from the migration out of Basel.4% 0.1% 1.54% 8.6% 1.6% 0. i. In four of the six economic regions in the canton.5% 0.92 291* 1. The high level of expansion is dampening price growth.87% 2.02 2011 7'949* 1. production-related reaction times.3% 3.8% 0. Otherwise. Building Permits by Regions and Segments Dwellings.8% 4.1%* Source: Swiss Federal Statistical Office.04% 7.3%* 2012 623* 1. Risk of a Pronounced Pork Cycle This oversupply threatens primarily the rental segment. that the supply will overshoot demand sooner or later because of long. canton: multi-/single-family dwellings.51% 6. Credit Suisse Economic Research Positive Effect: No Overheating The positive side of the coin is that there are no signs of overheating in real estate prices in the canton of Aargau.6%* 4'125* 1. in absolute terms.5% 1. The regions located towards Zurich are impacted by the population pressure and the price-related migration away from the neighboring canton. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Localized Risk of Oversupply Demand for housing is high because the canton of Aargau is equally attractive for commuters and employees in the local high-tech industries. due to the size of its housing market..1% 0.Economic Research Canton of Aargau: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 582 1. 10-year vacancy rate 3% 2% 1% 0% -1% -1% 0% 1% 2% Rent Own Baden Aarau Freiamt Mutschellen Brugg/Zurzach Brugg/Zurzach CH Fricktal Mutschellen Freiamt Aarau Baden CH Fricktal Vacancy rate 2011 3% 4% Source: Swiss Federal Statistical Office.4% 0. net rent in CHF/m2 and year.4% 1.4% 282 1.5% 2.1% 1.5% 1.33% 0.09 4'172* 1. Q3 2011 Most populous municipalities Wettingen Baden Aarau Wohlen Oftringen Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 10'258 13'884 8'847 11'974 8'669 11'729 7'556 10'226 6'806 9'213 7'788 10'536 7'173 10'444 6'055 5'745 5'764 4'700 8'815 8'363 8'393 6'837 219 229 208 200 185 227 210 236 202 201 187 249 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 69 .2%* 2007 7'593 1.3% 4.2%* 286* 1.1% 1. In Wettingen. size of circle = housing stock 4% Avg.87 2011 616* 1. the Aarau region is particularly at risk of real estate-related problems in the form of a pronounced pork cycle.2% 3'995 1.94% 5. it is primarily the town of Rheinfelden and its immediate surrounds that appeal to commuters traveling to Basel because of the attractive location and relatively low taxes.91% 7.6%* 1.82 2008 592 1.6% -0.0% 0. prices remain subdued because of the high supply of new residential units. the proximity to Zurich is also noticeable in the slightly higher prices for condominiums. Accordingly. there were more dwellings planned for the entire canton in 2011 than in any other year since 2006.3% 1. on annual basis.99 4'079 1.4% 0.7% 0.85 Aargau 2010 608 1.8% 0.4% 269 1.0% 1.1% 4'034 1. Only single family dwellings in the three largest municipalities are more expensive than the overall Swiss average.
the canton of Appenzell Ausserrhoden ranks 12th and is thus around average among the Swiss cantons. Source: Braingroup. The increase is concentrated mainly on financial services. This is attributable to the inter-cantonal migration out of Appenzell Ausserrhoden since 1994. corporate services as well as the information.1% 0. the population across all Ausserrhoden communes has grown at a below-average rate over the period from 2005 to 2010 relative to the national average. the seat of the cantonal government. the canton's financial situation is sound.5% – 10.0% -8. Emigration is almost exclusively concentrated on the 15-24 age group.0% – 4. postal services Information.0% -2. but scores for education and accessibility to transportation are average. a trend only briefly interrupted in the years 2007 and 2008 after free movement of persons was introduced. communication and IT sectors. Companies in these service sectors are more mobile and are therefore best placed to optimize their tax liabilities by moving to Appenzell Ausserrhoden. Appenzell Ausserrhoden has the lowest tax burden in Switzerland.5% 2.0% – -2.6% 3. Source: Swiss Federal Statistical Office.0% – 0. Source: Swiss Federal Statistical Office Company Start-up Rate Appenzell Ausserrhoden Share of newly established companies relative to number of existing companies 40% 35% 30% 25% 20% 15% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 Traditional industry High-tech industry Construction Trading and sales Transportation.0% – -1.G allen Heris au Appenzell Youth Emigration Aside from the commune of Gais. hotels and catering Administrative and social services Total AR Total CH Tax Reduction Revives Company Start-up Rate The canton of Appenzell Ausserrhoden's economy is dominated by the health and social sector. by far exceeding the Swiss average. -/-. Some communes have even seen the population contract. Population Growth 2005-2010 Average annual population growth in percent Canton AR 4. This means that Ausserrhoden's companies are more capital and/or profit intensive than is the case for companies in the other three cantons. communications. If short-term available financial assets are taken into account. Ausserrhoden's tax take per employee is either equal or higher. companies in Appenzell Ausserrhoden have benefited from Switzerland's lowest tax burden.0% 0. Credit Suisse Economic Research Tax Burden and Receipts from Companies Tax burden 2009: CH = 100. one example being Herisau. Tax on net income and on capital 130 120 Tax burden on legal entities 110 100 90 80 70 60 50 0 AI AR 1'000 2'000 3'000 4'000 Income in CHF per employee from direct company taxation 5'000 UR VS LU JU CH-average NE VD TI All cantons GE BS FR BE ZH SO GR BL AG SZ TG GL SH SG NW OW ZG Healthy Finances Despite Low Corporate Taxes The low tax burden imposed on legal persons means lower receipts per employee. IT Financial services Corporate services Entertainment.1% – 2.5% -1. Tax rates are attractive. Yet agriculture also plays a greater role in comparison to the national average.0% 0 5 10 km St.5% – 1. Since 2008.0% – 3. Compared with the cantons of Thurgau. = CH average AR Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + ++ = = = + AI ++ ++ -= SG + ++ = = = = TG + ++ = = + + Lowest Corporate Taxes In terms of locational quality.0% -3. The rate of company start-ups increased rapidly in the year that followed.7% – -3.Economic Research Canton of Appenzell Ausserrhoden: Location Factors Locational Quality to CH Average +/++ Advantage. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 70 . on the other hand. Uri and Appenzell Innerrhoden.0% 1. Despite comparably lower receipts from corporate tax and below-average receipts from natural persons.Disadvantage. Appenzell Ausserrhoden has net assets and is debt free from an economic standpoint. Swiss Federal Tax Administration. In terms of company taxation.0% – 0. made a positive contribution to growth between 2005 and 2010. International migration.
1%* 2012 8'042* 1.2% -0. net rent in CHF/m2 and year. Credit Suisse Economic Research Higher Base of Vacant Properties Despite the canton's economic aspirations.7 0.3% 1.92 Canton of Appenzell Ausserrhoden 2008 2009 2010 2011 53.9% 2.4% 7.5* 1.5 0.3% 0.3%* 1. The rather turbulent price trend since 2002 was followed by a considerable price correction in 2009.6% 0.87% 2.2% 3'995 1.Economic Research Canton of Appenzell Ausserrhoden: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 52.0% -0. the starting point for strong housing planning is still not ideal. The number of vacant rental properties in 2011 is above than the ten-year average and even higher than in the structurally plagued peripheral economic region of Toggenburg.Gallen/ Rorschach Appenzell A. The dynamic planning of rental properties and condominiums has led to a sharp increase in the expected expansion for the years 2012 and 2013. their share in the housing stock in the last ten years has risen only marginally to around 7% today.22% 1.91% 7.0% 0.02 2011 7'949* 1. provided that the canton remains successful in attracting new companies and their employees with attractive conditions.8% 0.0% 1.8% 0.88 27.1% 4'034 1.04% 7.1% 0. both in terms of the long-term average as well as the average for 2011.Gallen/ Rorschach 1% 2% Vacancy rate 2011 3% 4% Source: Swiss Federal Statistical Office.1% 1.0% 1.82% 7.6% 0.1% 1. Appenzell I. In the past. structural change is likely to slowly change the real estate environment too. Building Permits by Regions and Segments Dwellings.Rh.2% 0.4% 26.3% 0.1% 26.1% 1.Rh.7 0.6% -0. However. canton: multi-/single-family dwellings.7% 6. and the price difference versus condominiums is accordingly greater than the Swiss average. As a result.9% 0. Q3 2011 Most populous municipalities Herisau Teufen Heiden Speicher Gais Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 5'960 6'234 6'210 5'661 8'065 8'432 8'406 7'658 4'673 6'664 4'691 5'018 5'291 6'807 9'696 6'822 7'311 7'704 185 218 189 183 180 227 189 220 190 184 181 249 8'669 11'729 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 71 .7% 0.2%* 27. The number of vacant properties in the ownership segment is twice the Swiss average.8 0.94% 9.1% 1.9* 0. Condominiums can therefore be purchased cheaply.8% 1.9% 1.8% 0. where.11% -4.99% 7. 10-year vacancy rate Rent 4% Own 3% 2% 1% 0% -1% -1% 0% Toggenburg CH Appenzell I. for example.3% 1. Vacancies: Actual and Historic By type of housing. a former commercial site is being redeveloped. The expansion could dampen the recent price growth for condominiums once again.6% 0. despite price increases. According to our estimates.0% 1.8% 7.1% 0.09 4'172* 1. Appenzell A.9% 1. More than half of this increase is attributable to major projects in Herisau.95 Switzerland 2009 2010 7'786 7'864 1.6 0. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2. the risk of vacant properties remains limited.3% 4.4% 0. The problem has to do with the housing stock because virtually none of the newly-constructed residential units was vacant in 2011.3% 3. both vacant properties and price trends have been sensitive to larger waves of expansion. Just such a wave is rolling in once again.9 52.5% 0.4% 1.4% 1. size of circle = housing stock 5% Avg.1* 1.92 2012 52.0%* 0. Single Family Dwellings Remain Popular Condominiums continue to play a minor role in the canton's housing planning. CH Toggenburg St.99 4'079 1.56% 4.0 52.0% 0.Rh.3% 1.9* 0.1%* 0.1% 0.2% 3'950 1.1% 1. St.Rh.94% 5. regions: total 550 500 450 400 350 300 250 200 150 100 50 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 Appenzell A. on annual basis.0% 0.1% -1.4%* 4'125* 1.0%* 2007 7'593 1.90 26. The single family dwelling remains the most popular form of housing in the ownership segment.Rh. Older and outdated single family dwellings are also likely to have problems in this rural canton.1 53.1% 0.1%* Source: Swiss Federal Statistical Office. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research A Fragile Equilibrium A fragile equilibrium dominates the canton's real estate market. Wüest & Partner.8% 6.93 2008 7'702 1.94 26. MFD SFD Source: Baublatt.
receipts from direct taxes per capita – respectively per company employee – are relatively low. If short-term available financial assets are taken into account. like eight other cantons. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 72 . Growth was strongest in the administrative and social services sectors as well as in corporate services.5% rise recorded by the canton over the observed period was only surpassed by the cantons of Zug and Geneva. Although there was net immigration to Appenzell Innerrhoden from other cantons since 2003. postal services Financial services Entertainment. around 0. the migration balance collapsed in 2010. traditional industry also made a positive contribution to growth. Low corporate tax rates have encouraged this development. Contribution to Employment Growth 1995-2008 In percent by sector group St. has a net surplus and is thus debt free. the trend reversed in 2010. By far the most significant age group in terms of international migration is 25-39 years old. hotels and catering Werdenberg St. communications. After several years of significant immigration. As in the emigration wave seen in the nineties. trading and sales and cutting-edge industry. However. None of the eleven sector groups in the demicanton experienced a decline in employment levels. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation.Economic Research Canton of Appenzell Innerrhoden: Location Factors Locational Quality to CH Average +/++ Advantage. The cause is to be found in inter-cantonal migration.6% per year. In contrast to the trend across Switzerland as a whole. The 21. Galler Rheintal Source: Swiss Federal Statistical Office. this has not resulted in high levels of debt. Innerrhoden imposes a lower tax burden on natural persons. = CH average AI Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 ++ ++ -= AR + ++ = = = + SG + ++ = = = = TG + ++ = = + + Ranks Behind Ausserrhoden The canton of Appenzell Innerrhoden ranks around average in terms of locational quality. key here in the first few years after 2000 has been the 0-39 age group.5 percentage points below the Swiss average. Credit Suisse Economic Research AR Toggenburg CH SG Net Migration 1990-2010 Total number of people 200 150 100 50 0 -50 -100 -150 -200 Inter-cantonal International Total Collapse in Immigration Annual population growth in the canton of Appenzell Innerrhoden ran at 0. Source: Braingroup. Accordingly. The canton's tax burden is roughly equal to that in Ausserrhoden. though since 2008. though roughly in line with the canton of St. Third Highest Rate of Employment Growth Employment growth in the canton of Appenzell Innerrhoden has exceeded national performance by a factor of two in the period between 1995 and 2008. -/-. The tax strategy of the canton of Appenzell Innerrhoden provides for a below-average tax burden for both companies and natural persons. the tax burden on companies has been higher. education and accessibility are below the national average. 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Swiss Federal Statistical Office Tax Burden Synthetic indicators 2010. CH = 100 140 Asymmetric 130 Tax burden on legal entities 120 110 100 90 80 70 60 50 60 ZG SZ UR NW OW AI GR AG GL LU AR Asymmetric 80 90 100 110 120 Tax burden on private individuals 130 140 SH SG TG ZH TI BS Symmetric and high GE VD JU FR SO BE CH VS BL NE 50 Symmetric and low 70 Innerrhoden Tax Strategy Pays Off Taxation is both a locational factor as well as a source of income for the state. In comparison to Ausserrhoden.Gallen/Rorschach 35% 30% AI 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Traditional industry Construction Trading and sales Information. In contrast to its neighbor though. Gallen. Innerrhoden. which is why we score the canton somewhat lower than Ausserrhoden in terms of its overall locational appeal.Disadvantage.
7% 6.Economic Research Canton of Appenzell Innerrhoden: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 15.93 2008 7'702 1.0% 0.0% 1. MFD SFD Source: Baublatt. especially compared to its neighboring canton. 10-year vacancy rate Rent 4% Own 3% 2% 1% 0% -1% -1% 0% Toggenburg CH Appenzell I.91% 7. in contrast to Ausserrhoden.1% 1.09 4'172* 1.3% 3.03 Canton of Appenzell Innerrhoden 2008 2009 2010 2011 15. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Greater Stability Than in Appenzell Ausserrhoden The Appenzell Innerrhoden real estate market is characterized by higher stability.0% 1.1% 0.6% 1.9 0.1% 0.1% 4'034 1.1%* 0. Credit Suisse Economic Research Low Price Levels Despite Dynamic Growth The downside of this success is that the above-average price trend in the ownership segment has decoupled from the income trend.0% 1.0* 1. Building Permits by Regions and Segments Dwellings.Rh. Q3 2011 Most populous municipalities Appenzell Rüte Schwende Oberegg Gonten Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 8'089 10'948 6'355 6'306 4'895 5'718 8'594 8'535 6'619 7'729 6'400 5'691 5'455 4'291 5'464 9'319 8'289 7'941 6'244 7'956 217 209 206 173 183 227 219 211 207 174 184 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 73 .8% 3. Price Levels in the Largest Municipalities Transaction prices in CHF/m2.02 2011 7'949* 1.0* 0.1%* 2012 8'042* 1.2% 3'995 1. net rent in CHF/m2 and year.Rh.4% 1.27% -1.1% 0.7 15. this is not as concerning as in other locations because the price trend started from a low base and today's prices are still modest and below-average despite the increases.Rh.6% 0.05 6. That. prices for the few niums and the popular single family dwellings are likely to climb further because demand in Innerrhoden is strong and the supply of available condominiums and houses is scarce.5% 0. its construction activity is much weaker and is heavily dominated by single family dwellings. increases the appeal of the canton.6% -0.87% 2.7 15. meaning that an end to the growth in prices is hardly likely this year.Gallen/ Rorschach 1% 2% Vacancy rate 2011 3% 4% Source: Swiss Federal Statistical Office.9 1.6% 2.0% 6. Credit Suisse Economic Research Small Market Makes Adequate Planning Easier As a result.99 4'079 1.Rh. with more than 7'000 residential units. it is also not difficult for people seeking housing to move to adjacent regions.9%* 0.18 2012 16.6% 0.2% 0.8 0.1* 0.2% 1. even though that is not attractive from a tax perspective.7% 1. on annual basis. Based on the overall housing stock.8* 0.7% 6.5 15. Innerrhoden is also not confronted with increased numbers of vacant rental properties.1% 1.3% 7. the two Appenzell cantons demonstrate fundamentally different trends because.98% 4. Due to employment and population growth.2% 3'950 1. and far below the long-term average and those of the neighboring regions.5 1. making adequate housing planning easier. new residential units could and can still be easily absorbed without causing higher numbers of vacant properties.2%* 7.Gallen/ Rorschach Appenzell A. in turn.0% 1.Rh.0% 1.94% 9. regions: total 120 100 80 60 40 20 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 Appenzell I.4% -0.0% 0.04% 7.94% 5. Vacancies: Actual and Historic By type of housing.5% 0.7%* 4'125* 1.1%* Source: Swiss Federal Statistical Office.09 7.8% 0.0% 9.1% 1.2% 0.9% 1. Wüest & Partner. canton: multi-/single-family dwellings.8% 6.3% 1.3% 4. Moreover. St. its vacancy rate was equivalent to the Swiss average in 2011. which is likely to continue in 2012. As a consequence.7% 0.7 1.4% 7.95 Switzerland 2009 2010 7'786 7'864 1.1% 1.0%* 0. Appenzell A. CH Toggenburg St.05 6.1% 1.62% 9.9% 1. The market of the smallest canton in population terms is transparent.6% 1.9% 0.3% 0.5% 0.06% 7.72% 9.4% 1. size of circle = housing stock 5% Avg.8% -0. Nevertheless.0%* 2007 7'593 1. The market for rental apartments plays a minor role because of its limited size. Appenzell I.
only ahead of Geneva. The tax burden is relatively high. in line with the development across Switzerland as a whole. However. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 74 . the canton of Aargau imposes a much lower burden in terms of mandatory charges. Basel City has suffered as a result of restructuring by UBS and Novartis which went to the detriment of the city canton. Fricktal Source: Swiss Federal Statistical Office. Basel City closes the ranking in second to last position. thanks to tax cuts. though other sectors saw employment decline. This migration pattern remained unchanged. inter-cantonal migration was consistently negative over the twenty years from 1990.Economic Research Canton of Basel City: Location Factors Locational Quality to CH Average +/++ Advantage. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation. Basel City has been able to improve considerably on its score in comparison to the last ranking in 2008. = CH average BS Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 -= + ++ + BL = + + + + AG + ++ = = ++ + SO = = = + = Centrality Means Good Accessibility The canton of Basel City places fifth in the national ranking of locational quality. After strong contractions in 1995-1998. Immigration from abroad to Basel City was focused on individuals of working age. The other two northwestern cantons have experienced strong employment growth over the last 13 years. Both administrative and social services sectors experienced positive growth. the canton of Basel City is by far more attractive than Geneva on account of the considerably lower cost of living. Source: Swiss Federal Statistical Office Financial Appeal of Living by Component Heads of expenditure in the household budget Fixed costs High fixed costs lower tax advantages GE Dual disadvantages Ranking 2008 Ranking 2011 ZG ZH SZ NW GR OW UR AI GL LU SG TG AG SO AR SH VS JU BS CH TI BL VD Mandatory charges FR BE NE Combined advantages Asymmetric positioning Second Highest Cost of Living With respect to the financial appeal of living in the canton. especially for companies. Although net migration was positive in total over this period.Disadvantage. Overall. postal services Financial services Entertainment. the city canton benefits from its good accessibility and the availability of a highly qualified workforce. albeit at a lesser rate which was below the Swiss average. -/-. Thanks to its centrality. While fixed costs are lower in Basel Land and Solothurn. Credit Suisse Economic Research BS Laufental Net Migration 1990-2010 Total number of people 4'000 Inter-cantonal 3'000 2'000 1'000 0 -1'000 -2'000 -3'000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 International Total Inter-Cantonal Migration Basel City was the only canton to experience a population decline in the period between 1990 and 2010. in particular those between 25 and 39 years old. communications. this ratio was negative for all other age groups. The combination of comparably high taxes and high fixed costs weighs heavily on freely disposable income. Contribution to Employment Growth 1995-2008 In percent by sector group 35% 30% 25% 20% 15% 10% 5% 0% CH Oberes Baselbiet AG BL Unteres Baselbiet SO -5% -10% -15% -20% JU Traditional industry Construction Trading and sales Information. Basel City returned to growth in the period between 1998 and 2008. Despite it taking the penultimate position in the ranking. the canton of Aargau is more attractive than Basel City on account of the lower tax burden. hotels and catering Weak Employment Performance Over the period from 1995 to 2008. Basel City experienced a contraction in employment. Although net inter-cantonal migration of young adults aged between 15-24 was positive. However.
for example.4 190.7% -0. High Liquidity Despite Low Vacancies The real estate market of the canton of Basel City is.1% 8. apartments representing only 0.7 0. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing. for example.48% 9.03 108.0% 1.06 109.04% 7. regions: total 700 600 500 400 300 200 100 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 Basel-Stadt MFD SFD Source: Baublatt. Wüest & Partner.9% 1. it is unlikely that a housing shortage will result because.5% 0.6%* 1.5% 0.6% 0. This means the housing market is not as tight as it is.09 4'172* 1. Rents Soon at Zurich Levels Nevertheless. average four-room apartment with 110 m2 net living area is estimated to be CHF 2'347 in the city of Basel. net rent in CHF/m2 and year.2% 3'995 1.2%* 0. Due to the limited level of construction activity.6% -0. and by 2020 the zoning plan for the Erlenmatt site allows for some 100'000 m2 for apartments.Economic Research Canton of Basel City: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 185.02 2011 7'949* 1.to three-room apartments. canton: multi-/single-family dwellings. the vacancy rate in the rental segment in 2011 was 0.5%* 2007 7'593 1.5% 1. Vacancies are limited. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Limited Momentum on Basel's Real Estate Market Although the population has been growing again for some time. It appears that larger rental apartments are particularly in demand because three-quarters of the vacancies in 2011 were one.7% 0. Moreover.6%.4% 0. which contradict the need for urban densification. The high price for new single family dwellings.4% 1.5% 4. on annual basis.8% 0. For example.1%* 2012 8'042* 1.0% 1.1% 1.94% 5. not far from the level in the city of Zurich.0% 1. 10-year vacancy rate Rent Own Basel-Stadt CH Oberes Baselbiet Unteres Baselbiet CH Unteres Baselbiet 0.8 0.2% 3'950 1.2 0.7% 0. 70 rental apartments will be built by 2014 in the former transit camp on the Dreispitz site.0% Oberes Baselbiet Avg.3% 0.1% 0.99 4'079 1.6* 0.03 2008 186.02 Canton of Basel City 2009 2010 2011 187.5% Vacancy rate 2011 1.1% 1.8% 0.2 0.4% 108.3% 1.1% 1.5 0. no later than when the issue of purchasing property arises. the South Park in the vicinity of the SBB train station will be expanded with apartments.2% of the canton's total housing stock received building permits in 2011.0% 1.87% 2.90% 1.0% 0.20% 1.2%* 4'125* 1. results from the lack of available building land for this type of housing. significantly below its ten-year average.91% 7.93 2008 7'702 1.1%* 0.36% 8.3% 0.1 0. the market is liquid.1% 1. in Zurich.0% 1.0% 1. Q3 2011 Most populous municipalities Basel Riehen Bettingen SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 11'323 15'316 11'331 15'329 8'694 11'768 7'764 11'304 7'582 11'037 6'318 9'193 256 230 221 270 232 222 Switzerland 7'788 10'536 7'072 10'294 227 249 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 75 .6% 1.2%* 109.5% Source: Swiss Federal Statistical Office.4% 1.5% 0.7% 6.8% 1. By 2017. just 5% below the rent for a similar apartment in Zurich. The percentage of apartments listed for rent has been fluctuating for the last six years at around the 3% level.5% -0.95 Switzerland 2009 2010 7'786 7'864 1.1% 1. Still.0* 0.1%* Source: Swiss Federal Statistical Office.2% 1. as is typical for a city center.1% 1.3% 3.0% Basel-Stadt 0.4% 7.9 189.2* 0.3% 4.1% 4'034 1. new housing is planned in the medium and long term.72% 5. size of circle = housing stock 2.1% 0. Geneva or Lausanne. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.8% 0.0% 0.5% 0.5% 108. rents in the city of Basel have reached a level that is.2% 4. many of the canton's residents move to neighboring regions. Building Permits by Regions and Segments Dwellings.6% 1.4% 0.14 2012 191.2% 108.94% 9.1% 1.1% 1.7% 0.6* 0.0% -0. characterized by a high percentage of rental apartments. Nevertheless. The net monthly rent for a new. This limited level of construction activity has contributed in recent years to a considerable reduction in vacancies.
