Influential voice in the property industry

After his studies, Stefan Fahrländer worked at renowned institutions and research facilities in the field of economic research and real estate analysis. His career took him from Berlin via Zurich to the Middle East. Today, as a lecturer at universities and with his expertise, he is a significant figure in the real estate industry.

If you compare your figures from 2000 to 2024. What stands out?
Prices have risen steadily both in the residential property sector and for apartment blocks with rental flats. The price of an average property of the same quality has more than doubled since 2000. On average across the country, an identical EEC has become 160 per cent more expensive, an EFH 120 per cent more expensive and an identical MFH 90 per cent more expensive. Home ownership corrected somewhat between 2014 and 2019 due to the introduction of “self-regulation” in mortgage lending in response to pressure. In some cases, however, the banks have put the brakes on themselves. In the case of yield-producing properties, the turnaround in interest rates from spring 2022 stands out, which had an impact on transaction prices, although the city of Zurich was little affected.

What can you predict for the years 2030 and 2040?
Both the UN and FSO population forecasts assume that Switzerland’s population will continue to grow. Due to the “number of heads”, it is to be expected that there will be a considerable additional demand for living space. In addition, socio-demographic changes are expected to lead to a further reduction in the size of households and thus to an increase in demand for housing. Demand is concentrated in the centres and agglomerations, with the latter becoming ever larger as the cities become “overcrowded”.

What problems does the current property sector have?
Switzerland generally only has luxury problems and the sector itself has few problems. People looking for housing will have difficulties because it cannot be provided where there is demand. On the one hand, this has to do with quantity and, on the other, with the speed of the processes, especially the authorisation processes. The result is that demand is displaced geographically and households with less purchasing power are at a disadvantage compared to those with the means to pay.

Do you have any approaches to solving these problems?
We economists assume that the shortage will cause rents and prices to rise. In the 1990s, when demand was weak and rents were falling, nobody called for regulation. For around two decades now, however, supply in the centres has lagged far behind demand and there is once again a major shortage. The alternatives for households are then smaller flats – if they can find one at all – or moving to urban centres where flats are still available.

Have you changed the customer requirements for your company? How and why?
No. We still have practically the same, mostly highly exciting, projects.

How do you identify promising locations for property projects?
It’s particularly about which promising industries are located where. For most sectors – or at least parts of them – the centres are preferred, so the demand for space in the centres is high. In addition, central locations are also very attractive for many households and proximity to the centre is preferred. Accordingly, the central question is how the agglomerations spread out in the area, which depends on building land reserves and densification potential and to a large extent on transport routes and journey times.

What socio-demographic and economic indicators are decisive for your market and location analyses?
We rely heavily on the demand segments that we have developed together with sotomo (residential) and CSL Immobilien (office, retail). It’s not just about the number of households or businesses, but also about their needs in terms of the location – in particular the quality of the micro-location – as well as the space or flats. In addition to the needs, the willingness to pay must also be taken into account.

How do you assess the added value and development potential of complex properties?
We use the DCF method for this, whereby the cash flows of planning, construction, letting or sale are localised on the time axis. Time is money; this must not be forgotten. It should also be noted that assumptions about the future are always made at the time of valuation. Expected values are therefore used and there is a risk that the expectations will not materialise. These risks must be taken into account in addition to the time conditions in the form of a safety margin.

Is Switzerland being hit by the property bubble?
The world has been flooded with money, although the flood has now been temporarily halted by the rise in interest rates. However, money is likely to remain cheap in the future due to the high debt burden and great general prosperity. In this respect, the developments on the property markets are logical. If there is a bubble, then it is a general capital market bubble.

What else would have to happen for this to occur?
We would speak of a bubble if prices decoupled from the fundamentals.

Let’s go abroad. Prices in Germany have fallen. How is the property market in Germany and Austria doing? What do we have in common?
Switzerland is in a very robust financial position and can also pursue an independent monetary policy. The Swiss National Bank demonstrated this on 16 March by cutting interest rates. This is a major difference to Germany and Austria, which are dependent on the decisions of the ECB. Another difference – at least compared to Germany – is that the mood in Switzerland is also poor due to the crises and wars, but not as miserable as in Germany. If you compare developments – e.g. property prices – over several cycles and crises, Switzerland is more cautious in both upward and downward movements than many foreign markets, which are correspondingly much more volatile.

Redaktion: Jessica Bill, Bild: zVg.