Private developers step on the brakes
Published: Thursday, May 16th 2024, 07:40
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A quiet exodus is taking place in Switzerland. More and more private developers are moving away from residential construction. And not just for apartments, but also for traditional single-family homes.
A "cottage" in the countryside: that was the dream of the baby boomer generation. For the following generations, this dream is mostly just wishful thinking. Fewer and fewer people can afford to buy their own home due to the rise in real estate prices.
This is now also having consequences for the real estate market in Switzerland. Private individuals are losing interest in residential construction, as a study published by Raiffeisen on Thursday shows.
In addition to the pressure to build more densely, which further increases the complexity of construction projects, the flood of regulations, the trend towards larger residential buildings and the decline in craftsmanship are also responsible for this development, the bank writes in its analysis.
Basic DIY skills on the decline
"The basic manual skills of Mr. and Mrs. Swiss are tending to decline because there are more and more office jobs and most employees hardly do any manual work in their day-to-day work," Fredy Hasenmaile, Chief Economist at Raiffeisen Switzerland, is quoted as saying.
As a result, the desire to "build a cottage" continues to decline. What's more, in today's leisure society, a weekend off after a hard week's work is increasingly preferred to a "second job" on the building site.
Specifically, only around one in ten new rental apartments in Switzerland is built by private developers. Twenty years ago, it was still one in five.
Private individuals are also increasingly leaving the construction of single-family homes to professionals. Whereas in 2008, two thirds of planning applications for single-family homes were submitted by private individuals, this figure is now less than half.
Private individuals sell their investment properties
The study also shows that private individuals are not only acting less as developers, but are also selling their existing investment properties more frequently, particularly to institutional investors. The proportion of privately owned rental apartments has fallen from 49% to 45% since 2017.
"This development took place in secret for a long time, because during the period of low interest rates, institutional investors willingly filled the gap left by private investors," says Hasenmeile. It was only with the rise in interest rates and the decreasing relative attractiveness of real estate investments that institutional investors curbed their appetite somewhat, making the withdrawal of private developers, which had been ongoing for years, visible.
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