0% Olten/Gösgen/Gäu Unteres Baselbiet 0. the smallest Basel region.4% 1. in % Canton BL 22% – 24% 24% – 26% 26% – 28% 28% – 30% 30% – 32% 32% – 34% 34% – 36% 36% – 38% 38% – 40% 40% – 43% 0 5 10 km Base l Li esta l Delé mo nt Source: Swiss Federal Statistical Office. Relationship Between Active and Retired Persons Population of pension age in 2010 measured as a percentage of the workforce.0 1. Given the weaker population trends.8% 1. Fixed costs are also slightly above the national average.5 1. the canton of Basel Land has a below-average financial appeal.6% 0.0 – -0.0 – -1.6% 1.8% 0. As the cost of housing appreciates. the ratio of active to retired population stands as high as 39%. On the other hand. it does not score well.0 0. -/-. = CH average BL Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 = + + + + BS -= + ++ + AG + ++ = = ++ + SO = = = + = Location Factor Basel Center The canton of Basel Land places 11th in the national ranking and thus takes a middle of the road position relative to other cantons. The Upper Baselbiet also has an above-average number of retired persons in relation to the active population.0 -2. and we continue to expect below-average growth up to 2013.2% 1.0 0 5 10 km Delé mo nt Base l Li esta l Expensive Agglomeration Canton Given the relatively high tax burden.0% 1. Compared to the other northwestern cantons of Switzerland. real values 2. while the Upper Baselbiet and Laufental ranked around average. Growth of household income in the canton of Basel Land has been below the national average for several years. In terms of the tax burden.Economic Research Canton of Basel Land: Location Factors Locational Quality to CH Average +/++ Advantage.3 – 0.6 0.3 -0.0 – 3.6 – 1.0 -1.0 – 1.3 0. Credit Suisse Economic Research Household Income Forecast up to 2013 Average annual growth in percent. It benefits from high levels of education and good accessibility to transportation thanks to its proximity to Basel center. the communes close to Basel City reveal lower indicator values than the communes of the outer agglomeration belt. Laufental SO Thal Source: Credit Suisse Economic Research BL JU Freely Disposable Income in the Communes Synthetic indicator incl. commuting costs 2011.0 – 0. The Lower Baselbiet region came in 12th of Switzerland's 110 economic regions.Disadvantage. Older Population The population of Basel Land is much older than the Swiss average with the ratio of active to retired persons at 35%. Values in the southeastern part of the Upper Baselbiet are slightly above average. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 76 . a larger share of Basel Land's residents are of pensionable age than compared with the Swiss average.2% 0. a lower share of the population is aged between 20 and 35.0% Fricktal Oberes Baselbiet CH High Income in Lower Baselbiet Average household income per capita in the canton of Basel Land was considerably higher than the Swiss average in 2008. Only Laufental.5 – 2.0 2. The canton therefore reveals a dearth of people of working age. which enjoys good road and rail connections to Basel.2 – -2. has a population which is younger than the Swiss average. growth rates are higher than the Swiss average when considered on a per capita basis. In the Lower Baselbiet.4% AG BS 0. On the one hand. This is particularly true of Fricktal. Basel Land reveals a low locational appeal.3 – 0. CH = 0 Canton BL -5. The two neighboring cantons of Aargau and Solothurn are considerably more appealing from a financial perspective and are thus very attractive locations for those working in Basel City.
regions: total 2'000 MFD SFD Laufental Oberes Baselbiet Unteres Baselbiet 1'500 1'000 500 0 1995 1997 1995 1997 1999 2001 2003 2005 2007 2009 2011 1999 2001 2003 2005 2007 2009 2011 Source: Baublatt.1%* 2012 8'042* 1.3% 4. this traditionally popular form of housing in the canton of Basel Land is also weak. for instance.7% 0.1% 1.4%. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.0% 0. Wüest & Partner. net rent in CHF/m2 and year.3% 3.4% 1.1% 0.Economic Research Canton of Basel Land: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 269 0.2%* 133* 0.10 2012 277* 0.1% 1.0% 129 1. construction activity is limited and has been declining since 2004.2% 8.91% 7.7% 0.6% 0. on annual basis.6% 0.5% Vacancy rate 2011 2.0% 1.9% 0.7%* 0.5% 0.03 131 0.5% -0. This makes clear that the Aargau region is expecting further migration from the west. with low amounts of vacancies at the same time. Allschwil.6% 0.94% 5.3% 1. canton: multi-/single-family dwellings.0% 1.0% 0. Further Price Growth Foreseeable Differences in prices are strongly impacted by the proximity to the city of Basel. Planning applications for multi-family dwellings signal the stabilization of construction activity at a below-average level in a long-term comparison. Despite the low amount of vacancies.49% 2.8% 0.44% 5. the population pressure from the city center is even higher and is only relieved by the fact that some commuters move to the neighboring Aargau region of Fricktal because of the lower tax burden.2% 1.5% Source: Swiss Federal Statistical Office.1%* Source: Swiss Federal Statistical Office.0% 1.1% 0.0% 3.7% 0. There is a lot of construction there and – when measured against the housing stock – twice as much new housing is planned as in Upper Baselbiet and four times as much as in Lower Baselbiet.7% 6.7%* 0.5% 0.7% 1. it is probable that property prices will climb even further.7%* 4'125* 1.6%* 2007 7'593 1.4% 5.02 2011 7'949* 1.1%* 0.53% 2. 10-year vacancy rate Rent Own 1.4% 7.1% 4'034 1.4% 1.05 132* 0.1% 0.71% 8. Building Permits by Regions and Segments Dwellings. With about 200 approved building applications for single-family dwellings each in both Upper and Lower Baselbiet.0% 0. the housing market is intact because approximately 3% of the overall housing stock is constantly listed for rent. Q3 2011 Most populous municipalities Allschwil Reinach Muttenz Pratteln Binningen Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 10'637 14'387 10'984 14'858 10'435 14'123 8'839 11'955 12'839 17'374 7'788 10'536 7'700 11'215 7'300 10'622 7'718 11'230 6'018 8'756 8'491 12'363 7'072 10'294 250 247 235 224 267 227 259 253 244 227 287 249 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 77 . The canton's vacancy rate – similar to the trend in the canton Basel City – has been falling since 2007 and fluctuated in 2011 around the low level of 0.5% 1.94% 9.0% 1.9% 128 0.0% Avg.93 2008 7'702 1.95 Switzerland 2009 2010 7'786 7'864 1. As a result. offers residential areas that are more attractive from a tax perspective and just a stone's throw from the city center.1% 1.1% 1.9% 1.99 2008 271 0.4% 0.5% 0.6% -0.8% 0.5% -3.99 4'079 1.3% 1. size of circle = housing stock 2.7% 1.0% 0. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Attractive Residential Regions with Limited Expansion As in the neighboring canton of Basel City. The price for an average condominium has risen 35% within five years and is now on a par with the city of Basel.4% 0.01 Canton of Basel Land 2009 2010 2011 273 274 276* 0.8% 0. the incentive is likely to grow further to acquire property outside the canton's borders at lower prices in an environment that is relatively more attractive from a tax perspective.2% 3'950 1. This is remarkable because particularly the municipalities of Basel Land located near the city of Basel are considered to be an attractive residential region for people working in the city.6% 0.04% 7.9% 130 0. Furthermore.0% Oberes Baselbiet Unteres Baselbiet -0. because construction is also limited in the city of Basel.5% Laufental CH Unteres Baselbiet 0.09 4'172* 1.2% 3'995 1.5% Oberes Baselbiet CH Laufental 1. Planning Applications – No Indication of an Increase The increasing shortage is expressed in the low amount of vacancies.46% 5.0% 2.87% 2. Due to the moderate levels of construction activity.7% 0. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.0% 1.
Grindelwald. demand and size.25 -0. Credit Suisse Economic Research Supply vs. Horizontal line = Swiss average Canton of Berne Traditional industry High-tech industry Construction Financial services Trading and sales Transportation.00 – 1. The map on the left shows a sector's presence relative to the Swiss average measured in terms of the number of employees. Accessibility to the south of the canton into the communes of Spiez is better than the Swiss average. Gstaad and Grindelwald posted an aboveaverage performance when compared to the other 29 regions.25 – 0.50 – 2.00 -0. When compared to Jura. Data take account of both motorized individual transportation as well as public transportation options. while Gstaad. CH = 0 Canton BE 2. Whereas the Mittelland is well connected in terms of transportation. Accessibility to Transportation Index of motorized individual transportation and public transportation.75 – -0.25 – 0. Geographical Variety The figure on the left shows accessibility to transportation at the communal level.50 1.00 – -0.25 0 10 20 km So lot hurn Zug Lu zer n Bern Sa rnen Fr ibo urg Sta ns Source: Credit Suisse Economic Research Sector Specialization of Economic Regions Synthetic indicator 2008. hotels and catering 0 15 30 km Economy Variety The canton of Berne also reveals regional differences in terms of its economic structure. The Oberland stands out for its tourism focus.25 1. Demand Indicator for Tourism X axis = supply indicator. and the northeast benefits from its central position between Berne.50 0. postal services Information. which is the biggest destination in the Berne Oberland by overnight stays. Berne comes out on top in all five areas.50 – 4. Saas Scuol Leukerbad Lenk Almagell 0 -3 -2 Meiringen Hasliberg -1 Leysin -1 2 Lenzerheide Davos Silvaplana Crans-Montana Arosa Samnaun Val d'Anniviers -2 Savognin Adelboden -3 0 Belowaverage success Limited supply Broad supply Successful Destinations Gstaad and Grindelwald The figure on the left shows the position of Swiss winter sport destinations in terms of supply. -/-. though there is considerable variety in regional scores.50 – 0. is successful despite belowaverage supply. Moritz Celerina/ Schlarigna Zermatt Engelberg Grindelwald Lauter. the breadth of the supply and their success. Basel and Zurich. Accessibility scores vary greatly across the canton of Berne. while the remaining destinations received below-average scores in both components. Berne is around average. the demand indicator comes in around average.00 – 0. The alpine valleys of the Oberland score worst in terms of accessibility.25 – -1.Economic Research Canton of Berne: Location Factors Locational Quality to CH Average +/++ Advantage. Size of circle = Average number of overnight stays 2003-2010 Aboveaverage success 3 2 Gstaad Pontresina Sils im Engadin Villars-Gryon Saas Fee Laax Flims 1 Verbier 3 St.50 -1. is among the top three destinations in the country. Accessibility is best in the city of Berne. In terms of eduction and accessibility. the role of industry is of greatest significance.00 0.50 0.50 – -0. Only in the regions around the capital itself do employment levels reach and exceed the national average in the higher value-creating service sectors of the economy. The concentration of cutting-edge industry in the Jura regions is attributable to the strong presence of the watch industry there.Disadvantage.00 -1. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 78 . IT Corporate services Energy supply Administrative and social services Entertainment. Meiringen and Hasliberg received the worst scores. Berne reveals a particular disadvantage in terms of tax burden when compared to the neighboring cantons of Lucerne and Aargau. In Lauterbrunnen/Wengen/Mürren. communications.75 -1. Destinations within the canton of Berne vary greatly in terms of their size. Construction is also well represented in the south of the canton.5 – -1./Wen. In terms of the latter.75 0.75 – 1. Source: Swiss Federal Statistical Office. Y axis = demand indicator.25 -0. which is very much focused on the upscale market. = CH average BE Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 = = = = LU + ++ = = = = AG + ++ = = ++ + JU --- Canton Distinguished by Variety The canton of Berne ranks 18th in the cantonal ranking of locational appeal. To the north of the canton and for the Mittelland. the Jura and alpine regions reveal belowaverage scores./ 1 Klosters-Serneus Mür.
0% 1. larger projects are emerging in the two regions with a stronger orientation towards tourism: Thun and the Bernese Oberland East. In addition to the larger urban regions such as Berne and Biel.0% 0.87% 2.9% 1.94% 5.4% 7.0% 0. Building Permits by Regions and Segments Dwellings.18% 4. which shows that the low interest rate environment has exacerbated structural problems even further.5% 0. Wüest & Partner. the price of an average condominium in the municipality of Saanen (Gstaad) is at least twice as expensive as a similar unit in the city of Berne.8% 1.1% 1. calming influence compared to the overheating in other cantons.7% 0. net rent in CHF/m2 and year.6% 0. the vacancy rate for 2011 rose beyond the long-term average. Otherwise.6% 6.6%* 2012 990* 0.3% 1.5% 0.82 Berne 2010 978 0.99 4'079 1.Economic Research Canton of Berne: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 963 0. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.7% 0.1% 0.5% 0.94% 9.2%* 527* 0. However. the canton of Berne is a welcome.6% 0.9% 1.26% 7.3% 4.1%* 2012 8'042* 1.9% 0. meaning it is ranked number two behind Zurich.7%* 1. In some cases. canton: multi-/single-family dwellings. Interestrelated market distortions combine there with a high percentage of older apartments.5% 0.79 Canton of 2009 974 0.2% 0. Q3 2011 Most populous municipalities Bern Biel Thun Köniz Steffisburg Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 9'605 12'994 6'339 7'355 7'048 8'581 9'948 9'535 7'871 10'645 7'291 10'607 5'191 6'209 6'082 6'155 7'548 9'037 8'844 8'956 244 204 200 209 205 227 249 211 196 203 207 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 79 .0% 1.1%* 0. 10-year vacancy rate 5% 4% 3% 2% 1% 0% -1% -1% 0% Rent Own Saanen/ Obersimmental Kandertal Thun CH Bern CH Grenchen Oberes Emmental Oberaargau Jura bernois Biel/Seeland Schwarzwasser Burgdorf Aaretal Erlach/Seeland Berner Oberland-Ost All regions Berne 1% 2% 3% 4% 5% Vacancy rate 2011 6% 7% 8% Source: Swiss Federal Statistical Office. amounts of vacancies. albeit stable.6%* 2007 7'593 1.04% 7.4% 1. A Calming Influence between Overheated Cantons With regard to price levels. the prices in Berne's tourist destinations are in sharp contrast to this. regions: total Bern Oberaargau Erlach/Seeland Jura bernois Schwarzwasser MFD SFD Biel/Seeland Burgdorf Berner Oberland-Ost Oberes Emmental Kandertal Thun Aaretal Grenchen Saanen/Obersimmental 6'000 5'000 4'000 3'000 2'000 1'000 0 1995 1997 1995 1997 1999 2001 2003 2005 2007 2009 2011 1999 2001 2003 2005 2007 2009 2011 Source: Baublatt.12% 5.4% 0.8% 1.8% 5.95 Switzerland 2009 2010 7'786 7'864 1.8% 0.0% 0. Although prices have increased somewhat. Otherwise there is a balance between renting and ownership. the expansion in the canton has not followed the sharp increase in building permits for residential units that has occurred elsewhere throughout Switzerland since 2010.7% 523 0.1% 1. However. The rental apartment segment in Biel is also a problem. when measured against this size of the market.2% 0.91% 7.2% 3'950 1. Nearly 13% of Switzerland's housing stock is found in the canton.09 4'172* 1.93 2008 7'702 1.9% 515 0. Even though singlefamily dwellings are somewhat more expensive.8% 511 0.4% -1. the expansion in the housing stock has been modest in recent years. they are still not decoupled from income levels.06% 2.10% 1. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2. on annual basis.79 2008 969 0.6% 1. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Berne's Housing Market Is Calm The housing market in the canton of Berne is comparatively calm.83 2011 984* 0. their prices have also remained subdued for an urban environment.4% 0.7% 6.1% 1. Impulses from a demand side are limited.0% 1. The price level for condominiums in the city of Berne is approximately equal to the Swiss average.1%* Source: Swiss Federal Statistical Office.1% 4'034 1.6% 0.6% -0.1% 0.7% 519 0. Structural Rental Vacancies in the Periphery The region of Berne is dominated by rental apartments.1% 1. Several regions in the north of the canton are struggling with higher levels of vacancies. with increased. It hardly makes sense at the moment to rent in peripheral locations due to the cheap price of building land.87 530* 0. size of circle = housing stock 6% Avg.3% 3.8% 1.7%* 4'125* 1.8% 0.02 2011 7'949* 1. For example.2% 3'995 1.9% 1.
0% -8. whereas Neuchâtel comes in second to last.0% – 0. Credit Suisse Economic Research Glâne/Veveyse Growth Motor La Gruyère Employment growth in the canton of Fribourg was driven mainly by the administrative. and thus comes in considerably higher than the Swiss average of 1. postal services Financial services Entertainment. Thanks to the sale of excess gold reserves held by the Swiss National Bank and the favorable economy. Cutting-edge industry as well as trading and sales also made significant contributions to this rise in employment. La Gruyère revealed the strongest growth at 22.0% 1. At a regional level. At 7. the comparably high tax burden reduces the appeal of the canton in terms of locational quality.Disadvantage. social services and corporate services sectors. in Fribourg has recorded little contraction in employee numbers. In particular. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation.6% 3. nine cantons have been able to build up a net surplus and are thus.1% 0. in the period between 1995 and 2008. draws people from the relatively densely populated areas on the banks of Lake Geneva. the canton of Fribourg has the highest net surplus measured in terms of cantonal income of all cantons. as was the case through Switzerland as a whole. and as a financially attractive place to live. Large Financial Scope for Maneuver Gross debt is equal to all outstanding debt.Economic Research Canton of Fribourg: Location Factors Locational Quality to CH Average +/++ Advantage.7% – -3. The two neighboring cantons.0% – -2. 2010 40% Gross debt ratio 30% 20% 10% 0% -10% FR SG ZG GR SZ OW AR SH AI NW SO UR TG LU ZH VS VD GL ALL AG BS BL BE JU TI NE GE All cantons Net debt ratio Source: Federal Finance Administration. Highest Population Growth in Switzerland Population growth in the canton of Fribourg reached an average annualized rate of 1.0% 0 5 10 km La usa nne Neuchâ tel Bern Fr ibo urg Source: Swiss Federal Statistical Office Cantonal Debt Ratios As a percentage of cantonal income. it has been used to pay off debt. communications. Credit Suisse Economic Research Contribution to Employment Growth 1995-2008 In percent by sector group 35% 30% 25% 20% 15% 10% 5% La Gruyère FR 0% -5% -10% -15% -20% La Broye Traditional industry Construction Trading and sales Information. No other canton has been able to beat this. The increase in population is particularly pronounced along the transportation axes and close to the Vaud border.5% – 10.2%.0% -3. Overall. Adjusting for readily available financial assets results in net debt. Berne and Vaud. = CH average FR Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 = = - BE = = = = VD -= + = = NE --= + - High Tax Burden Reduces Appeal The canton of Fribourg ranks fifth from the bottom of the ranking. debt free.0% – 4. While a general shift has been seen in Switzerland as a whole.0% -2. employment growth was above the Swiss average.0% – 3.1%.1% – 2. Fribourg benefits from high population growth in the Bassin Lémanique region. -/-. The rise is less notable along the eastern peripheral regions of the canton where certain communes have even seen the number of inhabitants contract.0% 0. though given that interest rates are currently so low. from traditional industry to higher value-creating cutting-edge industry.5% -1. Population Growth 2005-2010 Average annual population growth in percent Canton FR 4. take middle position in the ranking. hotels and catering Source: Swiss Federal Statistical Office. These financial assets serve as a buffer in more difficult times or for extraordinary investments. from an economic perspective.5% – 1. The canton of Fribourg therefore has considerable scope for maneuver in its fiscal policies. Education and accessibility components of the assessment cannot sufficiently offset this disadvantage.0% – 0.0% – -1.1%.9% in the period between 2005 and 2010.5% 2. Murten Sense CH La Sarine Swiss Issues Real Estate – Real Estate Market 2012 80 .
04% 7.4% 1.95 Switzerland 2009 2010 7'786 7'864 1.4% 3.0% 0.99 4'079 1.7% 0. a reduction in vacancy rates in the canton can be anticipated for 2012.5% Glâne/Veveyse La Gruyère La Gruyère CH Sense Glâne/Veveyse La Broye Murten (Morat) La Broye CH Murten (Morat) La Sarine Rent Own Sense 1.93 2008 7'702 1.6%* 2007 7'593 1.1% 1.3% 3. This migration from other cantons has given Fribourg the highest population growth of all Swiss cantons.6% -0.4% 7.1% 1.5% 2.1% 1. the slight decline in the number of apartments approved for construction is likely.0% 1.5%* 4'125* 1.94% 5.0% 1.87% 2.98 2008 269 2. the forecourt of the Lake Geneva region.7% 127 1.0% 1.5%* 0.2% 3'995 1.0% 1.7% 0.0% 0.90% 6.83% 1.0% Source: Swiss Federal Statistical Office. on annual basis. Q3 2011 Most populous municipalities Fribourg Bulle Villars-sur-Glâne Marly Düdingen Switzerland Source: Wüest & Partner SFD Condo Rent Moderat Upscale Moderat Upscale Moderat Upscale 6'718 5'952 6'040 6'871 6'161 9'084 8'052 8'168 9'297 8'335 5'418 5'164 5'955 4'745 5'309 7'881 7'519 8'667 6'904 7'726 196 195 214 195 206 227 196 198 215 196 208 249 7'788 10'536 7'072 10'294 Swiss Issues Real Estate – Real Estate Market 2012 81 .5% -0.2% 3'950 1.1%* 0. Both of the regions Glâne/Veveyse and La Gruyère have a level of population growth that is twice the Swiss average.7% 0.02 Fribourg 2010 278 1.2%* 131* 1.8% 0.06 2011 283* 1. Building Permits by Regions and Segments Dwellings.2% 0.9% 1.0% 0.Economic Research Canton of Fribourg: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 263 1. far from price trends in the Lake Geneva region and also below the price trend for Switzerland overall. The number of vacant rental apartments has declined primarily in these regions.0% 1.1%* 2012 8'042* 1.5% 1. canton: multi-/single-family dwellings. but also the outlying communities in the extended commuter belt of the medium-sized and small towns. As it is likely that population pressure will continue with weaker expansion at the same time.7% 0.04% 1.5% 3.0% -0.7%* 2012 287* 1. net rent in CHF/m2 and year.1% 1.9% 0.09% 5.0% 129 1. The sparsely populated canton has significant land reserves.98 Canton of 2009 273 1. The expected expansion of the housing stock is accordingly high in all regions.5% 0.0% La Sarine 0.09 4'172* 1.0% Vacancy rate 2011 2. size of circle = housing stock 3. However.1% 1.9% 122 1.0% 1.3% 4.7% 6.4% 1.77% 11.7% 8.3% 125 2. regions: total 3'000 2'500 2'000 1'500 1'000 500 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 La Sarine La Gruyère MFD La Broye Sense SFD Murten (Morat) Glâne/Veveyse Source: Baublatt.1% 1. land prices are primarily responsible for the relatively limited increases in prices and the overall moderate price levels. Fribourg's regions can position themselves as interesting residential regions where housing is both available and affordable.0% 1.5% 0.0% 2.3% 6.5% 0.1% 4'034 1.9% 1. Besides the fact that the housing supply in the canton has until now reacted in a more rapid and comprehensive manner.02 2011 7'949* 1.1% 0.6% 0.6% 2. like last year.94% 9.1%* Source: Swiss Federal Statistical Office. 10-year vacancy rate 2.1% 0.0% Avg. Wüest & Partner. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2. to result in a somewhat lower level of construction activity. The south. Large Land Reserves Dampen Price Growth Despite considerable demand.7% -0.9% 1.1% 1. Vacancies: Actual and Historic By type of housing. has been particularly impacted by this trend.15 133* 1. prices in the canton of Fribourg have developed moderately. ensures that not only the suburban agglomeration municipalities along the Saane Valley are able to achieve a high rate of growth.5% 1. The good traffic situation.8% 1.3% 1.5% 2.91% 7. Credit Suisse Economic Research High Population Growth Reduces Vacancies The shortage of housing has forced many people seeking housing in the Lake Geneva area to move to the neighboring regions and cantons. which was finalized with the completion of the A1 in 2001.8% 0. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Slight Slowdown of the Dynamic Construction Activity Located between the dynamic region around Lake Geneva and the urban center of Berne.
Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 82 . charges.0‰ 0 200'000 400'000 700'000 1'500'000 5'000'000 GE BS ZH VD SZ NE OW NW ZG FR Source: Braingroup.4‰ 0.9‰ 0.5% – 2. Geneva also imposes some of the highest tax rates on smaller asset holdings.1‰ 0. a tendency which is very notable from the high shares of commuters employed in these sectors.9% – 0. though Geneva also scores above the Swiss average in terms of accessibility to transportation. Generally High Level of Taxation Both for companies as well as for natural persons.3‰ 0.5% 1.2‰ 0. Shortage of Construction Land Exhaustion of construction land reserves and population forecast Canton of Geneva Exhaustion of construction land reserves until 2012 – 2015 2016 – 2020 2021 – 2030 2031 – 2040 Annual growth rate of population forecast 2010-2020 -0. communications.9% – 1.0% 0. Around two thirds of Geneva's cross-border commuters work in the tertiary sector. constant population growth). Credit Suisse Economic Research Attractive Labor Market for Cross-border Commuters The root of Geneva's attraction to cross-border commuters rests not only with its border location. The other city canton.5% – 0. postal services Information. the share of cross-border commuters accounted for around 25% of the total workforce.9% 0.0% 0 10 20 km Source: Swiss Federal Office for Spatial Development. = CH average GE Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 -= ++ + + VD -= + = = ZG ++ ++ + ++ ++ ++ ZH ++ = + + ++ ++ Most Attractive Canton in Western Switzerland After tax cuts.5% 0.9%. For assets of between CHF 2-5 million. IT Construction Financial services Corporate services Administrative and social services 0 10 20 km Share of cross-border commuters in 2008 0% – 1% 1% – 10% 10% – 20% 20% – 30% 30% – 54% Source: Swiss Federal Statistical Office. constant density of housing. Basel City. 2008 Canton of Geneva Cross-border commuters by sector Traditional industry High-tech industry Entertainment.6‰ 0. Share of Cross-border Commuters in Employment In percent. Switzerland's population is set to increase by around 730'000. we see that. the canton of Geneva has manged to climb five places higher in the ranking since last year and currently ranks fourth as the most attractive canton in Western Switzerland. High Demand for Living Space on Lake Geneva The demand for residential land depends on the population trend. Industry and construction rely heavily on cross-border commuters.0% – 0. Geneva is also the most attractive canton for cross-border commuters in Switzerland. the canton of Geneva imposes Switzerland's highest tax burden and demands up to seven times what Switzerland's most tax efficient canton. Assuming constant conditions (no further land inclusion.8‰ 0.7‰ 0. Also construction reserves are becoming short in the nearby regions of Nyon and Morges/Rolle. In 2008.5‰ 0. The ace up its sleeve is the availability of highly skilled workers. This is equivalent to annual population growth of 0. the canton of Geneva imposes one of the highest tax burdens in Switzerland. has a similar tax structure to Geneva. Credit Suisse Economic Research Wealth Tax 2010 In ‰ of taxable assets. the canton of Geneva records an above-average tax take per capita. hotels and catering Energy supply Trading and sales Transportation.Disadvantage. with the smallest share of cross-border commuters working in financial services and administrative and social services sectors. It is hardly surprising then that Geneva also imposes a relatively high wealth tax. The increase will not be evenly distributed throughout Switzerland. -/-. Looking at tax receipts from natural persons overall. By 2020. but also its high valuecreating sector makeup. The highest shares of cross-border commuters are employed in the secondary sector. person liable for the tax: married person without children 0.Economic Research Canton of Geneva: Location Factors Locational Quality to CH Average +/++ Advantage. though. in contrast to other cantons with a relatively high tax burden. Nidwalden. available construction land in the canton of Geneva is likely to be exhausted in the next few years. The biggest growth will be around Lake Geneva and in parts of the cantons of Valais and Fribourg as well as in the major centers of Zurich and Zug.
Slight Easing on the Housing Market The scarcity of housing is reflected in record-low vacancy rates.04% 7.6% 1. size of circle = housing stock 1.7% of the overall housing stock.1% 1.0% 1. net rent in CHF/m2 and year. were vacant throughout the canton on June 1.6% 3.3%* 2007 7'593 1.8% 0. Building Permits by Regions and Segments Dwellings. and the purchase of property is prevented because of high capital requirements.94% 5. or 0. with a supply of housing for both managers and less affluent citizens.2% 1.93 2008 7'702 1. 556 apartments.7% 6.1% 0. canton: multi-/single-family dwellings.20% 9.2% 0.23% 12.5% 0.7% 0.5% 216 0.2% 3'995 1. All the same. Nevertheless.99 4'079 1. Wüest & Partner. 10-year vacancy rate Rent Own Morges/Rolle Nyon CH Nyon Morges/Rolle CH 1.1%* 0.3% 3.2% 3'950 1. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2. on annual basis.9% 1. apartments and houses totaling 3.5% Vacancy rate 2011 1.2% 1.8% 10.1% 4'034 1. despite low vacancy rates.4% 5.0% 1.6%* 0.6% -0.19% 22. 2011.22% 6.0% 1.6%* 4'125* 1.5% 0.0% 0. That at least indicates that housing fluctuation has increased slightly.1% 0. and a center of international politics.6% 0.5% -0.5% Genève Genève 0.1% 0.5% Source: Swiss Federal Statistical Office.4% 0.1%* 2012 8'042* 1.4%* 2012 471* 1.25% of the overall housing stock.25% 13.Economic Research Canton of Geneva: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 438 1.95 221* 0. and that some movement has come to Geneva's housing market.95 Switzerland 2009 2010 7'786 7'864 1. Overheating is Increasing Price levels are very high.8% 0.5%. the demand is so high that the neighboring regions in the canton of Vaud serve as an outlet: In the economic region of Nyon.5% Avg.63 Geneva 2010 459 1. the share of apartments listed for rent has risen steadily between 2009 and 2011.6% 0.6% 12.1% 0.94% 9. a thriving business location. but they are still well below average.3% 4. Q3 2011 Most populous municipalities Genève Vernier Lancy Meyrin Carouge Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 20'468 27'690 15'984 21'626 17'032 23'045 16'435 22'232 18'065 24'439 7'788 10'536 14'000 20'378 8'427 12'267 10'745 15'644 8'982 13'074 12'636 18'385 7'072 10'294 325 268 285 272 316 227 325 270 287 273 319 249 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 83 . which is scarcer in Geneva than anywhere else in Switzerland.1% 1.1%* Source: Swiss Federal Statistical Office.1% 1. the ongoing costs of residential property are – in contrast to the Swiss average – no longer affordable for a broad section of the public.6% 0.02 2011 7'949* 1.5% 0. In addition.9% 1.3% 1.0% 8.36 2008 446 1. Geneva also wants to be a residential canton. The market rent can no longer be paid by many households.87% 2. This fact corroborates our finding that prices are clearly overvalued due to excess demand in the residential property segment. In the neighboring regions of Nyon and Morges/Rolle. the share of dwellings with construction approval was a meager 0.1% 1.77 2011 465* 1.8% 1.0% 0.8% of the overall housing stock received building permits in 2011 in order to absorb the excess demand from Geneva.6% 1. reaching 1.6% 1.3% 1. regions: total 2'500 MFD 2'000 Genève SFD 1'500 1'000 500 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Baublatt.0% -0.09 4'172* 1. there is very little new construction.91% 7. In total.0% 1.4% 1. Indeed.7% 219 0. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Housing Is Scarce in the Canton of Geneva Geneva is a cosmopolitan city. However.6% 217 0.4% 1. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.1% 215 1. vacancy rates are slightly higher because of the more dynamic construction activity.as well as owner-occupied apartments. Nowhere has the gap between price and income trends opened so dramatically in recent years as in the canton of Geneva.4% 7. In fact.50 Canton of 2009 453 1. At the end of 2011.2%* 220* 0. which are far below the Swiss average in terms of both rental.0% 0. these complex goals block planning and particularly the realization of new residential housing in the canton.0% 0.
which points to limited growth potential in terms of value creation. Gallen and Schwyz come in some way ahead of Glarus.5% 2.0% – 0.0% 0. Nevertheless.0% -3.6% 3. The diameter of the circle represents the sector's significance in terms of total employment within the canton. inter-cantonal migration returned to positive territory for the first time since 1990. As a result of various tax cuts.1% 0. Glarus has meanwhile managed to move up a rank since 2008.0% -2. The combination of low fixed costs and low mandatory charges puts the canton of Glarus in second place in terms of its financial appeal as a place to live.0% – 3. the canton of Glarus received a below-average score. Glarus' economic structure is largely determined by the secondary sector. Only the communes of Mollis.5 0.5% – 1.0% 4. Source: Swiss Federal Statistical Office Opportunities/Risks Profile of Sector Structure Twelve largest sectors. Deviation from the national average is shown on the horizontal axis.5% – 10. Overall.0% -8. with many 15-24 year-olds choosing to leave the canton.1% – 2.0% Source: Swiss Federal Statistical Office.0 -2.5 1.0% – 0.0% 0 5 10 km Altdorf Glarus Brain Drain In order to gain a more detailed picture of population trends. Below-average Growth Potential The figure on the left gives an overview of the economy in Glarus.0% 0. we see the opportunities and threats facing the sectors as balanced.5% -1. Agriculture.2% per annum. social security contributions and obligatory health insurance).0% 8.Disadvantage. with the exception of Rüti. Glarus affirmed its position as one of Switzerland's most attractive places to live from a financial perspective in the assessment from 2008. Population Growth 2005-2010 Average annual population growth in percent Canton GL 4.0% Employment: deviation from the Swiss average Financial Appeal of Living by Component Heads of expenditure in the household budget Fixed costs High fixed costs lower tax advantages GE Double disadvantages Ranking 2008 Ranking 2011 ZG ZH SZ NW GR OW UR AI GL LU SG TG AG AR SO SH CH TI FR VS BE BS BL VD Mandatory charges NE JU Combined advantages Asymmetric positioning Second Most Appealing Place to Live The figure on the left shows the breakdown of the financial appeal for living in the canton with reference to fixed costs (housing costs.5 -1.0% 1. Credit Suisse Economic Research low -4. Glarus continues to struggle with the problem of youth emigration.0% – 4. 2012 high 2.7% – -3.0 -0. neighbors St.0% – -1. All in all. the canton of Glarus recorded below-average population growth of 0. southern communes. = CH average GL Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + ++ - SG + ++ = = = = SZ ++ ++ = = + GR + + = = -- Peripheral Location an Obstacle The canton of Glarus ranks 19th in terms of locational quality. Oberurnen and Schwändi are able to show growth above the Swiss average. -/-. ancillary costs and charges) and mandatory charges (income and wealth taxes.0 -1. The canton scores better than the national average in terms of tax burden. Although Graubünden has a similar position. retail and teaching score poorly. In 2010.0 1. the map on the left shows commune data from before the merger. have all reported population declines.5 -2.0% – -2.0 Health care Homes Electrotechnical equipment Finishing trade Education Retail trade Fabricated metal products Plastic Agriculture Agriculture and forestry Construction and industry Services Public sector Machinery Construction of buildings Opportunity-risk profile 0. Whereas the communes in the north section of the canton mainly show positive growth rates.0% 2. Between 2005 and 2010. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 84 . whereas the vertical axis represents medium-term opportunities and risks.Economic Research Canton of Glarus: Location Factors Locational Quality to CH Average +/++ Advantage.0% -2.5 Mineral products 6. though below national average in terms of the education and accessibility components.
6% 2.05% 4.4% 21.3* 0.1%* 0.04% 7.6% 0.9% 1. the amount of vacancies in rental apartments is structurally high.5* 0. prices fall from north to south.3% 4.1% 0. Q3 2011 Most populous municipalities Glarus Nord Glarus Glarus Süd SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 5'944 5'274 4'645 8'045 7'135 6'277 4'600 4'400 4'009 6'696 6'407 5'844 178 178 165 180 180 167 Switzerland 7'788 10'536 7'072 10'294 227 249 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 85 . is high.8% 1. Because of better accessibility when compared within the canton. Building Permits by Regions and Segments Dwellings.6%* 1.8% 1. In the past.0% 21.9% 1.0% 1.1% 1.7% 1. The fact that the vacancy rate has fallen and is considerably below the long-term average in 2011 can be attributed to the many people working on the pumped storage project "Linthal 2015" who reside in the Glarner Hinterland.1% 0. canton: multi-/single-family dwellings.7% 2. The declining vacancy rate confirms this trend.09 4'172* 1.99 4'079 1.7% 6.3% 1.82% 7. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.5% 0. Moreover. however.6% 20.27% 5.7 0.0% 20.1%* 2012 8'042* 1.4% -1.1% 1.0% 1.1% 1.2% 5. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.2 0.2 0.8% 0. Positive Effect: Moderate Prices The structural problems and the relatively difficult accessibility of its urban centers also have a positive effect for the canton of Glarus: Prices for residential property have remained affordable.0% 3. the difference to other regions.und Unterland MFD SFD 200 150 100 50 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 Source: Baublatt.85 21.02 2011 7'949* 1.4% 1.4 0.0% 1.5% 0.1% 0.4% 0.2% 3'950 1.95 Switzerland 2009 2010 7'786 7'864 1. Although the tax burden is below the Swiss average.0% 0. However.94% 9.2% 3'995 1. that the population in the Glarner Hinterland will continue to decline and barely grow in the canton overall.2%* 2007 7'593 1.82 Glarus 2010 38.6 0.5 0. regions: total 250 Glarner Hinterland Glarner Mittel.Economic Research Canton of Glarus: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 38.3% 3.3% 0.2% 0.3% 0. albeit much lower-than-average population growth. the structural problems in the Glarner Mittelland and Unterland are less than in the Hinterland. As accessibility becomes more difficult.0% 1.1% 4'034 1.6%* 4'125* 1.81% -7.07% 3. Considerable North-South Differences The differences within the canton are significant. particularly compared to the cantons in central Switzerland.8 0.1%* Source: Swiss Federal Statistical Office.2% 0.1% 0.6* 0. net rent in CHF/m2 and year. the accessibility of the canton is below average because of its geographical and topographical location.85 Canton of 2009 38. it is not likely that anything will change in that respect for the time being.91% 7.1% 1.6% -0. Nevertheless.87 2008 38. the extent of the problem is limited in absolute terms due to the small housing stock in the Hinterland.4% 4. the wave of expansion in the canton of Glarus between 2006 and 2010 was well received.94% 5. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Declining Residential Construction Stabilizes Market Due to positive. Wüest & Partner. From 2016 vacancies are likely to rise as a result.0% 0.7% 1. size of circle = housing stock 12% 10% 8% 6%Glarner Mittel4% 2% 0% -2% -1% CH March/Höfe Glarner Mittelund Unterland Linthgebiet und Unterland Avg.7% 0.2%* 2012 38.93 2008 7'702 1.2%* 21. It is also likely that large differences will appear again within the three municipalities of Glarus – prices are likely to fall the further the individual locations are from the Linth Plain. The appeal of the canton remains limited from a real estate perspective.0% 0. It is therefore likely that the slowdown in construction activity will have a positive impact on the stability of the real estate market and thus prevent the creation of another excess supply situation.3% 0.87% 2. New construction there is dominated primarily by single family dwellings.4% 7.82 2011 38.0 1. price trends were below average and very volatile.7* 0. It is likely. on annual basis. 10-year vacancy rate Rent Own Glarner Hinterland 0% Glarner CH Hinterland March/Höfe 1% 2% 3% 4% 5% Vacancy rate 2011 6% 7% 8% Source: Swiss Federal Statistical Office.
6 0. communications. industry is underrepresented. In terms of the tax burden. The high demand for second homes has driven up real estate prices in these areas and has a negative impact on the financial appeal of the area as a place to live. annual population growth in the canton of Graubünden was around half as high as in Switzerland as a whole in the period between 2005 and 2010. On an overall view. The canton's biggest disadvantage is its poor accessibility to transportation. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 86 . but other groups too. In the secondary sector. The age structure of international immigration has fluctuated over the years.0 0 10 20 km Zug Schwyz Gla rus Chur Altdo rf Bellinzo na High Cost of Housing in Tourism Destinations The figure on the left shows the financial appeal of the communes. Cutting-edge industry employs an above-average share of people in Prättigau. By contrast. Source: Swiss Federal Statistical Office.3 – 0. horizontal line = Swiss average Canton of Graubünden Traditional industry High-tech industry Construction Corporate services Trading and sales Transportation. In the canton of Graubünden.0 – -1.0 – -0. while in the Mesolcina regions. inter-cantonal emigration has increased.0 1. Freely disposable income remains particularly tight in renowned destinations such as Oberengadin and Davos/Klosters.0 2. Since 2005.3 0. CH = 0 Canton GR -5.5 1. while education scores close to the Swiss average. Not only has the 15-39 age group been leaving. commuting costs 2011. = CH average GR Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + + = = -- TI + = = - SG + ++ = = = = GL + ++ - Topography Impairs Locational Quality Graubünden ranks 20th in terms of locational quality. the canton is relatively attractive. but also comparably expensive tourist regions.0 -1. the service sector is very much underrepresented compared with the Swiss average. Source: Swiss Federal Statistical Office Sector Specialization of Economic Regions Synthetic indicator 2008.Economic Research Canton of Graubünden: Location Factors Locational Quality to CH Average +/++ Advantage.0 – 1. Only in the Rhine valley does the economic picture deviate from the canton average. hotels and catering 0 10 20 km Tourism Dominates Graubünden Economy The sector makeup is similar in all of Graubünden's regions. Source: Credit Suisse Economic Research Net Migration 1990-2010 Total number of people 2'500 2'000 1'500 1'000 500 0 -500 -1'000 -1'500 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Inter-cantonal International Total Inter-cantonal Emigration Across All Age Groups At 0. the share of employment in traditional industry is slightly above the Swiss average. Graubünden comes in some way behind front-runners Uri and Glarus. Population growth is primarily concentrated on the Graubünden Rhine valley regions and Engadin. postal services Information. Since the turn of the millennium. construction has a strong presence in all regions and energy in most of Graubünden's regions. IT Financial services Energy supply Administrative and social services Entertainment. Living costs are lowest along the A13 motorway and in the few Surselva communes.5 – 2. All in all.3 – 0.3 -0. Graubünden is slightly more attractive than Ticino.0 -2.0 – 0.0 – 3. Freely Disposable Income in the Communes Synthetic indicator incl.2 – -2.6 – 1.Disadvantage. international immigration has made a considerable contribution to growth. though since then.0 0. though scores better than Ticino. the share of 40-64 year-olds has increased slightly. there are numerous financially attractive communes. The dominant sector of the economy in the tourism regions in particular is hospitality and catering.5%. Otherwise. -/-.
With the revised urban and regional planning and the associated quotas for second homes in many locations. Tourist Destinations with the Highest Prices The impact of tourism is most noticeable in real estate prices. With estimated square meter prices above CHF 15'000 for average single-family dwellings and condominiums – assuming there are even any available – the tourist destination St. 12. which.3% 1.1% 1.6% -0.3% 4. Wüest & Partner.6% 0.7% 151 1. When measured against the overall housing stock. Price trends are markedly influenced by the regional appeal for tourists and the associated demand for second homes.6% 1.5% 1.2% 3'995 1.1% 1.4% 0.4%) Bündner Rheintal Oberengadin 1% Bündner Rheintal Engiadina bassa Schanfigg Mesolcina 0% Sarganserland Surselva Mittelbünden CH Oberengadin Domleschg/ Hinterrhein -1% 4% Avg.1% 0.8% 0.0% 0.7% 0.77% 4.1% 1.04% 7. Unterengadin. real estate prices are below the Swiss average in municipalities that are less strongly oriented towards tourism. (4.79% 3.6%.4% 7. Moritz is the leader from a price perspective. it will be even more difficult to satisfy the high demand.7% 0. In addition to the Bündner Rhine Valley.2%* 160* 1. size of circle = housing stock Mittelbünden Prättigau Domleschg/ 3% Hinterrhein Sarganserland Rent: Prättigau Surselva (3.93 2008 7'702 1.1%.4% 1. continues to grow in many areas and has reached a share of over 50% in the majority of tourist municipalities in the region.6%) Davos 2% Schanfigg CH Engiadina b. net rent in CHF/m2 and year. The lower rental vacancies in the Bündner Rhine Valley reveal that the more urban portion of the canton around the city of Chur is influenced by an increased demand for rental apartments. In contrast.91% 7.3% 153 1. is characterized by diverse real estate markets that are strongly dominated by regional influences.1%* Source: Swiss Federal Statistical Office.95 Switzerland 2009 2010 7'786 7'864 1.14 156 1.87% 2.6% 0. 6.0% 0.1% 1.1%* 2012 8'042* 1. the mountain regions dominated by tourism are the focus of an analysis of the real estate market.1% 1. Q3 2011 Most populous municipalities Chur Davos Igis Domat/Ems St.85% 7.2% 1.02 2011 7'949* 1.2% 3'950 1. regions: total 3'000 2'500 2'000 1'500 1'000 500 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Bündner Rheintal Surselva Domleschg/Hinterrhein Schanfigg MFD SFD Sarganserland Davos Mittelbünden Mesolcina Oberengadin Prättigau Engiadina bassa Source: Baublatt. Schanfigg.94% 5. as the largest Swiss canton.9% 155 1. 10-year vacancy rate Rent Own -1% 0% 1% 2% Vacancy rate 2011 3% 4% Source: Swiss Federal Statistical Office.0% 1.0% 0.3%. Moritz Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 10'137 13'716 13'113 17'735 6'903 7'161 9'335 9'690 6'900 10'037 9'818 14'296 5'927 5'891 8'637 8'578 203 248 199 190 322 227 193 250 201 192 324 249 15'298 20'703 7'788 10'536 15'818 23'022 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 87 .19 158* 1. A larger.8% 1.0% 0.0% 12.0% 1.Economic Research Canton of Graubünden: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 189 0. on annual basis. new construction project in Chur with about 80 rental apartments will probably provide some relief starting in 2013. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Focus on Second Homes Graubünden. canton: multi-/single-family dwellings.99 4'079 1.4% 0.7%* 1. Surselva and in the Bündner Rhine Valley.1%) Mesolcina (10.9% 1. In contrast.1%* 0.1%* 0.77% 8. The Bündner Rhine Valley near Chur is the only region where rental apartments play a meaningful role. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.25 2012 195* 0.0% 0.0% 0.3% 3.5% 0.1% 0. the market for rental apartments in individual regions is characterized by high vacancies due to the low demand for first homes. The focus in the other regions is on the construction of second homes. Demand for Rental Apartments in Urban Areas The construction of second homes is primarily the focus in tourist regions. as can be seen in the building permits. 8.8% 1. the number of apartments approved for construction is particularly high in the regions of Mittelbünden.91% 7.8% 3. Building Permits by Regions and Segments Dwellings.94% 9.9% 1.7% 6.7% 0.4% 1.0% 1.9% 1.6%* 2007 7'593 1.08 2008 190 0.1% 4'034 1.1% -0.09 4'172* 1.0% 5.4% 0.10 Canton of Graubünden 2009 2010 2011 192 193 194* 0. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.1%* 4'125* 1.
though freely disposable income in the canton of Solothurn is generally slightly higher.3%.5 0 -0. -/-. indicator ratios are even below the Swiss average. we do not expect the canton of Jura to experience growth above the Swiss average over the medium term. In terms of the cost of housing. employment in Jura's watch industry has grown by 32%.0 2.5 0 Locational quality 0. Jura scores particularly badly.0 -1. The tax burden on natural persons is the second highest in Switzerland.0 – -0. The high concentration of the canton's industrial portfolio in just a few sectors harbors a considerable risk which the assessment must reflect. as has happened in Switzerland as a whole. Only Neuchâtel is more unattractive in respect of this sub-indicator.5 -2.Disadvantage.6 0.0 – -1.5 -1 -0. Given the comparably low locational quality. Jobs Thanks to Boom in the Watch Industry The 8. CH = 0 Canton JU -5. = CH average JU Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 --- NE --= + - BE = = = = SO = = = + = Bottom of the Ranking as a Result of Peripheral Location and Tax Burden Since the first reassessment of locational quality under the new criteria in 2004. Jura has experienced a structural shift away from threatened industries to higher value-creating and more internationally competitive sectors. Berne and Neuchâtel.5 -1. Jura has greater financial appeal as a place to live than the neighboring cantons of Basel Land. the canton of Jura has finished at the bottom of the ranking.3 – 0.0 -1. CH = 0 2.3 -0.5 – 2.0 1. hotels and catering NE Source: Swiss Federal Statistical Office. Berne.0 – 0. we expect value creation to rise at a below-average rate over the long term.3 – 0. Solothurn and Basel Land. communications.3 0. In the regional comparison.5 Val-deTravers III La Chauxde-Fonds CH-average BS I NE Neuchâtel Sector evaluation 1. postal services Financial services Entertainment. strongly impaired by the high tax burden on natural persons. The canton's overall financial appeal as a place to live is. the canton of Jura has a good chance of seeing growth around the Swiss average over the next few years.5 Source: Credit Suisse Economic Research CH-average Grenchen Biel/Seeland Promising Position Thanks to Watch Industry Despite the significant presence of a dynamic watch industry. Contribution to Employment Growth 1995-2008 In percent by sector group 40% 35% 30% 25% 20% 15% 10% 5% 0% CH JU Grenchen BE -5% La Chauxde-Fonds -10% -15% -20% Jura bernois Traditional industry Construction Trading and sales Information. depending on the performance of the watch manufacturers and their suppliers in particular. commuting costs 2011. administrative and social services have seen considerable growth.5 1. In the Delémont and Porrentruy regions. Also in line with the national trend. however.0 VD BL BE JU VS Jura bernois SO Laufental Thal IV -2 -1. Accordingly. This sharp increase in one of Switzerland's cutting-edge industries contrast with the decline of traditional industry. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 88 . However.0 1. Over the period under review.0 0.5 1 II 1.0 0..0 – 1. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation. the peripheral canton of Jura is one of Switzerland's cheapest.0 – 3.5 2.2 – -2.6 – 1.0 0 5 10 km So lot hurn Base l Li esta l Delé mo nt High Taxes Reduce Financial Appeal to Live in the Canton In the ranking of freely disposable income. Credit Suisse Economic Research Neuchâtel Growth Potential for Value Creation Synthetic indicators 2012.3% rise in employment between 1995 and 2008 experienced by the canton of Jura is slightly below the Swiss average of 10. Freely Disposable Income in the Communes Synthetic indicator incl.Economic Research Canton of Jura: Location Factors Locational Quality to CH Average +/++ Advantage. Compared to its neighbors. The boom in the watch industry has been a significant factor in this development over recent years. Jura is placed 15th.0 -2.
8 0.0% 1. Wüest & Partner.4% 0. Price Levels in the Largest Municipalities Transaction prices in CHF/m2.9% 0. the vacancy rate of owned property in the canton of Jura is almost twice the overall Swiss average and has also risen above the ten-year average.4% 0.0% 1.87 2008 69.8% 0. This keeps the amount of vacancies high for apartments in older buildings and creates an imbalance between the housing segments that can be difficult to level off.2% 3'995 1.9% 2.00% 7.2% 3'950 1.6 0.2 0.0%* 1. in many places just the opposite is occurring.2 0. This price gap versus the adjacent regions of neighboring cantons is an opportunity for Jura's municipalities with good transportation connections to attract further households that are willing to pay for their dream of a single-family dwelling with a commute to Basel or the employment centers of the Mittelland.7% 0.4% 1. This trend is also reflected in the weak population dynamics of Jura's regional centers of Delsberg.7% 7.1% 1.00% 3.1% 1.1 70.9% 1.0% 0.Economic Research Canton of Jura: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 69.3%* 2012 70. regions: total 350 Jura MFD 280 SFD 210 140 70 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 Source: Baublatt. is bypassing Jura. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing. At 0.04% 7.1% 0.3% 1.96% 4.09 4'172* 1.1% 4'034 1.94% 9.3* 0.5% 1.2%* 36.0% 0.6% -0. size of circle = housing stock 6% Avg. cannot compete against affordable new construction on greenfield sites.6% 1.8% 4.95 Switzerland 2009 2010 7'786 7'864 1.1% 0.87% 2. Building Permits by Regions and Segments Dwellings.4% 7.1% 1.3% 0.6% 0.4% 0.7% 2.0% 0. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research New Construction on Greenfield Sites The low prices for building land in the canton of Jura enable both local residents and people moving there to realize the dream of owning their own home in the form of a free-standing single family dwelling – but mostly outside the village centers.77% 0.1% 1.9%.90 35.5% 0.6% 35.4% 0.0% 1.9% 0.93 2008 7'702 1.0% -1.99 4'079 1. which is widely observed throughout Switzerland in the regional and major urban centers.4* 0.1%* 2012 8'042* 1.1% 35.9% 0. which exists primarily in the center of towns.94% 5.7% 6. 10-year vacancy rate 5% 4% 3% 2% 1% 0% Laufental CH CH Jura Laufental La Chaux-deFonds Jura Jura bernois Rent Own La Chaux-deJura bernois -1% Fonds -1% 0% 1% 2% 3% 4% 5% Vacancy rate 2011 6% 7% 8% Source: Swiss Federal Statistical Office. Pruntrut.5% 1.1%* 0.91 2011 70. on annual basis.0* 1.0% 0.98 36.9%* 4'125* 1. canton: multi-/single-family dwellings. The low prices for building land distort the incentive system in that the renovation of the older housing stock.9 0. Increased Excess Base of Vacant Older Real Estate Many older rental apartments are vacant in the town centers of the Bernese Jura and the districts of Pruntrut and Delsberg.0% 0.5% 0. and Moutier. Credit Suisse Economic Research Affordable Single-family Dwellings for Commuters Not only are prices losing contact with the Swiss average. The completion of the Transjurane by 2017 will enable this opportunity to grow further.7% 34.3% 0. in fact. The trend towards re-urbanization via a condominium in a central location.6 0.4% 0.02 2011 7'949* 1.3%* 2007 7'593 1.1%* Source: Swiss Federal Statistical Office.4 0. they are also lagging behind the more expensive neighboring regions.3% 3.88% 8. This is further evidence of an excess base of vacancies related to older and remote single-family dwellings and older apartments in town centers that no one is willing to renovate because of the affordable new construction possibilities. net rent in CHF/m2 and year.6* 0.91% 7.3% 4.0% 0. Q3 2011 Most populous municipalities Delémont Porrentruy Bassecourt Courroux Saignelégier Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 5'008 3'887 4'508 4'218 4'306 6'774 5'252 6'103 5'710 5'826 4'527 4'764 4'209 4'109 4'064 6'585 6'926 6'133 5'985 5'911 171 161 161 174 148 227 172 161 161 175 149 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 89 .87 Canton of Jura 2009 2010 70.
25 -0. Nidwalden. IT Financial services Corporate services Entertainment. inter-cantonal migration has again moved into positive territory.50 -1. Zug and Aargau in terms of its appeal.00 – -0. CH = 0 Canton LU 2. Accordingly. = CH average LU Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + ++ = = = = OW NW ++ ++ = + ++ ++ = = = + AG + ++ = = ++ + High-ranking Neighborhood The canton of Lucerne ranks around average in terms of locational quality. Willisau and Entlebuch regions.50 lo thur n 1.75 – 1.25 – 0. has always been positive.50 – 4. Source: Credit Suisse Economic Research Net Migration 1990-2010 Total number of people 5'000 4'000 3'000 2'000 1'000 0 -1'000 -2'000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Inter-cantonal International Total Change in Trend in Inter-cantonal Migration After several years of negative migration. In terms of taxation. enjoy a very central position. immigration to the canton of Lucerne began again to increase towards the end of the nineties. the picture in the regions surrounding the city of Lucerne corresponds closely to the Swiss average with only slight deviation.75 – -0.25 1. Communes near to central Lucerne or Zug or along the main transportation routes towards Zurich and Olten/Basel/Berne.50 -0.Disadvantage. Entlebuch and the southern communes of the Willisau region reveal below-average accessibility. Cost intensive investment in infrastructure could improve transportation connections. Since 2005.Economic Research Canton of Lucerne: Location Factors Locational Quality to CH Average +/++ Advantage. though is unable to outperform the neighboring cantons of Obwalden. which over a considerable period of time. hotels and catering Administrative and social services 0 5 10 km Notable Differences Between City and Countryside The economic structure of the canton of Lucerne varies greatly between the urban and rural regions. while employment in the services sector comes in above the Swiss average. we see a relatively strong transportation sector alongside an above-average presence of traditional industry (primarily food industry) and construction. postal services Information. Source: Swiss Federal Statistical Office. accessibility falls sharply. As a result. In the Willisau region. Source: Swiss Federal Statistical Office Sector Specialization of Economic Regions Synthetic indicator 2008. The latter mainly consists of families and persons of working age. communications. Construction and industry are relatively weak in the Lucerne region.25 – 0.25 – -1. The dominant force here is international migration. Accessibility to Transportation Index of motorized individual transportation and public transportation.50 0.00 -1. the canton has an above-average appeal.00 0.25 0 5 10 km Zug S Luzer n Stans Sarne n North-south Divide for Accessibility Accessibility to transportation in the canton of Lucerne varies greatly from below average in some areas to far above average in others.50 – 2.00 – 1. -/-. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 90 . Horizontal line = Swiss average Canton of Lucerne Traditional industry High-tech industry Construction Energy supply Trading and sales Transportation. Immigrants are mainly employees in younger age groups.50 – 0.75 -1. while education and accessibility score around average. with the notable exception of 1998. Schwyz.75 0.00 Ber n – -0.25 -0. The region surrounding the cantonal capital have benefited strongly from the completion of the A4 motorway through Knonaueramt and from the Uetliberg tunnel. As distance to these centers increases.50 0. Lucerne has grown in appeal in comparison to other cantons.5 – -1.00 – 0. Whereas the secondary sector is strong and the tertiary sector relatively weak in the Sursee/Seetal.
1% 0. but not exaggerated levels.1% 1. they exceeded the 1% mark for the first time since 2000.6% 1. Q3 2011 Most populous municipalities Luzern Emmen Kriens Horw Ebikon Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 9'468 12'806 7'242 9'794 7'968 10'774 9'105 12'316 7'250 9'813 7'788 10'536 7'945 11'563 6'145 8'941 7'209 10'504 7'927 11'533 6'736 9'800 7'072 10'294 235 198 210 215 208 227 242 196 213 212 210 249 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 91 .0% 1.5% 0.3% 4.7% 6. Lucerne's builders demonstrated sound judgment with this moderate and economically adjusted planning. People interested in condominiums there feel the shortage via considerable price increases.1% 4.1%* Source: Swiss Federal Statistical Office.4% 1.6% 169 1.87% 2.3% 1.09 4'172* 1.9% 0.7% 1.0% -0.5% 1.0% 0.2% 0.1%* 2012 8'042* 1.83 Canton of 2009 373 1. With the exception of isolated points of shortage. also directly adjacent to the city of Lucerne and with a long lake front on the north shore of Lake Lucerne.82 2008 369 1.6% by 2009.91% 7.95 Switzerland 2009 2010 7'786 7'864 1.4% 1.91 180* 1.5% 1. Wüest & Partner. Kriens.2% 4.0% 0. Lucerne's builders exercised caution when the subprime crisis erupted in 2008.4% 1. The price of an average condominium here is estimated to be over CHF 10'500/m2.8% 0.69% 8.2% 173 1.5% Source: Swiss Federal Statistical Office. As a consequence.2% 3'995 1.2%* 2012 385* 1.4% 0.0% 0.0% 0. in some cases they are falling even further.1% 1. Inspired by the low amount of vacancies.1% 0.86 2011 381* 1.99 4'079 1.82 Lucerne 2010 376 0. Credit Suisse Economic Research Prices Depend on the Proximity to the City and the Lake Prices in the city of Lucerne have risen to above-average. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing. falling interest rates because of the recession.00% 1.93 2008 7'702 1. anti-cyclically to the overall Swiss trend. fluctuate at very low levels.1% 1.3% 3. regions: total 3'000 2'500 2'000 1'500 1'000 500 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Entlebuch Willisau Sursee/Seetal Luzern MFD SFD Source: Baublatt. on annual basis.1% 4'034 1.0% 1.3% 0. The most expensive municipality in the canton is Meggen. and surprisingly robust immigration.2% 0. But unlike Switzerland as a whole.94% 9. size of circle = housing stock 4. the amount of planning for new housing is limited.04% 7. such as Horw.80% 6.0% 1.7% 0.94% 5.1%* 2007 7'593 1. We expect.0% 4. that the housing stock in these municipalities will expand by less than 1% in 2012. Nevertheless. prices decline as the distance to the city increases and as the percentage on the lake decreases.2%* 0. it appears that supply and demand are in balance in the canton like nowhere else in Switzerland.0% 2.8% 0. net rent in CHF/m2 and year.5% Vacancy rate 2011 2.6% -0.5% 3. Price Levels in the Largest Municipalities Transaction prices in CHF/m2.1% 0. canton: multi-/single-family dwellings.6% -2. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Housing Planning with Sound Judgment Similar to the construction activity throughout Switzerland. Vacancies in the agglomeration municipalities of Lucerne.0% 1.1%* 0. Building Permits by Regions and Segments Dwellings.0% Avg. and then they fell back to the low level of 0.4% 171 1.2% 3'950 1.1% 1.79% 3. for example. or Adligenswil. planning activity – particularly in the area around the city of Lucerne – picked up again in 2009.Economic Research Canton of Lucerne: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 363 1.0% 2.3% 176 1.3% 0.4% 7.8% 1.5% -0. vacancies developed in Lucerne.5% 2.0% 0.02 2011 7'949* 1.6% 5. 10-year vacancy rate 3.5% Sursee/Seetal Entlebuch Willisau Luzern Luzern Entlebuch Own Rent Sursee/Seetal Willisau CH CH 0.62% -0.2% 0. in 2006.6% 0.0% 1.9% 1. In other municipalities. Lucerne's regions planned for many apartments in multi-family dwellings in a first wave from 2004 until 2007. Supply and Demand in Balance The moderate level of planning is also likely to prevent an increase in vacancies this year.3% 0.5% 0.2%* 4'125* 1. Horw provides an example of both: many residential areas located near the lake and immediate proximity to the city center.0% 1.2%* 178* 1.
25 – 0. is largely responsible for its good score. Neighboring cantons perform slightly better in both components.25 5 10 km Neuchâtel Fribourg 0 Large Intra-cantonal Accessibility Divide In terms of accessibility to transportation.0 -0.5 0. The comparably low fixed costs (housing costs. Opportunity-risk profile Fabricated metal products Source: Swiss Federal Statistical Office.0 -2. Credit Suisse Economic Research low -10.50 – -0. The metal products. Neuchâtel only scores above the Swiss average in terms of the availability of highly skilled workers. Tax Burden Reduces Financial Appeal In terms of its financial appeal as a place to live in. the canton of Neuchâtel ranks 21st.5 -1. population growth is concentrated in the communes along the banks of the river and in the Val-de-Ruz district. However. population has stagnated over the period between 2005 to 2010 and in Val-de-Travers it even contracted.75 – 1. hospitality and agricultural industries also face a risky future.75 0. ahead of Jura.50 – 0.5 – -1.5 Health care Homes Watches 1. transportation connections in Val de Travers and in the La Chaux-de-Fonds region are significantly below the Swiss average. ancillary costs and charges) can only partially offset the high burden on the household budget from mandatory charges (income and wealth taxes. Accordingly.50 – 2.25 -0.0% 10. Accordingly.00 – 0. The area along Lake Neuchâtel benefits from links to the A5 motorway as well as from its location within the catchment area of Berne.5 -2. Wholesale scores relatively highly.00 – 1. While the Neuchâtel region reveals an above-average to slightly below-average score. which accounts for close to 19% of employment in the canton. CH = 0 Canton NE 2.5 Finishing trade Retail trade Machinery Restaurant industry Agriculture Education Public administration Agriculture and forestry Services Public sector Construction and industry 20.25 – -1.50 -1.75 – -0.0 Wholesale trade 0.0 1. Source: Credit Suisse Economic Research Financial Appeal of Living by Component Heads of expenditure in the household budget Fixed costs High fixed costs lower tax advantages GE Dual disadvantages Ranking 2008 Ranking 2011 ZG ZH SZ NW GR OW UR AI GL LU SG TG AG AR SO SH CH TI FR VS BE BS BL VD Mandatory charges NE JU Combined advantages Asymmetric positioning Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 92 . In the La Chaux-de-Fonds region.Disadvantage. Neuchâtel falls into two distinct halves.75 -1.25 -0. its score falls below average.00 – -0.0% -5.00 -0. as the high value-creating watch industry. Health care.Economic Research Canton of Neuchâtel: Location Factors Locational Quality to CH Average +/++ Advantage. some regions in the Jura valleys are relatively difficult to reach. Looking at Neuchâtel's sector makeup without the watch industry.0 -1. The reason for this is that the canton imposes Switzerland's highest tax burden on natural persons. This measurement is subject to a considerable risk.0% 5. 2012 high 2. -/-.0% Employment: deviation from the Swiss average Accessibility to Transportation Index of motorized individual transportation and public transportation. Its greatest detraction is the relatively high tax burden. the canton's financial appeal as a place to live is set to rise. social security contributions and obligatory health insurance).00 0.0% Cluster opportunities and Risks in the Watch Industry The canton of Neuchâtel has a promising economic profile. Opportunities/Risks Profile of Sector Structure Twelve largest sectors.50 0.00 -1.50 – 4.0% 0. homes and watchmaking are accorded the most promising outlook in the canton of Neuchâtel.25 – 0.50 0. But also accessibility comes in below average. However. = CH average NE Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 --= + - VD -= + = = BE = = = = FR = = - Second Lowest Locational Appeal Neuchâtel ranks second to last in the national ranking of locational quality. the decision taken by the Neuchâtel government in June 2011 to reduce the tax burden on companies also includes tax relief for natural persons.0% 15.25 1.50 1. the lower end of average.
1% 0. The price per square meter of an average condominium falls by almost CHF 2'800 over the course of the 20 minute trip by automobile from the center of Neuchâtel to La Chaux-de-Fonds.1% 4'034 1. where 40% of the apartments were built prior to 1919.9% 8.6%* 4'125* 1. 10-year vacancy rate 4% 3% 2% 1% Neuchâtel 0% -1% Val-de-Travers -1% 0% CH La Chaux-deFonds Neuchâtel CH La Chaux-deFonds Rent Own Val-de-Travers 1% 2% 3% Vacancy rate 2011 4% 5% Source: Swiss Federal Statistical Office.6% -0.7% 0.Economic Research Canton of Neuchâtel: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 169. Despite the high popularity of single-family dwellings.4%* 2007 7'593 1.8% 88.95 2008 170.1% 0.5% 88. size of circle = housing stock 5% Avg.5%* 0.8 0. the demand for housing in the region of Neuchâtel is more stable. Building Permits by Regions and Segments Dwellings. the stable demand in the region of Neuchâtel is seen in the below-average low amount of rental vacancies.0* 0.9% 1.0% 0.6% 0.2% -2.1% 3.4% 1.1 0.9% 0.9% 0.10 2012 173.4%* 1.19% 6.26% 2. Starting from the city of Neuchâtel. the level of new construction activity there in an urban context is strongly dominated by major individual projects.1%* Source: Swiss Federal Statistical Office.04% 7.2% 0.05 89.2%* 90.3% 3.2% 0.4% 1.1% 1.1%* 2012 8'042* 1. regions: total 900 750 600 450 300 150 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 Val-de-Travers La Chaux-de-Fonds Neuchâtel MFD SFD Source: Baublatt.4 0.24% 8.7% 0.3% 1. net rent in CHF/m2 and year. Alleviation of Vacancies Through Modernization The increased level of underlying vacancies exists primarily in the rental segment in the regions La Chaux-de-Fonds and Valde-Travers.4% 0.0% 0.99 4'079 1.9 0. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.0% 0.9% 1.94% 9.8% 87.1% 1. To what extent the vacancies can be reduced will in future also depend on the performance of the watch industry. Single Family Dwellings on Beautiful Hillsides The top locations on hillsides.3% 4.0% 1. and the lower real estate prices when compared with the arc around Lake Geneva.05% 3. mean that single-family dwellings are very popular in the Neuchâtel region.1% 1. The housing stock grew through several boom phases until the crisis in the 1970s and 1980s.5% 1. Due to the beauty of the residential areas and the less cyclical sectors.7% 0. there is also demand for condominiums.7 0.4% 8.8 0.9 172. The real estate markets of the regions La Chaux-de-Fonds and Val-deTravers developed in parallel with the watch industry.5* 0.6 171.7% 1. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Fundamentally Different Real Estate Structure The Jura mountain chain divides the canton of Neuchâtel into two halves.4% 1.94% 5.7% 1.0% 1.8* 0. resulting in a high underlying amount of vacancies that is the cause for the ongoing cautious level of construction activity. In order to increase the appeal of the old housing stock of the region La Chaux-de-Fonds.7% 6.95 Switzerland 2009 2010 7'786 7'864 1.1% 1.5* 0.0% 0. Q3 2011 Most populous municipalities La Chaux-de-Fond Neuchâtel Val-de-Travers Le Locle Peseux Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 5'573 6'782 4'016 4'492 6'871 7'542 9'181 5'432 6'077 9'290 4'427 6'382 4'173 3'418 6'082 6'452 9'296 6'081 4'970 8'852 162 216 155 144 203 227 163 224 156 144 204 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 93 . In contrast.2% 3'995 1.5% 1.2% 3'950 1. the continued availability of building land. Wüest & Partner.02 2011 7'949* 1.19% 7. on annual basis.4% 7.5% 0.05 89. the real estate markets of these halves differ in both their structure and their development.87% 2.1% 1. The price of an average apartment has risen 76% in a five-year comparison.1% 0.8% 0.09 4'172* 1. It is particularly relevant for the real estate market whether there is success in getting the high number of cross-border commuters to settle in the region. making the level of activity correspondingly volatile.91% 7. prices fall rapidly the greater the distance is from the city. However.93 2008 7'702 1. most housing investments in the last 15 years have been in renovation and reconstruction activities. canton: multi-/single-family dwellings.0% 1. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.98 Canton of Neuchâtel 2009 2010 2011 171.1%* 0.7% 0.
cannot be insufficiently offset by the low tax burden.0 -1. as in eight other cantons.4‰ 0.1‰ 0. Wealth Tax 2010 In ‰ of taxable assets.0 -2.3 – 0. For married couples without children. Nidwalden is outdone by the canton of Zurich for total assets up to CHF 600'000. it appears the communes of Hergiswil and Stansstad are considerably more attractive in terms of tax than the other communes in Nidwalden. In the other Nidwalden communes. Nidwalden is one of Switzerland's eight cantons with an above-average tax base. in the form of a "flat-rate tax". According to our measurements. closely followed by Schwyz. A key factor determining the high income is the canton's above-average share of persons between 40 and 65 years of age. Zurich and Schwyz. The low taxation strategy attracts high-income and wealthy households to the canton.0% 2.Disadvantage.0% UR SZ CH Strong Growth in Income Like the cantons of Zug and Schwyz.0 – 3.3 -0.3 – 0. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 94 . person liable for the tax: married person without children 0.2‰ 0.0 – 1.5 1. Nidwalden ranks fourth in the cantonal ranking over this period. commuting costs 2011.6 0.0 0. both effects result in above-average real estate prices. freely disposable income comes in above the national average. which from the perspective of the middle classes.5‰ 0. -/-.Economic Research Canton of Nidwalden: Location Factors Locational Quality to CH Average +/++ Advantage.6‰ 0.0‰ 0 200'000 400'000 700'000 1'500'000 5'000'000 ZH OW ZG UR NW LU SZ Switzerland Lowest Tax Burden for Wealthier Individuals Like other cantons in Central Switzerland. The advantage of a below-average tax burden stands against average scores in education and accessibility to transportation.0 0 5 10 km Lu zer n Schwyz Sta ns Sa rnen Altdo rf Low Taxes and Proximity to Center Have their Price With respect to the financial appeal of living in Nidwalden. Credit Suisse Economic Research Freely Disposable Income in the Communes Synthetic indicator incl. Both in terms of income tax as well as wealth tax. On the other. Wealth tax is imposed.5 – 2. Source: Credit Suisse Economic Research Household Income Forecast up to 2013 Average annual growth in percent.0 1. it imposes the lowest burden in Switzerland.0 2.5% NW OW ZG LU 0. Even in terns of household income per capita. though above this point.3‰ 0. CH = 0 Canton NW -5.3 0.2 – -2. These are individuals at an advanced stage in their careers who generally command a higher income than their younger counterparts.6 – 1. Nidwalden comes in behind Zug as the second most attractive canton in Central Switzerland. Looking at the tax burden on natural persons in Nidwalden in detail. the appeal of a low tax burden results in additional demand for housing.0 – -1. Nidwalden shows the fourth highest growth in household income after Zug.0 – 0. In the regional comparison.0% 1. On the one hand. the canton of Nidwalden has sought to improve its appeal with the help of tax cuts. it is among the most attractive cantons in Switzerland. = CH average NW OW Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 ++ ++ = = = + ++ ++ = + UR ++ ++ -- SZ ++ ++ = = + Second Most Appealing Canton in Central Switzerland Nidwalden ranks sixth in the locational quality ranking for Swiss cantons.5% 2. there are considerable differences between the communes of Hergiswil and Stansstad close to Lucerne and the other communes of the canton.5% 1. Relative to other cantons. there is population pressure emanating from the center of Lucerne and weighing on the two agglomeration communes.0% 0. in the period between 2008 and 2013.0 – -0. Source: Braingroup. real values 3.
0% 1.88 20. Most of this demand is concentrated in the municipality of Hergiswil.9 41. This is likely due to the longer marketing times necessary for exclusive real estate.0% 1.3% 1.7% 0. Pfannenstiel on Lake Zurich. very much like that in the canton of Lucerne. where the sustainability of growth is increasingly in doubt.1%* Source: Swiss Federal Statistical Office.1% 1. Q3 2011 Most populous municipalities Stans Hergiswil Buochs Stansstad Ennetbürgen Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 7'685 10'400 14'097 19'071 7'218 9'768 12'040 16'290 8'919 12'071 7'788 10'536 5'955 6'645 8'667 9'674 223 238 220 257 235 227 224 240 221 256 236 249 8'845 12'874 7'936 11'556 8'064 11'741 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 95 .00% 12. increases demand for real estate in the high-end segment. wherever other people take their vacations.5% Avg.9% 1.02% 6. Overall.06% 0.6* 0.3 0. prices have risen by 2. with the goal of optimizing their taxes.3% 4. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.3% 0.02 2011 7'949* 1. with the exception of last year.1% 19.95 Switzerland 2009 2010 7'786 7'864 1. for example.1% 0.1% -1.9% 0.e. which.8 1.e.04% 7. Building Permits by Regions and Segments Dwellings.5% 1.8%* 0.a. The influx of high-income households.5% 2.0% 0. such as.5% -0.85% -4. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research A Second Wave of Expansion is Underway Housing production in Nidwalden is heavily influenced by the dynamics in Central Switzerland overall.0% 0. the majority of larger projects are in Stans.3%* 4'125* 1. the attractive housing situation south of Lake Lucerne has to be paid for with longer travel times to the Swiss employment centers.9% 0.93 2008 7'702 1.9% 1.94% 5. As is the case in other municipalities with a high share of very good locations. with 10 to 15 minutes of travel time given no traffic jams. a second wave of expansion is currently underway. canton: multi-/single-family dwellings.7% 6.6% -0.6% 0.1%* 0. might appear high.09 4'172* 1. More Vacant Properties in the Ownership Segment Demand for housing in Nidwalden is generally sound. Following the years 2004 through 2006.0 1.8% 19. i. vacant properties in the ownership segment are above average.8%* 2007 7'593 1.2%* 20.. regions: total 800 700 600 500 400 300 200 100 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 Sarneraatal Nidwalden/Engelberg MFD SFD Source: Baublatt.87% 2.9% 0.8 40.6 0.2% 0.5% 10.5% 0.4 1.7% 0.5% 0.8% 0.1% 0. The housing stock is growing in attractive locations.4% 6..1% 1.1% 0.99 4'079 1.3* 1. Wüest & Partner.1% 1.93 2008 40.0% Source: Swiss Federal Statistical Office.2% 3'950 1.1% 1.4% 1.0% Vacancy rate 2011 1.4% 7.7 1.7% 1.5% 1.5% 0.0% 0. besides low taxes and a view of the lake.3% 3.0% 0.91% 7. offers the shortest distance to Lucerne. size of circle = housing stock 2.90% 8. for single family dwellings and 3. developing at a lower level and.Economic Research Canton of Nidwalden: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 40.0% 1. some of the housing approved for construction is tourism-related. For example.7% 0.1% 4'034 1. Hergiswil.0% 0. for condominiums in Nidwalden overall since 2000.5% -0. Peripheral Location Dampens Price Growth Although the CHF 1. housing for staff with 130 apartments is being built on Mount Bürgenstock in connection with the construction of the new hotel.3* 0. i.7% p. net rent in CHF/m2 and year.5* 1.0% 1. Accordingly.0% Innerschwyz Sarneraatal CH Uri Sarneraatal Uri Nidwalden/ Engelberg Rent Own Innerschwyz CH Nidwalden/ Engelberg -0.0% 0.91 Canton of Nidwalden 2009 2010 2011 40.9% 19. on annual basis. The peripheral location of the canton south of Lake Lucerne slows down price growth and protects Nidwalden against a situation like that in the canton of Zug.7 million price tag for a standard single family dwelling in the most exclusive municipality of Nidwalden.a.5% 0.1% 0. Otherwise. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.5%* 1.5% 0.1% 4.1%* 2012 8'042* 1. 10-year vacancy rate 2.7% 1.9% 1.2% 3'995 1.96 2012 41. at rates which are below average for Switzerland as a whole.89 20.8% p.4% 0.94% 9.
Economic Research Canton of Obwalden: Location Factors Locational Quality to CH Average +/++ Advantage. = CH average OW NW Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 ++ ++ = + ++ ++ = = = + LU + ++ = = = = UR ++ ++ -- Lower Taxes Improve Appeal In comparison to other cantons. agriculture. With respect to corporate taxes.75 -1.50 – 0. Nidwalden is placed in the front mid-field area. Obwalden reveals slightly above-average locational quality.75 0. Source: Braingroup. Topography Reduces Accessibility The map on the left illustrates accessibility at a communal level. Obwalden imposes the lowest tax burden in Central Switzerland. -/-.Disadvantage. communications. Insofar. closely followed by Nidwalden. IT and corporate services sectors which benefit from Europe's lowest taxation rates on profits. hotels and catering Administrative and social services Total OW Total CH Start-up Boom in the Canton of Obwalden The structure of industry in Obwalden is very different to the national average. Source: Swiss Federal Statistical Office. These are mainly companies from the financial services. the commune of Alpnach benefits from its proximity to Lucerne and is the only commune in Obwalden to boast ratios above the Swiss average. though is outdone by the cantons of Zug and Schwyz in the taxation of natural persons.00 – 1. both for natural persons as well as for companies.50 – 4.75 – -0. Mobile companies based in the services sector are best placed to take advantage of these taxation benefits. but also of the potential that can be reached as a result.50 0. the canton has experienced an above-average number of company start-ups as a result of its attractive corporate tax policies.50 1. IT Financial services Corporate services Entertainment. account was taken not only of the quality of the connection. the less accessible they are.50 – 2. it is outdone only by the canton of Appenzell Ausserrhoden. Among the neighboring cantons. CH = 0 Canton OW 2.50 – -0. it ranks third nationwide. hospitality and electronics. The mountainous landscape and the Vierwaldstädtersee limit options available to civil engineers for road building.25 -0. communication. postal services Information.00 -0. The four largest sectors include construction finishing.25 – 0. Credit Suisse Economic Research Tax Burden Synthetic indicator 2010. The fiscal competition over recent years has formed Central Switzerland into a comparably homogeneous taxation zone.00 – 0. information.75 – 1. After incisive tax reductions in 2006 – for natural persons in 2006 and 2007 – Obwalden became one of the most tax competitive cantons in Switzerland.00 0.25 1.25 -0. CH = 100 140 Asymmetric 130 Tax burden on legal entities 120 110 100 90 80 70 60 50 60 ZG SZ UR NW OW AI GR AG GL LU AR Asymmetric 80 90 100 110 120 Tax burden on private individuals 130 140 SH SG TG ZH TI BS Symmetric and high GE VD JU FR SO BE CH VS BL NE 50 Symmetric and low 70 Active Participation in Tax Competition The canton of Obwalden imposes one of the lowest tax burdens in Switzerland. In terms of the taxation of natural persons. at least at the cantonal level.25 – -1.50 0.50 -1.25 – 0. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 96 .00 -1. Least central is Engelberg. Lucerne is only slightly above average and Uri clearly below average.5 – -1. In calculating the values. Since 2006. Accessibility to Transportation Index of motorized individual transportation and public transportation.00 – -0. The canton of Obwalden is disadvantaged by its topography. The further south the communes are located.25 5 10 km Stans Sarne n 0 Source: Credit Suisse Economic Research Company Start-up Rate Obwalden Share of newly established companies relative to number of existing companies 42% 35% 28% 21% 14% 7% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 Traditional industry High-tech industry Construction Trading and sales Transportation.
85 19.9% 1. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Growth in Housing Stock Because of Larger Projects Housing production in Obwalden is heavily influenced by the dynamics in Central Switzerland overall.3% 0. to which refugees from the city traditionally and frequently flee to realize the dream of owning their own home.1% 18.1% 1.3% 4.5% Vacancy rate 2011 2.87% 2. Alpnach.8% 1.6% 8.0% 0.09 4'172* 1.91% 7. The groundbreaking ceremony for a resort in Engelberg with a mix of over 130 rental apartments and condominiums was held in September 2011.4* 1.5% Berner Oberland-Ost CH Sarneraatal Entlebuch Sarneraatal Rent Own Nidwalden/ Engelberg Berner Oberland-Ost Nidwalden/ Engelberg CH Entlebuch 0. Low Prices Despite Low Taxes The comparatively recent low-tax strategy of the canton of Obwalden has not yet led prices to increase to exaggerated levels.0% 1.3%* 1.0% 1.6% -0.2%* 2007 7'593 1. the low-tax strategy of the canton changes the motives of the immigrants.8* 1.6% 0. in particular. Rental Apartments Are Losing Ground The number of vacant properties in both the ownership and rental segments is below the overall Swiss average.5% -1.88 Canton of Obwalden 2009 2010 2011 35.0% 0.3% 3.2%* 20.5%* 4'125* 1. canton: multi-/single-family dwellings.2 1.9* 1.1%* Source: Swiss Federal Statistical Office.1% 1.5% Source: Swiss Federal Statistical Office.8% 0.0% 0.76% 6.1% 0.0% 0. developing in a manner quite similar to that in the canton of Nidwalden and.0 35.5% 0. however.04% 7. for instance.8% 1. The price differences between the municipalities can mainly be explained by whether the location has good transportation connections and if it has attractive residential areas. Q3 2011 Most populous municipalities Sarnen Kerns Alpnach Sachseln Engelberg Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 8'984 12'155 7'573 10'245 7'694 10'413 8'226 11'129 7'895 10'684 7'788 10'536 5'927 5'464 6'391 5'991 8'622 7'956 9'304 8'726 221 209 208 205 231 227 222 210 210 207 233 249 7'445 10'837 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 97 .0% 2.70% -5.0% 0.9 2.2% 7. this figure has risen in a long-term comparison because of dynamic levels of construction activity in the rental segment.0% 1. This trend confirms once again that rental apartments do not have an easy time everywhere because of the interest situation. Wüest & Partner.5 35.1%* 0.Economic Research Canton of Obwalden: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 34.7% 0.85% 13.94 2012 36.0% 0.93 2008 7'702 1.2% 3'995 1. net rent in CHF/m2 and year.8% 0. With the tourist destination of Engelberg.0% 1. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2. which is considered part of the economic region of Nidwalden/Engelberg.1%* 2012 8'042* 1.99 4'079 1.5% 0.94% 9. it is unlikely that the number of vacant properties will rise in 2012.8% 0. Because of the increasing appeal of Obwalden as a residential canton due to tax reasons.1* 1.8% 2.95 Switzerland 2009 2010 7'786 7'864 1. at a lower level than in the canton of Lucerne.0 0. with the exception of last year.7% 0.4% 1. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing. With the growing appeal of home ownership for people in higher income categories. Furthermore.1% 1.4 1.02 2011 7'949* 1. the rental segment is losing ground.4 1. Several projects along the A8 in the Sarner Aa Valley will lead to considerable growth in the housing stock in 2012.6% 1. Obwalden's real estate market is also characterized by vacation home construction. with the market mechanisms of a vacation destination applying here due to the number of second homes.90 2008 34.2% 0.5% 0. Building Permits by Regions and Segments Dwellings.3% 1.7% 6.1% 4'034 1. regions: total 900 800 700 600 500 400 300 200 100 0 1995 1997 1995 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 Nidwalden/Engelberg MFD SFD Sarneraatal Source: Baublatt.4% 2.2% 3'950 1.6% 0. on annual basis. Prices fall accordingly as you proceed south.8% 18.4% 0.5 0. 10-year vacancy rate 4% 3% 2% 1% 0% -1% -0.2% 19. This applies.86 19. Engelberg is an exception. size of circle = housing stock 5% Avg.87% 1.9%* 0.94% 5. to peripheral regions.86% 5.4% 7.3% 0.1% 0.5% 1.7% 0.1% 1.3% 1. is closest to Lucerne in terms of transportation.
00 – -0.Economic Research Canton of Schaffhausen: Location Factors Locational Quality to CH Average +/++ Advantage. which scores poorly in terms of accessibility. just ahead of the canton of Thurgau.2 – -2. Credit Suisse Economic Research Untersee/ Rhein Successful Structural Changes in Industry Between 1995 and 2008. postal services Financial services Entertainment. Like Switzerland as a whole – yet more exaggerated – employment in traditional sectors of industry declined.25 – -1.0 2. Overall. = CH average SH Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + ++ = = = + ZH ++ = + + ++ ++ TG + ++ = = + + AG + ++ = = ++ + On the Outskirts of Zurich Schaffhausen ranks eighth in terms of locational quality. A favorable tax burden stands in contrast to average scores in terms of education and accessibility to transportation. Other communes in the eastern section of the canton also enjoy good transportation links. This has an adverse effect on the canton as a residential and commercial area.50 0. CH = 0 Canton SH 2.50 – 0.25 1. hotels and catering Unterland Source: Swiss Federal Statistical Office. commuting costs 2011. there is a considerable west-east divide in terms of accessibility.0 0.3 -0. The cantons of Aargau and Zurich come in some way ahead thanks to their high accessibility scores. Contribution to Employment Growth 1995-2008 In percent by sector group 35% 30% 25% 20% 15% 10% 5% 0% Thurtal TG AG Weinland Brugg/Zurzach -5% -10% -15% -20% ZH CH SH Traditional industry Construction Trading and sales Information.0 1. The city of Schaffhausen and the communes of Neuhausen on the Rhine Falls are the best connected areas of the canton. They benefit from their proximity to the German city of Singen and from the nearby E 54 European motorway.75 – -0.50 -1. accessibility in the canton of Schaffhausen ranks close to the national average.25 – 0. Within the canton.75 – 1.00 – 0. Freely Disposable Income in the Communes Synthetic indicator incl. weighing down the canton's residential appeal.0 – 0. Accessibility to Transportation Index of motorized individual transportation and public transportation.0 – -0. employment has increased at a lesser rate than the national average.Disadvantage.25 -0.5 – 2.50 0.0 – 3.0 0 5 10 km Scha ffhaus en Fr au enfeld Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 98 .5 1. By contrast. while high valuecreating cutting-edge industry grew strongly.3 0.75 -1. -/-.0 -1.50 1.0 -2.5 – -1. social services and corporate services sectors has increased since 1995. communications.0 – -1. CH = 0 Canton SH -5. employment in the administrative.75 0. the canton of Schaffhausen experienced a significant structural shift in its industry.00 0.25 – 0.25 -0. Compared to other regions. it scores much better than nearby regions in Zurich and Aargau in terms of its financial appeal. Comparably low fixed costs and a below-average tax burden raise the canton to seventh position in terms of freely disposable income. the housing stock is older than the national average.25 0 5 10 km Scha ffhaus en Fr au enfeld Source: Credit Suisse Economic Research High Regional Divide with Respect to Accessibility Overall.50 – 2.6 – 1.3 – 0. though other neighboring regions have seen weaker growth. Yet because the neighboring regions are closer to Zurich center or are better connected. The Thurgau Rhine region is similarly attractive in this respect.6 0. these score better in this area.50 – -0.0 – 1. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation. An exception is formed by the district of Stein.00 -0.00 -1. Also similar to the rest of Switzerland.50 – 4.3 – 0. Financially Attractive Place to Live Even if the canton of Schaffhausen can't match neighboring regions in terms of accessibility.00 – 1. Thurtal and Zurich Unterland have recorded higher growth rates.
7 76.2% 3'995 1.3% 1.6%* 2007 7'593 1. regions: total 700 Schaffhausen 600 500 400 300 200 100 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 MFD SFD Source: Baublatt.1% 0.0% 37. it has fallen compared to the long-term average.95 Switzerland 2009 2010 7'786 7'864 1.47% 4. Although the housing supply is expected to increase somewhat.5% 37.1%* 2012 8'042* 1. size of circle = housing stock 3.4% 7. however. About half of the canton's housing stock was built prior to 1960.3 0. Otherwise there is a need for renovation in Schaffhausen's housing stock.99 4'079 1.0% 1.5% 0.0% 0. the single family dwelling is very popular.87 2012 77. Wüest & Partner. This trend places the economic region of Schaffhausen in good company with the adjacent regions of the neighboring cantons.0% 0.75 2008 75.94% 5. canton: multi-/single-family dwellings.5% 2.5% 1.3% 4. on annual basis.1% 1. housing planning was stepped up.0% 0.7%* 0. As in the neighboring canton of Thurgau.02 2011 7'949* 1.0% 1.09 4'172* 1.3% 3.3 1.0% 37.0% -0. the new housing could increase the competitive pressures for the older housing stock and thereby provide impulses for renovation.5% -0.84 38.1% 1. there is still no risk that rising numbers of vacant properties will result. 10-year vacancy rate Rent Own Untersee/Rhein Schaffhausen Vacancy rate 2011 1.0% Weinland CH Untersee/Rhein Schaffhausen CH Weinland Avg.1% 1.5% 0.2% 3'950 1.91% 7.5% 2.5% 0.1%* 0.0% 1.6% -0. That includes single and multi-family dwellings from large housing developments in Schaffhausen.0% 1.8% 10.9 0.5% 1.87% 2.0% 0.1% 1.3% -3. Credit Suisse Economic Research Brisk Demand Squeezes Vacant Properties Housing planning appears appropriate to the level of demand in Schaffhausen and the structure of its housing stock.8% 0.9% 0. particularly in the rental segment.8* 1.Economic Research Canton of Schaffhausen: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 74.0% 1. Q3 2011 Most populous municipalities Schaffhausen Neuhausen a. In fact.2%* 39.7% 0. Vacancies: Actual and Historic By type of housing.7 1. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.93 2008 7'702 1.5% 3. More planning applications suggest that further increases in expansion can be expected for 2012.1%* Source: Swiss Federal Statistical Office. Given the dramatic price increases in the neighboring canton to the south. These activities likely resulted in an aboveaverage increase in the housing stock in 2011.9% 1.9% 1.04% 7. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Rejuvenation of Housing Stock Construction activity awoke from its slumber in 2010.03% 5.08% 7.04% 3.78 Canton of Schaffhausen 2009 2010 2011 75. greater excess capacity is not to be expected.0% -3.7% 6.1%* 4'125* 1.1% 0.0% 0. has been more moderate than the overall Swiss average.9% 1.4% 1.0% 2.2% 3.9% 1.3 76.0% 1.1% 4'034 1.82 38.9% 1.5% 0.0% Source: Swiss Federal Statistical Office. This trend.3% 2. Although the number of vacant properties was above the overall Swiss average in 2011.3* 1. In reaction to the sudden increase in population growth in 2007 and 2008.9% 0. Schaffhausen is therefore one of the regions that has been spared the effects of overheating.56% 2.3% 1.3% 1.3% 0. Building Permits by Regions and Segments Dwellings.94% 9.9* 0.5% 0.6% 0. Thayngen Beringen Stein am Rhein Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 6'806 5'718 5'613 5'726 6'129 9'213 7'735 7'594 7'748 8'290 5'636 4'991 4'836 5'127 5'655 8'207 7'267 7'037 7'467 8'237 172 176 179 182 180 227 169 177 181 183 181 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 99 . Rhf.8% 0.5% 1.0% 0. Schaffhausen's current moderate prices could prove to be an opportunity to attract owners who commute to Winterthur or to the economic region of Zurich.3* 0.6% 1.5 0. Price Difference Versus the Canton of Zurich is an Opportunity The prices for condominiums have also risen in the canton of Schaffhausen.3 0. Still.5%* 1. particularly recently. net rent in CHF/m2 and year.
0 – 1. it has the lowest tax burden for natural persons.0 – 0. hotels and catering Administrative and social services 0 5 10 km Source: Swiss Federal Statistical Office. In Einsiedeln and Innerschwyz. Schwyz loses its edge in terms of tax burden and is outdone by cantons which otherwise tax higher earners at a higher rate.0 -2. These cantons include Geneva and the two Basel cantons. Low-tax Strategy in Taxation of Income The canton of Schwyz is at the vanguard in terms of tax competition.0 1.0 – -1. Its key advantage is the comparatively low tax burden. indicator ratios are above the Swiss average. health insurance premiums. From a regional perspective. both in terms of education and accessibility to transportation by its neighbors Zug and Zurich. = CH average SZ Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 ++ ++ = = + ZG ++ ++ + ++ ++ ++ ZH ++ = + + ++ ++ LU + ++ = = = = Strong Competition in the Neighborhood The canton of Schwyz places in the upper half of the ranking in seventh position in terms of locational quality. The map on the left shows freely disposable income for the broad Swiss middle class in the communes. horizontal line = Swiss average Canton of Schwyz Traditional industry High-tech industry Construction Corporate services Trading and sales Transportation. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 100 . Credit Suisse Economic Research Freely Disposable Income in the Communes Synthetic indicator incl. In the other Schwyz communes.Disadvantage.5 1. Freienbach and Feusisberg have the lowest tax rates in the whole of Switzerland. as well as in Küssnacht (SZ). After Zug. The cost of housing. Here. As the figure on the left shows.0 – -0. communications. on the other hand.0 -1. The canton of Schwyz attracts high-earning and wealthy households with its low tax strategy and as such has the fourth highest resources of any Swiss canton. postal services Information. the canton of Schwyz places the lowest tax burden on a family with two children with an annual income of CHF 325'000. Schwyz is beaten hands down. IT Financial services Energy supply Entertainment. charges and commuting costs all have their role to play.6 – 1.3 -0. Schwyz puts in a poor showing in terms of the level of education of its population.0 0 5 10 km Sta ns Sa rnen Altdo rf Zug Lu zer n Schwyz Source: Credit Suisse Economic Research Sector Specialization of Economic Regions Synthetic indicator 2008.0 2. The March/Höfe region.0 0. commuting costs 2011. -/-.0 – 3. Wollerau. Low Tax Burden Results in High Real Estate Prices The burden on the household budget doesn't come solely from tax though. For individuals earning less than CHF 90'000. Income Tax 2010 In % of gross income. High Value-creating Companies in March/Höfe The industrial landscape of the Einsiedeln and Innerschwyz regions reveals a similar structure.3 – 0. This results in below-average freely disposable income. the share of the population employed in the service sector is below average. The high demand for tax efficient and centrally located housing means elevated real estate prices in the three communes with the lowest tax burden on the banks of Lake Zurich.2 – -2.Economic Research Canton of Schwyz: Location Factors Locational Quality to CH Average +/++ Advantage. though economic activity is primarily concentrated in the Höfe area. person liable for the tax: married person with two children 30% 25% 20% 15% 10% 5% 0% 50'000 125'000 200'000 GL ZG UR SG 275'000 350'000 SZ ZH LU Switzerland 425'000 500'000 Source: Braingroup.3 – 0. is distinct from the other two as a result of the above-average share of its population employed in the high value-creating service sector.3 0. the share of the population employed in more traditional industries is considerably higher than the national average. CH = 0 Canton SZ -5. Differences occur between the central communes in the north of the canton with their good transportation links and the much less accessible and mountainous south.6 0. Notable is the comparably low significance of the public sector.5 – 2. closely followed by Zug. On the other hand. as is the case for the tourism sector.
62% 6. In general. regions: total 1'800 1'500 1'200 900 600 300 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 MFD SFD Einsiedeln Innerschwyz March/Höfe Source: Baublatt.9% 1.1% 1.68% 6.1% 0. A new condominium with average features in the municipalities of Feusisberg and Freienbach now costs more than CHF 9'000/m2. Building Permits by Regions and Segments Dwellings.3 1. are located in the south of the canton.6% 69.1* 1. The unique feature about the canton of Schwyz is that its housing stock continues to grow robustly.92% 8.7%* 4'125* 1. The High Range of Prices is Evidence of Diversity Demand pressure and the recent.1%* Source: Swiss Federal Statistical Office.2%* 2012 149.5% 0.7% 0.9% 1.0% 2.94% 9.1% 4'034 1.0% 1.2% 3'950 1. on annual basis.6% 1. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.0% 0.3% 1. Q3 2011 Most populous municipalities Freienbach Schwyz Einsiedeln Küssnacht Arth Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 14'073 19'045 8'185 11'071 9'315 12'600 11'960 16'181 8'871 12'006 7'788 10'536 9'545 13'896 6'555 6'264 6'182 9'548 9'111 8'993 251 211 214 257 209 227 258 213 215 259 210 249 8'727 12'704 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 101 . there is no structural imbalance between these two types of housing.95 Switzerland 2009 2010 7'786 7'864 1.1% 0.0% 1.1% 1.82 Schwyz 2010 146.9% 2.0% 1.7% 6.6% 0. particularly in the district of Höfe. In nine municipalities.3% 0. The one exception is the region of March/Höfe: In both districts of the region. vacancy rates in the two segments were below average during 2011 – in the region of Innerschwyz also in a long-term comparison.91% 7.5% Vacancy rate 2011 2. With one exception.5 1.0% 67.2% 3'995 1.9* 2.1%* 2012 8'042* 1.4% 7.85 2011 148.93 2008 7'702 1.6 1.8% 0. Because building land in the municipalities of the district of Höfe.0 1.4% 0. even in less accessible locations such as Einsiedeln – both for condominiums as well as for rental apartments.6% -0.87% 2.76% 3.2%* 70.5% 0.1% 0.94% 5.2% 9.0% March/Höfe Innerschwyz Einsiedeln CH March/Höfe Einsiedeln Innerschwyz CH Rent Own 0.4% 1.7% 0.1% 1. is becoming increasingly scarce and therefore more expensive.5* 1.5% 1.0% 1. Interest-Related Market Distortions in Good Locations Schwyz is a residential canton.0* 1.1% 1.8% -0.04% 7.0% Source: Swiss Federal Statistical Office.1 2.99 4'079 1. in Wollerau. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Dynamic Growth The high level of diversity in the canton provides the local real estate markets with quite different dynamics in the smallest of areas. In 2011. That means this region.0% 2.5% 1.77 2008 143. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.0%* 2007 7'593 1. uniquely-affordable financing conditions have driven prices upward.3% 0.7 1.78 Canton of 2009 144.0% 0.3% 3.3% 68.1% 0.6% 0. a similar condominium costs half as much as it costs in Wollerau.0% 0.5 2.5% -0.0% 66.3% 4. which provide a favorable tax environment and are relatively easy to reach from Zurich.1%* 0. Local expansion waves lead to correspondingly volatile reactions in vacancy trends.9% 0.0% Avg. the price even exceeds CHF 11'000/m2.6% 7.70% 7.6% 1.1% 0. except for Steinerberg.7 0. size of circle = housing stock 2.7% 0.5% 0. 10-year vacancy rate 1.1% 0. There is a balance between renting and ownership. the number of vacant rental apartments has increased over the last three to four years. almost a third of all building permits for residential units in the region March/Höfe were attributable to the municipality Lachen. net rent in CHF/m2 and year.09 4'172* 1.0%* 0.5% 0.9% 2.02 2011 7'949* 1.5% -0.Economic Research Canton of Schwyz: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 141. with its high share of good residential locations – and thus many rental apartments in the upscale segment – has been particularly impacted by the interestrelated distortion between renting and ownership. Wüest & Partner. canton: multi-/single-family dwellings.9% 7.90 72. which. most of the construction activity in the canton is concentrated in the district of March.
7 0.2 0.2 0.0 – 3.7 0. The distinct focus of these parts of the canton and the resulting centrifugal forces are illustrated well by the figure.6 0. However. for natural persons.0 – -1. postal services Financial services Entertainment.3 -0.5 1.5 0.2 – -2. while these sectors have grown strongly in Grenchen. This structural shift is in line with the general trend across Switzerland.0 -1. -/-. communications.1 0. Communes in the direct catchment area of the city of Basel are less financially appealing than those in the south of the canton.5 1.0 1. The canton benefits from good accessibility. The Gäu and Thal areas involve a longer drive to a major Swiss center.0 0. Source: Swiss Federal Statistical Office. the cost of living in the canton of Solothurn is considerably cheaper. The northern regions of the canton of Solothurn are in the direct catchment area of the city of Basel. the tax burden is lower than in the nearby cantons of Basel Land and Berne.0 -2.8 1. The economic regions of Laufental and Thal saw a strong contraction in employment in traditional sectors of industry which could not be compensated by other sectors.Economic Research Canton of Solothurn: Location Factors Locational Quality to CH Average +/++ Advantage.7 1. Catchment Areas of the Major Swiss Conurbations Population in catchment area in millions. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation.5 Canton of Solothurn 60 min 3. = CH average SO Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 = – = = + = BL – = + + + + BE – – = = = = AG + ++ = = ++ + Mittelland Canton at the Intersection of National Axes The canton of Solothurn ranks 13th in the locational quality ranking. On a communal level.0 – 0. Source: Credit Suisse Economic Research Contribution to Employment Growth 1995-2008 In percent by sector group 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Oberes Baselbiet Unteres Baselbiet CH SO Olten/ Gösgen/Gäu Grenchen Solothurn Laufental Thal Traditional industry Construction Trading and sales Information.1 0. From a cantonal perspective. though.5 1.0 2.8 1.3 0. In order to relieve pressure on the household budget. However. these are less suitable residential areas for those working in these centers. there are broad differences within the canton.3 – 0. The figure on the left shows the populations of major Swiss conurbations for various travel distances. Source: Credit Suisse Economic Research Freely Disposable Income in the Communes Synthetic indicator incl. travel times: mot.0 – -0. the canton of Solothurn reduced taxes for natural persons for 2012.5 1. Solothurn has also experienced a considerable contraction in cutting-edge industry.3 0. hotels and catering The Struggle with Structural Change Employment growth in the canton of Solothurn over the period between 1995 to 2008 was shaped by an increase in administrative and social services as well as from a decline in traditional industry.3 – 0. The southern regions around the cantonal capital border directly on the conurbation around Berne. commuting costs 2011.5 2.Disadvantage. With an average commute of around 60 minutes.0 0 5 10 km Liestal Aar au Del émo nt So lo thurn Financially Attractive and Central Living Space The financial appeal of the Swiss cantons and communes is comprehensively expressed in terms of a household's freely disposable income. Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 102 .6 – 1.0 – 1. individual transportation Zurich Basel Berne Lausanne Lugano Geneva 40min 20 min 40 min 2.5 – 2.3 Base l Li esta l Delé mo nt Solot hurn Zug Lu zer n Schwyz Stans Sa rnen Altdo rf Aar au Züri ch 0 10 20 km Neuchâ tel Bern Fr ibo urg Between Conurbations Proximity to city centers is a valuable advantage.4 0. CH = 0 Canton SO -5. Solothurn ranks 12th in the national ranking. though the tax appeal for companies is below average. though still higher than in Aargau. Compared to the centers of Berne and Basel.
6% -0.0% 0. In contrast. the upscale properties are more expense in absolute terms because of their size.4% 7.8% 0.1% 1.87% 2.1% 1.1% 4'034 1. for example.7% 1. the square meter prices for moderate and upscale properties do not vary significantly.1% 122 1.93 2008 7'702 1. it is likely that the housing stock will grow by about 1. The average price in Switzerland for a similar condominium is estimated to be CHF 778'000.80% 5.2% 2.4% 1. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.8% 0.9% 0.1%* Source: Swiss Federal Statistical Office. The remote region of Thal is particularly impacted by this phenomenon.4% 0.79 124 1.4% 6. 10-year vacancy rate Rent Own Olten/ Gösgen/Gäu Grenchen Olten/ Gösgen/Gäu Thal Laufental Solothurn CH Thal -1% -1% 0% Laufental 1% 2% 3% 4% Vacancy rate 2011 5% 6% 7% Source: Swiss Federal Statistical Office.0% 0. Recently.7% 0. The last time that this figure was exceeded was in 1995.1% 0.8% 1.0% 1.7% 0.7% 0.0% 1.94% 9.3% 1. on annual basis.77 2008 252 0.2% 3'995 1.1% during 2012.7% 2. 965 apartments in multi-family dwellings were approved for construction. is becoming less important.6% 0. size of circle = housing stock 5% 4% 3% 2% 1% 0% Grenchen Solothurn CH Avg.7% 6.09% 3.2% 3'950 1.91% 7. In addition to natural discrepancies.6%* 0. net rent in CHF/m2 and year. the high demand for property ownership means that vacancies in this segment fluctuate near the overall Swiss average.9% 0.95 Switzerland 2009 2010 7'786 7'864 1. canton: multi-/single-family dwellings.5% -1.04% 7.6% 0. slightly faster than the average of recent years. It is likely that the supply of new projects will continue because many building applications continue to be submitted. Building Permits by Regions and Segments Dwellings. only CHF 574'000. Q3 2011 Most populous municipalities Olten Solothurn Grenchen Zuchwil Biberist Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 6'032 6'258 5'387 5'952 5'823 8'161 8'465 7'284 8'052 7'877 5'218 5'436 5'018 4'818 4'609 7'593 7'911 7'311 7'015 6'711 186 200 170 202 182 227 180 193 171 200 183 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 103 . In the rental segment.81 2012 258* 0. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing. Together with the 418 single-family dwellings that were approved for construction in the last 12 months.6%* 2007 7'593 1.9% 123 0.1% 1.1%* 0.4% 0. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Housing Production at Record Levels Planning for new housing in the canton of Solothurn is proceeding at full speed.09 4'172* 1.1%* 2012 8'042* 1. That is also an explanation for the high vacancy rate of 2.2%* 127* 1. the single-family dwelling.0%* 2.02 2011 7'949* 1.1% 0.3% 4. the low interest rates distort the market to the extent that purchasing in many places has become cheaper than renting.80 126* 1. In Olten.9% 1.8% 0.1% in the rental segment in the canton of Solothurn. In 2011.1%* 4'125* 1.9% 121 0.95% 6. Wüest & Partner.0% 0.Economic Research Canton of Solothurn: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 250 0. However.5% 0.77 Canton of Solothurn 2009 2010 2011 253 255 256* 0. a condominium with average features and 110 m2 of net living area costs.00% 0. which historically was the traditional form of housing in the ownership segment in the canton of Solothurn.0% 1. the number of vacant condominiums and single family dwellings has fallen especially dramatically in the region of Grenchen.65% -0.8% 0. regions: total 1'600 Olten/Gösgen/Gäu MFD 1'200 SFD Solothurn Grenchen Laufental Thal 800 400 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Baublatt. Limited Price Differences in the Large Towns The price ranges in the five largest municipalities are considerably below the overall Swiss average.4% 0.3% 3. Compared to the dynamic construction of condominiums and rental apartments.6% 0.0% 1.1% 1.94% 5. Sharply Rising Vacancies in the North of the Canton There is a considerable difference in vacancy rates between ownership and renting.0% 0.0% 2.99 4'079 1.0% 1.
Accessibility to Transportation Index of motorized individual transportation and public transportation.50 0. Gallen: Location Factors Locational Quality to CH Average +/++ Advantage.Disadvantage. -/-. CH = 0 Canton SG 2. Swiss Federal Customs Administration.Economic Research Canton of St. Gallen.75 n -1.25 0 5 10 km Fr au enfeld St.75 – -0.0 – 3.50 u zer -1. Although the A3 and the southern section of the A13 lead through the mountainous south.0 – 0.50 – 0. High Financial Appeal of Canton As in the case of accessibility.3 – 0. Gallen's communes rank below the Swiss average. Gallen accounted for 5.25 – -1.5 – -1.5 1.0 0. All in all.75 0.25 1.5 – 2. on Lake Walen and in the Werderberg region is also slightly more expensive than in the northern section of the canton on account of the beauty of the landscape and relatively good transportation links. Consequently.00 – 0.00 -1. The assessment takes account of economic developments and not forex trends.50 – 2.6 – 1. Life in the southern Linth region.25 – 0.6 0. proximity both to Zurich and to the lake result in a comparably high cost of housing. St. Gallen regions. exports: moving average over six months 2 1 0 -1 -2 -3 -4 -5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 SG Exports SG Barometer CH Exports Growth threshold Source: OECD.0 1. Gallen ranks 15th in terms of locational quality.50 – 4.0 2.00 – -0. The economy of the Rhine valley has also been particularly adversely affected by the appreciation of the Swiss franc.25 -0.G al len Züri ch Herisa u Appenzell Zug Schwyz Glarus Disadvantaged Mountain Regions The representation of accessibility on the left illustrates the regional variation within the canton of St. Almost 40% of these come from the St.00 – 1.0 -1. Alongside export performance.G al len Züri ch Herisa u Appenzell Zug Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 104 .5% of Switzerland's total exports in 2010. Accordingly.25 – 0. = CH average SG Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + ++ = = = = ZH ++ = + + ++ ++ GR + + = = -- TG + ++ = = + + Typical Eastern Switzerland Profile The canton of St. St.75 – 1. Gallen Rhine valley enjoy efficient and aboveaverage accessibility compared with the rest of Switzerland as a result of the A1 and A13 motorways. the region has taken an above-average hit from the economic slowdown in the EU. The region's most important trading partner is the EU which accounts for around 60% of exports. Gallen/Rorschach and the St.00 -0.0 – 1. Freely Disposable Income in the Communes Synthetic indicator incl.3 0. the canton ranks behind Zurich and Thurgau.00 0. CH = 0 Canton SG -5. while education comes in around the Swiss average. given the current strength of the Swiss franc.50 Aa ra u 1. though ahead of Graubünden. This uses leading indicators to provide a prospective assessment of export sales. Altdo rf Source: Credit Suisse Economic Research Trade Weighted Export Barometer In standard deviations. the distance to centers in Switzerland's Mittelland are much greater than in northwestern St. Gallen's Rhine valley.50 0. the figure on the left shows the cantonal export barometer. Gallen also scores average in terms of accessibility to transportation. the barometer is likely to overstate export sales and further weakening is to be expected. In the Rapperswil-Jona region. Like most cantons in Eastern Switzerland.0 – -0. Seven of St.0 0 5 10 km Lu zer n Sta ns Altdo rf Schwyz Gla rus Fr au enfeld St.25 -0. the regions of Wil. The geographical center and the south of the canton are less accessible as a result of their particular topography. Overall.50 – -0. Credit Suisse Economic Research Rhine Valley Dependent on Exports St. the tax burden is relatively low. St.3 – 0.2 – -2. the financial appeal of living in the canton varies greatly from region to region. Gallen benefits both from below-average fixed costs as well as from comparably low mandatory charges.0 -2.0 – -1. While the communes in the Linth region benefit from their proximity to the center of Zurich. commuting costs 2011.3 -0.
Demand is strengthened further by employees in Liechtenstein who live in the Rhine Valley region.1% 1. for instance in Rorschach and the surrounding area. canton: multi-/single-family dwellings. Credit Suisse Economic Research Industrial Activity Influences Demand The extent to which the market will be able to manage with this large increase in numbers of rental apartments in the industrialized regions in the east depends on the performance of the economy and the trends in employment.1% 4'034 1.0% 1. In absolute terms. where structural change is noticeable.3% 3.99 4'079 1.85 Canton of St. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Construction Activity Constantly High The construction boom in St. Even though the situation has not intensified when compared to the long-term average.6% 0.9% 1.04% 7.94% 9.0% 225 1.1% 1.9% 1. which plays a major role in St. size of circle = housing stock 5% Avg. the housing stock in the Werdenberg region is likely to grow by 2.9%* 0.3% 3.0% 1.2% 0.09 4'172* 1. on annual basis.1% -0.2%* 1.85 2008 471 1.2% 1.6% 0.6% -0. falling immigration in the wake of a slowdown in industrial performance – and the resulting decline in the target group for new rental apartments – threatens to lead to a rising number of vacant properties.93 2008 7'702 1. the economic region facing Zurich. Vacancies: Actual and Historic By type of housing.Gallen/Rorschach Wil St. with a focus on rental apartments.9% 4. Gallen 2009 2010 2011 475 478 482* 0.1% 0.02 2011 7'949* 1.0% 1. Building Permits by Regions and Segments Dwellings. regions: total 4'000 St.0% 1.Gallen/ Rorschach Toggenburg Rent Own Linthgebiet Wil St.2%* 238* 1. and the average condominium has increased 50% in price over five years.1% 230 1. However. in terms of housing stock.5% 0.7% in 2012. Gallen and the Bundner Rhine Valley and has created additional employment opportunities.89 235* 1. The number of vacant rental apartments was above average in 2011 in all regions except Sarganserland and the Linth region.95 Switzerland 2009 2010 7'786 7'864 1.7% 0.7% 6.7% 0.6% 0.5% 0.4% 1.3% 228 1.2%* 4'125* 1.4% 7.Gallen/ Rorschach St. and in Rapperswil-Jona.1% 1.2% 3.1%* 0.87 232 1.8%* 2007 7'593 1.1%* Source: Swiss Federal Statistical Office.94% 5. Gallen Rapperswil-Jona Wil Gossau Uzwil Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 7'887 10'671 9'629 13'026 8'032 10'871 6'742 6'113 9'116 8'271 6'200 6'482 5'773 4'664 9'022 9'437 8'407 6'785 199 226 199 196 182 227 201 219 212 198 184 249 8'155 11'874 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 105 . construction activity is the highest in the St.3% 1. But prices are also increasing in other locations.1% 1.1% 1.Economic Research Canton of St. Price Levels in the Largest Municipalities Transaction prices in CHF/m2. In Rapperswil-Jona. Based on current planning. The highest prices are in the city of St.4% 6. The increased demand in the region results from the years of excellent performance by local industry.1% 1. Q3 2011 Most populous municipalities St.91% 7. the municipality of Wil with its good transport links to Zurich.1% 0. Galler Rheintal Werdenberg Sarganserland St.0% 0.6% 0. on Lake Constance.38% 1. Credit Suisse Economic Research Prices Are Recovering St.93 2012 486* 0. 10-year vacancy rate 4% 3% 2% 1% 0% -1% -1% 0% Wil Sarganserland CH Werdenberg CH Toggenburg Linthgebiet St.1%* 2012 8'042* 1.46% 6. Galler Rheintal Werdenberg Toggenburg MFD SFD Linthgebiet Sarganserland 3'000 2'000 1'000 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Baublatt.47% 6.2% 3'950 1.0% 0.3% 4. Some areas are seeing a race to catch up in terms of price growth. Gallen: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 466 0.8% 0.0% 1. net rent in CHF/m2 and year. Gallen is a diverse canton from a price perspective.0% 0.3% 1.5% 0.7% 0. most of the planning is in the Sarganserland and Werdenberg regions. Gallen is continuing. Gallen. Gallen/Rorschach region and in Wil.45% 3.87% 2.9% 1. Galler Rheintal 1% 2% Vacancy rate 2011 3% 4% Source: Swiss Federal Statistical Office. Wüest & Partner.54% 2.2% 3'995 1. an average condominium today costs 53% more than it did five years ago.0% 1.
00 -1.0 1. As well as attractive tax conditions and above-average accessibility to transportation. Thurgau has also experienced a structural shift in its industry towards higher value-creating cutting-edge industry. Most other areas are also well connected and score above the Swiss average in terms of accessibility.25 – -1. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation.0 – 1. Accordingly.50 – 4.0 2.25 -0.00 -0.50 1. Otherwise. Appenzell Source: Credit Suisse Economic Research Freely Disposable Income in the Communes Synthetic indicator incl. CH = 0 Canton TG 2.Economic Research Canton of Thurgau: Location Factors Locational Quality to CH Average +/++ Advantage. postal services Financial services Entertainment. -/-.25 -0. while the other two regions underperformed the Swiss average.50 – 0.75 0.25 1. score below the national average.0 – 0. Thurgau scores around the Swiss average in terms of education. Communes along the A1 and A7 motorways in the west of the canton enjoy particularly good transportation links. inter-cantonal immigration has risen notably since 2001.2 – -2.5 1. Only a few communes. Gallen comes in some way behind the Lake Constance canton.00 – 0.25 0 5 10 km Konstanz Frauenfeld St. Credit Suisse Economic Research Untersee/ Rhein Accessibility to Transportation Index of motorized individual transportation and public transportation. hotels and catering St.Gallen Zürich Herisau In Zurich's Catchment Area Proximity to Zurich is expressed in terms of the canton's accessibility. Schaffhausen.3 -0. The combination of the relatively low cost of living and its proximity to Zurich. Zurich ranks second.75 – 1.75 -1. Thur Valley: Motor of the Thurgau Economy Employment growth in the canton of Thurgau was considerably higher than the Swiss average in the period between 1995 and 2008. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 106 .6 – 1.00 – 1. The driving force behind this growth was the Thur valley.0 – -0.5 – 2. which has a shortage of housing.0 – 3.0 – -1. commuting costs 2011.0 0 5 10 km Konstanz Frauenfeld St.0 -2. while St.3 – 0. = CH average TG Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + ++ = = + + ZH ++ = + + ++ ++ SG + ++ = = = = SH + ++ = = = + Attractive Position Among Regions Thurgau comes in ninth in the cantonal ranking of locational quality.Disadvantage.50 – -0. communication and IT sectors have also recorded growth. The canton of Thurgau is covered by the Ostwind tariff agreement.Gallen/ Rorschach CH SG Oberthurgau WinterthurLand Weinland ZH SH Source: Swiss Federal Statistical Office.25 – 0.5 – -1. Alongside growth in corporate services and administrative and social services – sectors which have performed well across Switzerland – cutting-edge industry.0 -1.6 0. With the exception of the northwest. away from these transportation axes. trading and sales as well as the information. Thurgau's communes also benefit from the Z-Pass tariff agreement. Contribution to Employment Growth 1995-2008 In percent by sector group 35% 30% 25% 20% 15% 10% 5% Wil 0% Thurtal TG -5% -10% -15% -20% Traditional industry Construction Trading and sales Information.3 – 0.75 – -0.0 0.00 0.3 0.50 0.50 – 2. Commuting costs for public transportation to Zurich varied in 2011 depending on commune and came in between CHF 2'100 and CHF 3'300.50 0. Thurgau therefore comes in very close to its neighbor. Indicator ratios are above the cantonal average on the south side of the lake near Constance and Frauenfeld as well as in the Berg and Bürglen communes. In line with the national trend.25 – 0.50 -1. CH = 0 Canton TG -5. Thurgau's financial appeal as a place to live is very much homogeneous throughout the canton.00 – -0. make the canton an attractive alternative for those working in Zurich. A comparatively low tax burden and low cost of housing means households enjoy aboveaverage freely disposable income. communications.Gallen Zürich Herisau Appenzell Attractive Canton to Live in Thurgau ranks fifth in the national ranking of most financially appealing cantons to live in.
1% 0.3% 4. Until now. Building Permits by Regions and Segments Dwellings. The Thur Valley – and especially Frauenfeld – can position itself better in this respect.0% Oberthurgau Thurtal CH Untersee/Rhein CH Thurtal Oberthurgau Rent Own Untersee/Rhein Vacancy rate 2011 2.1% 4'034 1.2% 1.8% 1.1% 1. there is a need in many places to modernize the outdated housing stock.93 2008 7'702 1. the single-family dwelling. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.4% 114 1.0% 1. particularly in Oberthurgau.4% 7.5% 2. more than half of all residential units were built between 1946 and 1980. Overall.77% 3.3% 0. in addition to the condominium. net rent in CHF/m2 and year. as a result. where the housing stock is growing in the areas around the municipalities of Romanshorn and Arbon.5% 0.91% 7. price levels are impacted by the willingness of immigrants to pay. the surge of activity now extends along the lake and beyond into Oberthurgau. The shorter distance to Winterthur and Zurich.1% 0. in part. 10-year vacancy rate 3.0% 1. regions: total 1'800 1'500 1'200 900 600 300 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Untersee/Rhein Oberthurgau Thurtal MFD SFD Source: Baublatt.5% 116 1.5% 0.4% 1.9% 1.87% 2.1% 1.0% 1.0% 1.4%* 1. In Kreuzlingen. In Kreuzlingen.4% 1.82 Thurgau 2010 248 1.0% 0.6% 112 1.0% 0.2% 0.45% 5.1%* 2012 253* 1. the high amount of immigration has absorbed the new housing supply well.1% 1. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.1%* Source: Swiss Federal Statistical Office. they are only exceeded by smaller lakeside communities that have a high percentage of locations with lake views.5% 1. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Ongoing Construction Boom in Oberthurgau The canton's spirit of optimism is expressed.4% 1. It is likely that the canton's moderate accessibility would have a negative effect.0% -0. vacancies are still likely to increase in 2012.2% 0.3% 1.2% 3'950 1. Land prices overall are still low in Thurgau.37% 5.8% 0.6% -0.7% 0. they appreciate in equal measure both the comparatively low taxes and the proximity to the northern neighbor. In addition.5% Source: Swiss Federal Statistical Office.6% 0.8% 0. size of circle = housing stock 4.83 2011 251* 1.04% 7.3% 3.2%* 118* 1.02 2011 7'949* 1. remains a popular form of housing.80 Canton of 2009 245 1.3% 1.94% 5. Single-family Dwellings Are Still Affordable The relatively good transportation connections mean that prices are higher in the Thurgauer regional center of Frauenfeld when compared to the rest of the canton. Wüest & Partner.3% 111 1.0% Avg. The regional centers of Frauenfeld and Weinfelden launched the construction boom in the Thur Valley in 2006.5% 1. if a market downturn were to occur due to rising interest rates or a drop in immigration. on annual basis.86 119* 1.2% 1.0% 0. Kreuzlingen and the region of Untersee/Rhein followed in 2008 with an increase in its already strong level of construction activity. will probably provide stability to the Thur Valley in an increasingly difficult market environment.5% 0.5% 1.1% 1.09 4'172* 1.1% 0.5%* 4'125* 1.8% 1.99 4'079 1.7% 1.8% 1.0% 0.94% 9.5% 3.0% 4.47% 2.7% 4.5% 1.82 2008 242 1.5% 0.5% 2.Economic Research Canton of Thurgau: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 238 1.0% 2.1%* 0.2% 3'995 1.5% -0.95 Switzerland 2009 2010 7'786 7'864 1.7% 6. in the dynamic level of construction activity that has wandered from region to region since 2007. for example.0% 1.5% 3. Q3 2011 Most populous municipalities Frauenfeld Kreuzlingen Arbon Amriswil Weinfelden Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 7'210 6'927 6'331 5'847 6'573 9'748 9'374 8'561 7'916 8'897 5'855 5'718 4'882 4'709 5'609 8'526 8'326 7'104 6'852 8'163 193 203 172 175 183 227 188 222 180 176 184 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 107 . Slight Increase in Vacancies Likely The dynamic level of construction activity needs to be closely monitored because vacancies in the rental segment are already at above-average levels in some places. as well as its good transportation connections.62% 1.1% 1.1%* 2012 8'042* 1. although in 2011 they still did not increase beyond the long-term average.7% 0.1%* 2007 7'593 1.0% 0. canton: multi-/single-family dwellings.0% 3.
00 – 1.25 Bellinzo na 0 10 20 km Isolated by Mountains and National Borders Accessibility in Ticino is below the Swiss average.00 – -0. Source: Swiss Federal Statistical Office.50 0. The share of cross-border commuters is particularly high in cutting-edge industry. Mendrisio has the highest share of cross-border commuters in Ticino. however.25 -0.25 – -1. Once the New Transalpine Railway is fully operational.50 – 4. immigration from other cantons is very much focused on those over 40 years of age. But Ticino also scores poorly in terms of education and is below the national average here. Ticino's ratio between the active to retired population is lowest in the Bellinzona region at 33%. the lower their accessibility scores. but Lugano and Locarno also draw in numerous employees from Italy.Disadvantage. Energy. financial services and the administrative and social services sectors make only limited use of the Italian workforce. quite pronounced. Older Population Under 30 year olds are considerably underrepresented in Ticino compared with Switzerland as a whole thanks to intercantonal emigration.00 -1. The comparably old population can also be explained with respect to the low birth rate recorded between 2006 and 2010.00 0. after Pays d'Enhaut in Vaud.25 -0. -/-. Credit Suisse Economic Research Accessibility to Transportation Index of motorized individual transportation and public transportation. While international immigration covers a broad range of age groups. the number of commuters are unlikely to change much. Credit Suisse Economic Research Share of Cross-border Commuters in Employment In percent.75 – 1. Ticino has the second highest share of crossborder commuters in Switzerland.75 -1. The differences between the individual regions are. From a regional perspective. expected in 2019. in the service sector and in trading and sales. 2008 Cross-border commuters by sector Traditional industry High-tech industry Construction Energy supply Trading and sales Transportation.75 – -0. communications.00 -0. postal services Information.25 – 0. Neighboring cantons score similarly to Ticino. with Mendrisio in particular benefiting from the conurbation surrounding Milan. though given the large distances to domestic centers. travel times between Zurich and Lugano will be considerably shorter. hotels and catering Administrative and social services 0 10 20 km Canton of Ticino Share of cross-border commuters in 2008 0% – 1% 1% – 10% 10% – 20% 20% – 30% 30% – 54% Cross-border Labor Market After Geneva. Since 2008. in % Canton TI 22% – 24% – 26% – 28% – 30% – 32% – 34% – 36% – 38% – 40% – 24% 26% 28% 30% 32% 34% 36% 38% 40% 43% Bellinzo na 0 10 20 km Source: Swiss Federal Statistical Office.50 – 0.75 0.50 -1.25 – 0.50 0. The reason for this is the absence of a large conurbation within the canton and the relatively large distance to the next major center beyond its borders.Economic Research Canton of Ticino: Location Factors Locational Quality to CH Average +/++ Advantage. The deeper the communes are into the Alpine valleys. Relationship Between Active and Retired Persons Population of pension age in 2010 measured as a percentage of the workforce. while at 42% the Locarno region has the second oldest population of all 110 of Switzerland's economic regions. Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 108 .50 – -0.25 1. These commuters are represented in roughly equal shares in the secondary and tertiary sectors of the economy. = CH average TI Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 + = = - GR + + = = -- UR ++ ++ -- VS = = -- In Line with Neighboring Cantons Ticino places 21st in the national ranking in terms of locational quality.00 – 0.5 – -1. The Mendrisio and Lugano regions enjoy the best transportation links.50 1. CH = 0 Canton TI 2.50 – 2. there has only been net emigration of under-40 year olds from Ticino to other cantons. The most significant negative factor is its poor accessibility resulting from its topography. Around 28% of employees in 2008 were cross-border commuters. IT Financial services Corporate services Entertainment.
Economic Research Canton of Ticino: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 329 1.0% 1. Their number was driven so high that the increase in overall Swiss housing planning looked pale in comparison. 2007.5% 0. Lugano and Mendrisio. In contrast.7% 6. This can be seen. The boom in Ticino's construction activity that began in 2003 is mainly due to the planning of condominiums and single-family dwellings. Although the vacancy rate in the rental segment in 2011 was still 3%. prices fluctuate at relatively moderate levels. regions: total 3'000 2'500 2'000 1'500 1'000 500 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Lugano MFD Locarno SFD Mendrisio Bellinzona Tre Valli Source: Baublatt. canton: multi-/single-family dwellings.1% 0.3% 1.0% 0. before implementing an increasing number of projects in 2010 because of decreasing uncertainty about the economy.77% 8.7% 7.0% 0. Q3 2011 Most populous municipalities Lugano Bellinzona Locarno Mendrisio Giubiasco Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 10'468 14'161 7'839 10'606 9'823 13'290 7'282 7'032 9'852 9'516 8'036 11'696 6'364 6'218 5'973 9'267 9'044 8'696 7'655 11'141 218 195 201 193 179 227 230 196 198 193 180 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 109 .0% 1.5% -2.9% 0.3% 0.95 Switzerland 2009 2010 7'786 7'864 1.3% 1. 10-year vacancy rate 4% 3% 2% 1% 0% -1% -1% 0% 1% 2% Locarno Tre Valli CH CH Mendrisio Lugano Rent Own Mendrisio Tre Valli Locarno Bellinzona Lugano Bellinzona Vacancy rate 2011 3% 4% Source: Swiss Federal Statistical Office.4% 7.1% 0.39 Ticino 2010 340 1. size of circle = housing stock 5% Avg.2%* 220* 0. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Condominiums In Focus Two expansion waves characterize the Ticino real estate market.1%* Source: Swiss Federal Statistical Office.3% 3.1% 0. for example.99 4'079 1. which began June 1. net rent in CHF/m2 and year. Ticino`s builders then slammed on the brakes.09 4'172* 1. thereby driving up prices for residential property.2% 1.91% 7.85% 11. in the rental housing market. in Mendrisio.1%* 2012 8'042* 1.2% 3'995 1. when on average 20% of all planned apartments related to the rental segment.9% 1.0% 1.1% 1.94% 5.1% 1.1% 1.1% 214 1. it fell noticeably below its ten-year average.8%* 0. which is dominated by local residents. particularly in the rental segment.6% 0.5% 1.7% 0.27 2008 333 1. this wave surged primarily from the south and extended into the two most economically dynamic regions in Ticino.1% 4'034 1.6% -0.9%* 2007 7'593 1.9% 1.1% 1. they remain unaffordable for many local employees in sectors with low value creation. In contrast to the period between 2006 and 2008.1%* 0.04% 7. In 2009.53 222* 0.1% 0.0% 0. Wüest & Partner. their share fell in 2011 to 7%. and which led to a migration wave throughout Switzerland.74% 1.0% 1. In the canton of Ticino. Although prices in many places are below the Swiss average.8% 218 0. Vacancies: Actual and Historic By type of housing.2% 216 1. on annual basis.1% 1.93 2008 7'702 1. The difference between these two phases lies in the relationship between the planned forms of housing.4% 1. Credit Suisse Economic Research Fewer Rental Projects Limit Rental Vacancies The fact that housing was not being produced to stock during the first housing boom in Ticino is.9%* 4'125* 1. even in Lugano and Locarno.02 2011 7'949* 1.3% 1.9% 0.2% 1. in part.0% 3.0%* 2012 346* 0. Significant Difference between Renting and Owning Wealthy buyers from both Switzerland and abroad compete in the canton of Ticino for the best locations. thereby helping to absorb the high supply of housing in these regions. the result of the elimination of quotas within the context of free movement for EU/EFTA citizens. Building Permits by Regions and Segments Dwellings.2% 8.1% 1.42 2011 343* 1. particularly when compared to average household income.2% 3'950 1.3% 1.33 Canton of 2009 336 0.87% 2.72% 6.0% 1.2% 1.2% 211 1.94% 9.3% 4. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.8% 0.68% 6.
High values mean a high concentration of employees in few companies and vice versa. The electronics and plastics manufacturer Dätwyler and RUAG industrial group employ a large share of the canton's workforce. Gurtnellen and Wassen are among the most attractive from a financial perspective.006 0.0% Sarnen 1. Distribution of Employees Across Companies Herfindahl index 2008: higher value = higher concentrations 0. are the most expensive communes. albeit at a relatively low level of 0. Credit Suisse Economic Research Population Growth 2005-2010 Average annual population growth in percent Canton UR 4. the capital. those in the 15-24 age group tended to leave Uri.002 0.0% – 4.0% -3.004 0. Highest Company Dependency in Canton of Uri The figure on the left illustrates the dependence of the cantons on individual companies. This takes account of all mandatory charges as well as fixed costs. Accordingly.0% -8.1% – 2. On the other hand.1% 0. Its above-average appeal in terms of taxation cannot offset the competitive disadvantages which come from relatively low levels of education and poor accessibility. while Silenen. commuting costs 2011. the number of companies is taken into account. Thanks to taxation amendments in 2009. Within the canton.0% – 0. CH = 0 3 AI OW TG AR SH SG NW GR SZ SO LU AG JU VS FR 2 1 0 -1 -2 -3 -4 NE ZH BL UR GL Cheapest Residential Canton in Switzerland The financial appeal of the Swiss cantons and communes is comprehensively expressed in terms of a household's freely disposable income. Accordingly.2% per year.0% – 3. The peripheral canton of Glarus is characterized by a similar profile.Economic Research Canton of Uri: Location Factors Locational Quality to CH Average +/++ Advantage. smaller locations tend to get higher values in the index.010 0.000 Source: Swiss Federal Statistical Office. = CH average UR Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 ++ ++ -- GL + ++ - SZ ++ ++ = = + NW ++ ++ = = = + Low Locational Appeal Despite Low Taxes The canton of Uri ranks at the bottom of the ranking for locational quality. In calculating values for the Herfindahl index. Uri ranks first in the cantonal ranking and is therefore the most attractive canton in terms of finance for the broad Swiss middle class.0% – 0.016 0. the tourist destinations of Andermatt and Altdorf. the canton of Uri managed to record population growth over the period under review.5% -1. Andermatt.0% 0.0% – -1. The canton of Uri reveals the highest values in the whole of Switzerland. -/-.012 0. Although the tax burden is lower in the neighboring cantons of Zug and Schwyz.0% 0 5 10 km Sta ns Altdo rf Schwyz Slight Growth Thanks to International Immigration Population growth in the canton of Uri shows a clear trend.014 AR GE OW FR NW BS SG ZH SZ AG GR LU TG ZG BL VS TI SO BE NE VD SH GL AI JU UR 0.5% – 10.0% – -2. side valleys and locations in the upper Reuss valley area struggled with negative net migration.5% – 1. Dependency is measured using the Herfindahl index. In particular. net inter-cantonal migration was strongly negative. Only three cantons rank lower than this central canton of Switzerland. Thanks to international migration. Uri's economy is very much dependent on these two companies.6% 3. though other age groups also experienced negative net migration trends. Source: Swiss Federal Statistical Office Freely Disposable Income (RDI-indicator) Synthetic indicator incl.0% -2. However. Population growth was recorded in communes surrounding the Reuss delta and along the river as well as close to the tourist destination.5% 2.Disadvantage. the cost of housing is considerably lower in Uri.7% – -3. TI ZG BE Source: Credit Suisse Economic Research VD BS GE Swiss Issues Real Estate – Real Estate Market 2012 110 .008 0.
the number of properties of this type lying vacant is naturally lower than in housing developments with condominiums.0% 1. much of what is happening in the canton of Uri is related to the tourism project in Andermatt.4% 7.5% 0.7% 0.7 0. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Uri Is Not Just Andermatt From a real estate perspective.4% 1. Attractive Residential Canton with Long Travel Times In the larger valley municipalities of Uri.3%* 2012 35.5% 1.3%) Glarner Hinterland Innerschwyz CH Innerschwyz Nidwalden/ Engelberg Vacancy rate 2011 1.75% 7.3% 1. canton: multi-/single-family dwellings.3% 4.3% 0.0% Source: Swiss Federal Statistical Office.94% 5.95 Switzerland 2009 2010 7'786 7'864 1.5% 0. size of circle = housing stock 2. it is possible to acquire condominiums cheaply – if they are available.0% 0.7% 0.1% 0.2% 3'950 1. some of which.2%* 17.5% 2.5% -0.1% 1.87% 2.02 2011 7'949* 1.2% 3'995 1. together with the reduced level of taxes.91 17.8% 0.4% 0.2 0. who then reside here for an extended period of time.0% 7.86% 6.94 2008 35. a proportion of the 40 residential units there are intended to be sold to permanent residents of the region. In addition to completed condominiums in Altdorf.4% 17.79% 9.7% 0. Q3 2011 Most populous municipalities Altdorf Schattdorf Bürglen Erstfeld Silenen Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 6'863 6'516 6'105 5'363 4'847 9'290 8'813 8'252 7'258 6'561 5'827 5'809 5'036 4'827 4'364 8'481 8'452 7'326 7'022 6'356 208 194 171 174 155 227 227 196 173 175 156 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 111 . Further south.98 17.93 2008 7'702 1.6 0. In Andermatt itself.5% 0.8%* 0.4 1. The low number of residential property vacancies is partly due to structural issues. in turn.0% 0.7% 17.5% 0. 39% of the housing stock in the canton of Uri is single family dwellings.1% 0.6% -0.0% 1. Besides the economic effects. In fact.2% 0.5* 0.1% 1.93 2011 35.9% 1. Andermatt is already not the only municipality in the canton with larger construction projects. however. this must be paid for with long travel times to Swiss employment centers.09 4'172* 1.2 0. on annual basis.3 0.5% 0.8% 0.1% 0.0% 0. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2. Low prices.3% 3.5% 2.7% 17. the Andermatt effect in the Urseren Valley is leading to higher prices. the price of an average condominium has risen 68% in the last five years.7%* 4'125* 1. Construction activity over the course of time is quite volatile due to individual projects of this size.94% 9.3 35.5% Avg.8% 0. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing. High Share of Single Family Dwellings Because of the moderate level of construction activity.3% 0. further housing is being built in the municipality of Burglen and at the foot of the Furka pass in the municipality of Realp.8% 0.0% -0.87% 1. the number of vacant properties is now within narrow limits – especially in the ownership segment.0% 1.1% 1.4* 0.3%* 2007 7'593 1. Because construction of single family dwellings is generally commissioned by the occupants themselves. the project has created a spirit of optimism in the canton that is likely to attract further construction projects. and only 15% is condominiums.3% 0.6% 0. Building Permits by Regions and Segments Dwellings. this volatility is not excessively high.9* 0.1% 0. According to our estimates.91% 7.0 0.5% -0. with the highest disposable income in Switzerland. are likely to be second homes. make Uri an attractive residential canton.74% -3.0% 1.1%* Source: Swiss Federal Statistical Office.1%* 2012 8'042* 1.0% 2. where often not all the condominiums are sold by the time the project is completed.99 4'079 1.1% 1. net rent in CHF/m2 and year.1%* 0.5% 0.8* 0. 12.92 Canton of Uri 2009 2010 35.9% -3.7% 6.5% 1.0% 0.1% 4'034 1. Wüest & Partner.9% -0. In addition to vacation properties.6% 0.04% 7.Economic Research Canton of Uri: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 35.8%.0% Uri CH Nidwalden/ Engelberg Uri Rent Own Rent: Glarner Hinterland (6. however. regions: total 240 200 160 120 80 40 0 1995 1997 1997 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 1995 Uri MFD SFD Source: Baublatt.8% 1. 10-year vacancy rate 2.
International migration accounted for around three quarters of this increase. Only the tax burden on companies and the availability of highly qualified workers comes in close to the Swiss average. Moritz in Graubünden. Also.50 – -0.00 – 1. supply and success.00 – -0.0% 0. As a result of their direct links to the A9 motorway and to the railway network. growth rates are generally below the Swiss average. the trend in Lower Valais was very different to that of Upper Valais.25 – 0. though their success has been unspectacular. Y-axis = demand indicator. The western communes up to the Leuk region generally reveal above-average growth rates. Its greatest disadvantage is its poor accessibility. communes at the bottom of the Rhone valley score better than communes further away from the river.25 – -1.25 Sio n 0 10 20 km Better Accessibility Along the Rhone Accessibility to transportation in the canton of Valais is below the Swiss average in every region.1% 0. CH = 0 g Canton VS 2.75 – -0. Valais recorded the fifth highest population growth in Switzerland. Crans-Montana and Val d'Anniviers have a relatively large tourist offering.5% 2.50 -1.0% – 0.75 -1. Leukerbad and Saas Almagell. The low accessibility scores are attributable to the large distances to major centers in Western and German-speaking Switzerland. Compared to these areas.75 – 1. low daily expenditure as well as the high seasonal nature of the entire undertaking have meant lower demand indicators. aside from in a few separate tourist destinations.0% 1. below-average overnight stay ratios. Valais has below-average scores. Size of circle = Average number of overnight stays 2003-2010 Aboveaverage success 3 2 Gstaad Pontresina Sils im Engadin Villars-Gryon Saas Fee Laax Flims 1 Verbier 3 St.0% – 3. In Upper Valais.00 0.Economic Research Canton of Valais: Location Factors Locational Quality to CH Average +/++ Advantage.Disadvantage. the canton's difficult topography weighs on accessibility.5 – -1. have a small tourist offering and demand is below average.50 – 2.0% – 4.50 0.50 1. There is also a significant west-east divide. Here.00 -0. behind all four of its neighboring cantons. = CH average VS Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 = = -- VD -= + = = BE = = = = UR ++ ++ -- Challenging Starting Point The canton of Valais takes third from the bottom in the national ranking of locational quality./ 1 Klosters-Serneus Mür.25 -0.0% -2.0% -8. -/-.75 0.50 – 4. In terms of other factors.50 0.25 – 0. In both destinations.7% – -3.6% 3. Success and supply is also above average compared with Switzerland's 31 other tourism regions in Saas Fee and Verbier. which shortens the Berne-Visp rail connection by an hour.0% – 0.1% – 2. mostly the situation in Upper Valais improved.0% -3. the top destination in Switzerland. both in terms of size. Zermatt: Most Successful Destination in Switzerland The globally renowned destination of Zermatt is. The shorter distance to Lausanne makes the Lower Valais much more accessible. Source: Credit Suisse Economic Research Supply vs. a drawback which is largely due to its topography.5% – 1. even though with the opening of the Lötschberg basis tunnel. Population Growth 2005-2010 Average annual population growth in percent Canton VS 4. High Population Pressure in Lower Valais Between 2005 and 2010. Moritz Celerina/ Schlarigna Zermatt Engelberg Grindelwald Lauter.0% – -1. closely followed by St.00 -1.5% -1. Demand Indicator Tourism X-axis = supply indicator.0% – -2. These areas benefit from strong growth around Lake Geneva where a shortage of housing is pushing the population into the Rhone valley. Saas Scuol Leukerbad Lenk Almagell 0 -3 -2 Meiringen Hasliberg Belowaverage success -1 Leysin -1 2 Lenzerheide Davos Silvaplana Crans-Montana Arosa Samnaun Val d'Anniviers -2 Savognin Adelboden -3 0 Limited supply Broad supply Source: Credit Suisse Economic Research Swiss Issues Real Estate – Real Estate Market 2012 112 .00 – 0. Several communes even experienced population decline./Wen.25 1.0% Sio n 0 10 20 km Source: Swiss Federal Statistical Office Accessibility of Transportation Index of motorized individual transportation and public transportation.25 -0.50 – 0.5% – 10.
1% 1.31% 5. 8.21 2011 316* 1.7% 6. Q3 2011 Most populous municipalities Sion Monthey Sierre Martigny Brig-Glis Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 6'694 6'065 6'306 5'371 5'024 9'058 8'206 8'535 7'271 6'800 6'091 5'573 5'218 5'745 5'327 8'874 8'111 7'600 8'370 7'756 181 191 187 204 193 227 185 193 189 207 194 249 7'788 10'536 7'072 10'294 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 113 .4% 10. Both employees of local industrial and service companies and commuters employed in the Lake Geneva area settle in the towns of the Rhone Valley to the west of Sierre.94% 9.5% 1. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Diverse Demand in Lower Valais In Upper Valais. new housing is mostly geared towards vacationers because of the limited growth in the local population.3%.1%* Source: Swiss Federal Statistical Office.1% 0.8% 0. Wüest & Partner. size of circle = housing stock 8% Avg.2%* 225* 1.0% 0.31 229* 1. 10-year vacancy rate 7% 6% 5% 4% 3% 2% 1% 0% -1% -1% Visp Sion Goms Sierre Brig CH Martigny Sion Brig CH Monthey/ St-Maurice Visp Monthey/ St-Maurice Sierre Rent Own Rent: Leuk (3. net rent in CHF/m2 and year.99 4'079 1.4% 1.93 2008 7'702 1.02% 11.1% 0.9% 1.5% 0.91% 7. 8.4% 7.4%* 2012 320* 1.7% 0.5% 1.6% 1. Significant Price Differences Between the Valley and the Mountain Prices for condominiums are considerably below the overall Swiss average in the five largest municipalities that are not dominated by tourism.0% 1.4%* 1.87% 2.0% 1.2% 213 1.4% 1. high population pressure from the Lake Geneva area is driving strong growth in the region's housing stock. In Grimentz. The high demand for condominiums compared to single family dwellings can be seen in the limited price difference between these two types of housing.3% 1. In the ownership segment. whereas in Zermatt they represent only 47%.7% 7.1%* 0.1% 1. The share of second homes in the overall housing stock varies considerably based on the legal framework.1% 1.9% 1.06 2008 303 1. The high vacancy rate in the rental segment in the Leuk and Goms regions results from the small stock of rental apartments.6% -2. regions: total 4'000 Sion Martigny Visp Leuk MFD SFD Monthey/St-Maurice Sierre Brig Goms 3'000 2'000 1'000 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Baublatt. Strong housing planning in Upper Valais should therefore not be overemphasized.1% 4'034 1.6% -0.3% 1.0% 1.2% 1.3% 1.8% -1.3% 1.0% 0.3% 3. It is certain that the number of vacant properties in 2011 was considerably lower than the longterm average.1%* 2012 8'042* 1.6% 216 1.3%* 2007 7'593 1. Added to that is the construction of second homes.95 Switzerland 2009 2010 7'786 7'864 1. The frontrunner here is the municipality of Bagnes (Verbier). Added to that comes methodological uncertainty due to vacation properties. which is flourishing in several vacation destinations. for example.04% 7. with a square meter price of almost CHF 15'600 for an average condominium.5% 12. Vacation Properties Cause Uncertainty The number of vacant properties in tourist cantons is difficult to interpret because of the high share of vacation and second homes.01% 5.5%.17 Valais 2010 312 1. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.8%) Martigny 0% Leuk 1% 2% 3% 4% Vacancy rate 2011 5% 6% 7% Source: Swiss Federal Statistical Office. vacant properties in all regions fluctuate below the 1 percent mark.03% 4.3% 1.0% 1.6% 0.09 4'172* 1.5% 222 1. Prices outside the regional centers rise sharply due to the high demand for second homes.1% 219 1.1% 1.3% 4.09 Canton of 2009 307 1.6%* 4'125* 1.30% 9.9% 1.Economic Research Canton of Valais: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 299 1.02 2011 7'949* 1. on annual basis.3%) Goms (5. canton: multi-/single-family dwellings. Building Permits by Regions and Segments Dwellings.2% 3'950 1.1% 1.3% 1. This trend shows that any potential oversupply in the rental segment will not intensify further. 81% of the housing stock is second homes. Demand in Lower Valais is higher. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.1% 1.2% 3'995 1.0% 1.94% 5. Whether first or second home: demand is generally high.0% 1.
5 Basel 1.8 Zurich Sio n 2.2 0. Drawn by the attractive labor market of Geneva/Lausanne.8 1. hotels and catering Source: Swiss Federal Statistical Office. La Vallée benefits from high growth in the watch industry. while only few pensioners are returning to the canton.4 Berne 1. Nyon. -/-.7 1. mainly younger persons of working age have moved to the region.5 0. Swiss Issues Real Estate – Real Estate Market 2012 114 .Disadvantage. Vaud comes in ahead of the cantons of Fribourg and Valais. Catchment Areas of the Major Swiss Conurbations Population in millions. By contrast. although beyond the canton's borders. which in Nyon and Morges/Rolle has led to strong growth in the high value-creating service sector. individual transportation 0 10 20 km Neuchâ tel Bern Fr ibo urg Sa rnen La usa nne Canton of Vaud 20 min 40 min 60 min 3. The high population growth over recent years has resulted in an increasing shortage of housing around Lake Geneva. Morges/Rolle and Vallée de Joux rank within the Top 5 of Switzerland's 110 economic regions. Since 2000.7 0. From some areas. the canton of Vaud has experienced the highest net migration of all Switzerland's cantons.1 0.5 0. the canton of Vaud is one of Switzerland's most dynamic cantons. Other components are more or less in line with the Swiss average. In the Catchment Area of Major Centers The canton of Vaud has its own major center with the city of Lausanne. postal services Financial services Entertainment.3 1. By contrast.7 Lausanne 0.5 2. Vevey and Montreux also make up two mediumsized centers in the canton of Vaud. communications.1 0. Its appeal is impaired by its high tax burden. As a result. Only the mountainous region of Pays d'Enhaut comes in considerably below the Swiss average. As a result. travel times: mot. Only individual communes in Pays d'Enhaut and Aigle are further than an hour's drive from Lausanne. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation. population growth is spreading to less central communes in the north of the canton. and are thus less suitable for commuters. even two major centers can be reached within 40 minutes.5 Geneva Genf Source: Credit Suisse Economic Research Net Migration 1990-2010 Total number of people 16'000 14'000 12'000 10'000 8'000 6'000 4'000 2'000 0 -2'000 -4'000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Inter-cantonal International Total Population Boom Thanks to International Immigration Measured in terms of population. a major center is easily within commuting distance. This is true of the Nyon and Morges/Rolle regions. By far the greatest contribution to growth within the canton comes from the administrative and social services and corporate services sectors.2 Lugano 1. Credit Suisse Economic Research Pays d'Enhaut Employment Boom Even in terms of employment.3 0. Geneva or Berne. = CH average VD Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 -= + = = GE -= ++ + + FR = = - VS = = -- High Taxes Weigh on Locational Appeal The canton of Vaud takes 17th in the ranking of locational quality. From most of Vaud's communes. this has been driven almost exclusively by international immigration which has risen sharply since the turn of the millennium. Source: Swiss Federal Statistical Office Contribution to Employment Growth 1995-2008 In percent by sector group 70% 60% 50% 40% 30% 20% 10% 0% Morges/Rolle La Broye Nyon VD Aigle CH La Vallée Lausanne Yverdon -10% -20% -30% Gros-de-Vaud Vevey/Lavaux Traditional industry Construction Trading and sales Information.5 0.Economic Research Canton of Vaud: Location Factors Locational Quality to CH Average +/++ Advantage. The major centers of Geneva and Lausanne drive these trends. Vaud scores above average in terms of the availability of highly skilled workers. The cities of Geneva and Berne are also easily accessible. into the canton of Fribourg and into the Rhone valley. but behind Geneva.
Canton of Vaud: Real Estate Facts
Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 672 1.5% 1.3% 1.2% 354 1.1% 0.60% 11.3% 10.8% 0.81 2008 688 2.4% 2.2% 1.0% 357 1.0% 0.46% 10.0% 8.0% 0.85 Canton of Vaud 2009 2010 702 712 1.9% 1.5% 1.6% 1.2% 0.9% 1.3% 360 0.9% 0.42% 3.5% 0.6% 0.90 365 1.3% 0.45% 7.3% 6.1% 0.94 2011 725* 1.8%* 2012 737* 1.6%* 2007 7'593 1.1% 1.0% 1.2% 3'950 1.1% 1.04% 7.7% 6.5% 0.93 2008 7'702 1.4% 1.3% 1.2% 3'995 1.1% 0.94% 5.3% 4.6% 0.95 Switzerland 2009 2010 7'786 7'864 1.1% 1.0% 1.0% 0.8% 0.9% 1.1% 4'034 1.0% 0.87% 2.6% -0.7% 0.99 4'079 1.1% 0.91% 7.3% 3.0% 1.02 2011 7'949* 1.1%* 2012 8'042* 1.2%*
370* 1.3%* 0.52% 13.6% 9.2% 1.04
4'125* 1.1%* 0.94% 9.4% 7.1% 1.09
Source: Swiss Federal Statistical Office, Wüest & Partner, Credit Suisse Economic Research
* Forecast/estimate Credit Suisse Economic Research
A Work and Residential Canton Needs Housing The canton of Vaud can look back on an extremely successful decade of economic development. The companies located in the canton utilize the large population of the Vaud region and the high number of highly qualified people; in addition, they attract migrants from other parts of Switzerland and abroad. Furthermore, the canton acts as a residential canton for commuters to Geneva who are unable to find adequate housing there. Its large reserves of building land, which are above average when compared to Switzerland overall, enable the canton to react to the population pressure with a high level of construction activity, which is likely to increase even further because of a record high number of building permits. The strongest expansion is expected in the region of Nyon, where apartments representing 3.8% of the overall housing stock received building permits in 2011. Uniquely Low Rental Vacancies in Lausanne Traditionally, the people of Vaud are renters. Rental apartments represent the lion's share of the overall housing stock in the entire canton. In the economic region of Lausanne rental apartments are in such demand that their vacancies fluctuate at the levels of condominiums and single-family dwellings, which is unique to this extent even among major Swiss urban centers. Higher numbers of vacancies can be seen in the region of Murten, which only partially belongs to the canton. In the region of Aigle, there has been a significant amount of construction on the one hand, while on the other hand the communities oriented towards tourism, with their second and vacation homes, distort the statistics on vacancies. Prices Rise Inevitably The combination of strong economic performance, high appeal for employees, and low vacancies due to a level of residential construction that only partially satisfies demand, leads inevitably to rising prices and, in some places, to unsustainable price levels, particularly in the Vaud communities on Lake Geneva. Prices are more affordable further north of the lake. However, the lack of regional centers there makes the development of transportation alternatives difficult, particularly for public transportation.
Building Permits by Regions and Segments
Dwellings; on annual basis; canton: multi-/single-family dwellings; regions: total
7'000 6'000 5'000 4'000 3'000 2'000 1'000 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Lausanne Yverdon Aigle MFD Vevey/Lavaux La Broye La Vallée SFD Morges/Rolle Gros-de-Vaud Pays d'Enhaut Nyon Murten (Morat)
Source: Baublatt, Credit Suisse Economic Research
Vacancies: Actual and Historic
By type of housing; size of circle = housing stock
2.5% Avg. 10-year vacancy rate 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -0.5% 0.0%
La Broye Murten (Morat) Lausanne La Vallée Pays d'Enhaut CH Vevey/Lavaux Yverdon La Vallée Yverdon La Broye Vevey/Lavaux Gros-de-Vaud Morges/Rolle Nyon CH Morges/Rolle Gros-de-Vaud Aigle Murten (Morat)
Aigle Pays d'Enhaut
Vacancy rate 2011 2.0% 2.5%
Source: Swiss Federal Statistical Office, Credit Suisse Economic Research
Price Levels in the Largest Municipalities
Transaction prices in CHF/m2; net rent in CHF/m2 and year; Q3 2011
Most populous municipalities Lausanne Yverdon-les-Bains Montreux Renens Nyon Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 12'169 16'458 7'315 9'897 11'976 16'200 9'750 13'194 13'016 17'606 7'788 10'536 10'118 14'726 6'827 9'933 9'591 13'956 8'236 11'993 11'109 16'163 7'072 10'294 263 210 224 221 265 227 248 210 227 227 277 249
Source: Wüest & Partner
Swiss Issues Real Estate – Real Estate Market 2012
Canton of Zug: Location Factors
Locational Quality to CH Average
+/++ Advantage, -/-- Disadvantage, = CH average
ZG Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 ++ ++ + ++ ++ ++
SZ ++ ++ = = +
ZH ++ = + + ++ ++
AG + ++ = = ++ +
Leader in Locational Quality The canton of Zug heads up the ranking of locational quality with some distance between it and the cantons of Zurich and Aargau, which follow in second and third place. Since the indicator was first calculated in its current form in 2004, Zug has been able to maintain its position at the head of the ranking. All four neighboring cantons also have above-average locational quality ratios. High Growth Potential The figure on the left shows the medium and long-term growth potential for value creation using economic assessments and locational quality. With respect to the opportunities and threats facing its resident companies, Zug is considerably better positioned than the Swiss average. In terms of locational quality, it is surpassed by no other canton. As a result, growth potential is above average both in the medium as well as in the long term. Given its average economic assessment, potential in Zug's mountain communes comes in around the national average over the medium term, whereas the Lorzenebene/Ennetsee region is expected to turn in particularly strong and above average growth.
Growth Potential for Value Creation
Synthetic indicators 2012, CH = 0
2.5 2.0 1.5
Lorzenebene/ Ennetsee ZG Zimmerberg ZH March/Höfe Zuger Berggemeinden Knonaueramt
1.0 0.5 0 -0.5 -1.0 -1 IV UR -0.5 0 LU OW AG
II 2 2.5 3
0.5 1 1.5 Locational quality
Source: Credit Suisse Economic Research
Luzern Freiamt NW
Freely Disposable Income in the Communes
Synthetic indicator incl. commuting costs 2011, CH = 0
Canton ZG -5.2 – -2.0 -2.0 – -1.0 -1.0 – -0.3 -0.3 – 0.0 0.0 – 0.3 0.3 – 0.6 0.6 – 1.0 1.0 – 1.5 1.5 – 2.0 2.0 – 3.0 0 2.5 5 km
Fre iam t
Source: Credit Suisse Economic Research
High Real Estate Prices Offset Tax Advantage Despite the low tax burden, the canton of Zug ranks only 19th in terms of financial appeal as a place to live. Comparably high real estate prices weigh heavily on freely disposable household income. While the tax burden is the primary factor for high-income households, the key factor for the middle classes and for households with below-average income is the cost of housing. The sharp rise in real estate prices over recent years has resulted in many households moving to communes which are less expensive in this respect, notably in the Freiamt and Lucerne regions. Indicator values in the communes of Zug, Walchwil, Oberägeri, Unterägeri and Hünenberg signal low financial appeal.
Synthetic index 2012, CH = 100
250 225 200 175 150 125 100 75 50
SZ BS GE ZG
Source: Federal Department of Finance
SH TI NE AG AI OW GR SO AR SG TG LU BE FR VS GL JU UR
High Tax Base per Capita The resource index is the basis for the redistribution of tax income among the cantons. It represents the height of the tax base of a canton per inhabitant compared to the Swiss average. With Zug heading the list, eight cantons have an above-average resource potential. These cantons are net contributors, while the others are net recipients of taxationbased subsidies. The resource potential of Zug is 2.5 times higher than the Swiss average as a result of the high number of high-income and wealthy inhabitants as well as its high value-creating companies. For 2012, Zug made a net contribution of CHF 2'392 per inhabitant in tax subsidies which accounted for 18% of total payments.
NW ZH VD BL
Swiss Issues Real Estate – Real Estate Market 2012
Canton of Zug: Real Estate Facts
Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 109.1 1.8% 1.6% 1.5% 50.3 1.5% 0.27% 4.3% 8.6% 0.82 2008 110.4 1.1% 1.7% 1.2% 50.9 1.2% 0.26% 6.9% 7.5% 0.84 Canton of Zug 2009 2010 110.9 112.2 0.5% 1.2% 1.0% 1.2% 1.3% 1.6% 51.6 1.3% 0.28% 4.2% -1.1% 0.87 52.4 1.6% 0.28% 8.3% 5.4% 0.90 2011 114.2* 1.7%* 2012 116.1* 1.6%* 2007 7'593 1.1% 1.0% 1.2% 3'950 1.1% 1.04% 7.7% 6.5% 0.93 2008 7'702 1.4% 1.3% 1.2% 3'995 1.1% 0.94% 5.3% 4.6% 0.95 Switzerland 2009 2010 7'786 7'864 1.1% 1.0% 1.0% 0.8% 0.9% 1.1% 4'034 1.0% 0.87% 2.6% -0.7% 0.99 4'079 1.1% 0.91% 7.3% 3.0% 1.02 2011 7'949* 1.1%* 2012 8'042* 1.2%*
53.3* 1.8%* 0.27% 9.2% 5.7% 0.96
4'125* 1.1%* 0.94% 9.4% 7.1% 1.09
Source: Swiss Federal Statistical Office, Wüest & Partner, Credit Suisse Economic Research
* Forecast/estimate Credit Suisse Economic Research
High Price Segment Dominates the Picture Activity has started to pick up in the housing market in the canton of Zug. Investors recognized the increased demand for rental apartments and set in motion an expansion of the supply in this segment. There has been a noticeable shift in new construction activity throughout the canton from condominiums to rental apartments. From a regional perspective, construction volume is primarily limited to the canton's core region of Lorzenebene/Ennetsee. Construction activity in the regions adjacent to neighboring cantons is also high; sometimes residents of Zug who cannot afford the dream of owning their own home in their own canton move to these areas. The discussion about the real estate market in Zug is by and large primarily influenced by the high demand in the high price and luxury segment. However, the overall market is, in fact, much more diverse. Virtually No Vacant Rental Apartments It is not really surprising that vacancies are low. There are few regions in Switzerland where the level of vacancies for rental apartments and condominiums lies so closely to each other at a low level as in the region of Lorzenebene/Ennetsee. Rental apartments in the upscale price segment of this region are also in demand from highly qualified immigrants; their firms located in Zug often pay the cost of housing and are frequently not as price sensitive as private individuals seeking housing. In contrast, the level of vacancies in Zug's mountain municipalities is higher, although still considerably below the overall Swiss average, as this region, with its rural character, is more likely to be of interest for people seeking to own a home. Price Exaggerations Do Not Exist Across the Board The limited availability of residential units in desirable locations with a view of the lake leads to square meter prices of CHF 15'000 and more for condominiums, particularly in the city of Zug, the municipality of Walchwil, and increasingly the municipality of Oberägeri. On the opposite side of Lake Zug, the prices for condominiums are much lower. The price of a condominium with average features in the municipality of Risch is estimated to be nearly CHF 8'200/m2.
Building Permits by Regions and Segments
Dwellings; on annual basis; canton: multi-/single-family dwellings; regions: total
1'400 1'200 1'000 800 600 400 200 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Zuger Berggemeinden Lorzenebene/Ennetsee MFD SFD
Source: Baublatt, Credit Suisse Economic Research
Vacancies: Actual and Historic
By type of housing; size of circle = housing stock
2.0% Avg. 10-year vacancy rate 1.5% 1.0% 0.5% 0.0% Lorzenebene/
Ennetsee Innerschwyz CH Knonaueramt
Zimmerberg Lorzenebene/ Einsiedeln Ennetsee
Innerschwyz CH Zuger Berggemeinden Knonaueramt
Zuger Berggemeinden Zimmerberg
-0.5% -0.5% 0.0% 0.5% 1.0%
Vacancy rate 2011 1.5% 2.0%
Source: Swiss Federal Statistical Office, Credit Suisse Economic Research
Price Levels in the Largest Municipalities
Transaction prices in CHF/m2; net rent in CHF/m2 and year; Q3 2011
Most populous municipalities Zug Baar Cham Steinhausen Risch Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 15'468 20'923 13'315 18'019 11'105 15'019 12'234 16'555 11'815 15'987 7'788 10'536 11'155 16'237 9'082 13'222 8'664 12'615 8'227 11'970 8'173 11'896 7'072 10'294 316 254 272 255 235 227 319 247 263 257 237 249
Source: Wüest & Partner
Swiss Issues Real Estate – Real Estate Market 2012
Source: Swiss Federal Statistical Office Employment Growth 1995-2008 In percent by sector group Winterthur-Land 40% Zürich-Stadt Furttal Oberland-West 30% 20% 10% 0% -10% -20% -30% Knonaueramt Glattal Traditional industry Construction Trading and sales Information. International immigration in 2010 is still around twice as high as it was in 2006. On a regional level. IT Corporate services Administrative and social services High-tech industry Energy supply Transportation. Particular benefit is drawn from the canton's excellent accessibility to transportation as well as from its tax advantages for natural persons. The trend weakened considerably in the years 2009 and 2010 on account of economic uncertainty.0% – 4. immigration from abroad increased notably from the year 2007 with the introduction of free movement of persons.Economic Research Canton of Zurich: Location Factors Locational Quality to CH Average +/++ Advantage. the industrial sector is in decline. CH = 0. Financial services and the information.0% – -1. communication and IT sectors also revealed considerable growth.0% 0. The trend is primarily focused in the urban agglomeration and only to a lesser degree in the center itself due to limits on construction there.0% -7. In contrast to in the rest of Switzerland though.0% – 0.6% – -2. Furttal has benefited from growth in the information. postal services Financial services Entertainment.0% – 0. corporate services and administrative and social services were also the biggest contributors to the increase in employment in the canton of Zurich. The figure on the left shows the population forecast up to 2020.9% Canton ZH 4.3% 2. hotels and catering Pronounced Growth of the Service Sector As in Switzerland as a whole. communication and IT sectors and the Zimmerberg region from a notable rise in employment in financial services. -/-. = CH average ZH Tax burden on natural persons Tax burden on legal persons Level of education Availability of highly skilled workers Accessibility in terms of transportation Locational quality 2011 ++ = + + ++ ++ AG + ++ = = ++ + TG + ++ = = + + SG + ++ = = = = Broad Appeal The canton of Zurich comes second in the cantonal ranking of locational quality. Source: Swiss Federal Statistical Office. Nearly two-thirds of net migration is attributable to immigrants of between 25 and 39 years of age.9% – 2. the population boom has now shifted to neighboring communes. this has led to a housing shortage in the center of the metropolitan area. The canton of Zurich is expected to reveal above-average population growth throughout this period. Zurich's attractive labor market has a global appeal.0% 0 5 10 km Aar au Züri ch Schaffhau sen Fr au enfeld Zug Source: Credit Suisse Economic Research Net Migration 1990-2010 Total number of people 25'000 Inter-cantonal 20'000 15'000 10'000 5'000 0 -5'000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 International Total High International Immigration Between 2005 and 2010. Population Boom in Zurich Center Population growth in the canton of Zurich was the third highest nationwide between 2005 and 2010. Over recent years.0% – 10.9% -1. Thurgau and St.0% 0. Inter-cantonal migration is of much lesser significance. In particular. communications. Its contribution to growth has fluctuated between positive and negative balances over the period under review.Disadvantage. Credit Suisse Economic Research Weinland Oberland-Ost CH Winterthur-Stadt Zimmerberg Pfannenstiel Unterland Limmattal ZH Swiss Issues Real Estate – Real Estate Market 2012 118 . international migration accounted for 80% of the increase in population. As a result of rising house prices. Gallen also push up the canton's score.0% -2. The driving force remains the city of Zurich. Both traditional as well as higher value-creating cuttingedge industries recorded contractions in headcount. Population Forecast 2010-2020 Average annual growth in percent. The above-average availability of highly-qualified workers and the high level of education among the population in comparison to other nearby cantons such as Aargau.
2% 3'995 1. canton: multi-/single-family dwellings.0% 0.3% 1. the significant increase in the housing supply was not able to bring an end to the growth in prices. Wüest & Partner.5% 0.97 Zurich 2010 1'369 1.2% 3'950 1. Credit Suisse Economic Research Vacancies: Actual and Historic By type of housing.09 697* 1.9% 0. 10-year vacancy rate 2.6% 0.2% 0. Because the market environment has become more difficult for upscale rental apartments due to interest-related distortions.99 4'079 1. Stable prices cannot be expected until the period of low interest rates comes to an end.06%. particularly those at expensive B locations.6% 0.2% 6.93 2008 7'702 1. offers more than commuter communities.8% 4.8% 0.04% 7. this regional center. Q3 2011 Most populous municipalities Zürich Winterthur Uster Dübendorf Dietikon Switzerland SFD Condo Rent Moderate Upscale Moderate Upscale Moderate Upscale 16'903 22'865 9'468 12'813 10'750 14'542 12'242 16'568 10'097 13'652 7'788 10'536 11'818 17'200 7'591 11'044 8'100 11'793 7'882 11'467 7'445 10'830 7'072 10'294 269 211 235 245 235 227 267 207 238 255 230 249 Source: Wüest & Partner Swiss Issues Real Estate – Real Estate Market 2012 119 .1% 1.0% 0.5% 1.8% 1.4% 1. net rent in CHF/m2 and year.65% 10.0% 1.4% 7.4% 1.5% Avg.1%* 2012 8'042* 1.5% -0.0% 1.61% 6.1% 6.1% 665 1. in the direction of Winterthur.95 Switzerland 2009 2010 7'786 7'864 1. Moreover.0% 2. Until now.5% 1.1% 4'034 1. and along the Limmat Valley towards Aargau. Ownership and renting are equally in demand because of low interest rates and considerable immigration. the vacancy rate at Pfannenstiel has increased even further compared to its long-term average.6% 1. The highest prices in the canton are found in the region of Pfannenstiel.0% 0.6% -0.Economic Research Canton of Zurich: Real Estate Facts Demand: Inhabitants (in 1'000) Population growth Net migration Absorption Supply: Housing stock (in 1'000) Growth in housing stock Market outcome: Vacancy rate Price trend condo Price trend SFD Price trend in relation to income trend 2007 1'308 1. Winterthur remains attractive with regards to rental apartments.4% 658 1. where building land is expensive because of its good location on the sunny side of the lake.0% 671 0.09 4'172* 1.1% 0. size of circle = housing stock 2.1% 1. particularly in the city itself as well as in the economic regions close to the city. regions: total Zürich-Stadt Winterthur-Stadt Limmattal Furttal Weinland MFD SFD Glattal Oberland-West Unterland Knonaueramt Zimmerberg Pfannenstiel Winterthur-Land Oberland-Ost 12'000 10'000 8'000 6'000 4'000 2'000 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Baublatt.2% 1. Building Permits by Regions and Segments Dwellings.01 2011 1'391* 1. Credit Suisse Economic Research Price Levels in the Largest Municipalities Transaction prices in CHF/m2.2%* 4'125* 1.1%* 0. as an actual city.1% 0.3% 4.0% -0.91 2008 1'333 1. Credit Suisse Economic Research * Forecast/estimate Credit Suisse Economic Research Agglomeration of Zurich is Still Growing The canton of Zurich is growing.62% 8. the number of commuters is increasing.3% 3.94% 5. growth is therefore channeled primarily into the Glatt Valley.0% 0.5% 0. Of these. Due to high levels of construction activity in the agglomeration region around the city.3% 6.6%* 2012 1'411* 1.93 Canton of 2009 1'351 1.9% 1. Homogeneous Price Structure Prices in the city of Zurich are considerably higher than those of the other larger municipalities in the canton.87% 2.5%* 2007 7'593 1.9% 1. thereby resulting in an above-average price level overall.9% -0.0% 1.5% 0. Higher Vacancies at Luxury Locations The high demand for housing in the city of Zurich can be seen in the limited structural difference between rental and ownership vacancies.0% 1. Uster) have adjusted significantly. Accordingly. and the public transportation connections to Zurich are very good.3% 1.3% 0. and the demand for housing is high.2%* 0. on annual basis.91% 7.8% 1.1% 1.5% 0.7% 6. In contrast. but also further towards the north into the Unterland.1%* Source: Swiss Federal Statistical Office. The marketing of exclusive properties. there is an above-average amount of vacancies at Pfannenstiel.2% 0. This means the overall vacancy rate within the city limits is at the record low level of 0.0% 1.6% 1.94% 9.5% Zürich-Stadt 9 regions Zurich Winterthur-Stadt Winterthur-Stadt Knonaueramt CH Zimmerberg Weinland Knonaueramt Oberland-Ost CH Glattal Pfannenstiel Oberland-West Pfannenstiel Unterland Winterthur-Land Limmattal Furttal Rent Own 1.02 2011 7'949* 1.2% 680 1.5% Source: Swiss Federal Statistical Office. meaning that the city of Zurich is also reaching its limits from a transportation perspective.2%* 688* 1.2% 0.79% 6. there is a significant amount of housing construction.7% 0.5% Vacancy rate 2011 2.0% 1. the possibilities in the city are limited. the property prices along the arterial routes to the west (Dietikon) and the east (Dubendorf.1% 1.65% 2. However. takes longer on average than for standard residential units.
Economic Research Swiss Issues Real Estate – Real Estate Market 2012 120 .
good location Price level of upscale properties: new building. record date: June 1 every year Price trend: growth rates of transaction prices. St. Gallen/Rorschach St. Geostat Swiss Issues Real Estate – Real Estate Market 2012 121 . very good location Switzerland's Economic Regions 54 51 75 52 110 17 107 108 95 94 96 89 90 88 91 97 47 43 16 106 46 15 14 21 45 22 23 44 93 92 109 105 104 103 24 25 27 28 49 50 19 20 18 31 79 53 48 74 30 29 34 32 37 38 33 26 70 69 98 99 100 84 85 86 87 83 73 68 72 76 3 77 4 1 78 5 41 13 12 10 11 2 6 42 7 9 8 62 61 36 35 39 40 80 63 81 82 57 55 56 58 59 60 64 67 65 66 71 101 102 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Zürich-Stadt Glattal Furttal Limmattal Knonaueramt Zimmerberg Pfannenstiel Oberland-Ost Oberland-West Winterthur-Stadt Winterthur-Land Weinland Unterland Bern Erlach/Seeland Biel/Seeland Jura bernois Oberaargau Burgdorf Oberes Emmental Aaretal Schwarzwasser 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Thun Saanen/Obersimmental Kandertal Berner Oberland-Ost Grenchen Laufental Luzern Sursee/Seetal Willisau Entlebuch Uri Innerschwyz Einsiedeln March/Höfe Sarneraatal Nidwalden/Engelberg Glarner Mittel. average features. 110 m2 (condo/rent)/124 m2 (SFD) net living area. as a percentage of the housing stock Vacancy rate: number of vacant residential units as a percentage of the housing stock. upscale features. Galler Rheintal Werdenberg Sarganserland Linthgebiet Toggenburg Wil Bündner Rheintal Prättigau Davos 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 Schanfigg Mittelbünden Domleschg/Hinterrhein Surselva Engiadina bassa Oberengadin Mesolcina Aarau Brugg/Zurzach Baden Mutschellen Freiamt Fricktal Thurtal Untersee/Rhein Oberthurgau Tre Valli Locarno Bellinzona Lugano Mendrisio Lausanne 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 Morges/Rolle Nyon Vevey/Lavaux Aigle Pays d'Enhaut Gros-de-Vaud Yverdon La Vallée La Broye Goms Brig Visp Leuk Sierre Sion Martigny Monthey/St-Maurice Neuchâtel La Chaux-de-Fonds Val-de-Travers Genève Jura Source: Credit Suisse Economic Research.Economic Research Explanations Real Estate Indicators Population: permanent resident population at year-end Net immigration/emigration: balance of international immigration and emigration as a percentage of the population Absorption: share of houses and apartments that the market can absorb. every third quarter year-on-year Price/income ratio: quotient from the trend (indexed. 1990 = 100) of prices of condominiums and household income Price level of average properties: new building. 135 m2 (condo/rent)/155 m2 (SFD) net living area. Appenzell I.und Unterland Glarner Hinterland Lorzenebene/Ennetsee Zuger Berggemeinden La Sarine La Gruyère 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 Sense Murten (Morat) Glâne/Veveyse Olten/Gösgen/Gäu Thal Solothurn Basel-Stadt Unteres Baselbiet Oberes Baselbiet Schaffhausen Appenzell A.Rh.Rh.
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