(Fr) What can we expect from the real estate investment market in 2021?

Tatiana Vogt
Advisory Board

Even though 2020 has come to an end, the effects of the coronavirus pandemic that has dominated last year are far from over. The real estate market, like other investment markets, will continue to feel the pressure in 2021, according to experts, but the overall outlook for the recovery is positive.

The end of last year was dominated by news of coronavirus vaccines being rolled out across Europe and the effectiveness of this move will determine how quick and efficient market recovery is. The news we are hearing at the moment seem encouraging, providing hope of a quick return to normality.

According to an outlook by CBRE, however, the recovery in European real estate will be uneven. As expected, the retail and hospitality sectors are likely to be the worst affected of all European real estate sectors. However, even here there are some positive indicators.

At the same time, CBRE points out we are witnessing “a dramatic acceleration in the changing role of the office”. The outlook for this sector remains somewhat uncertain until we have a better idea of how permanent the move to home working really is.

However, the analysts believe new opportunities will undoubtedly emerge in 2021 and beyond. For example, data centres have already benefitted from the lockdown measures forcing more people to use the internet, while the logistics sector is also seeing strong development to support the rising demand from urban centres.

In terms of the European commercial real estate investment market, CBRE expects a return to normality by the second half of 2022, as long as the vaccine programmes are as effective and widespread as we hope.

The forecast is particularly positive for the logistics market, as well as the multi-family sectors, as European governments show willingness to support wage and rental programmes.

However, even the office market is expected to begin a “gradual return” to profitability this year, with higher quality assets and locations outperforming. CBRE also expects “some degree of resilience” in the retail property market.

Secure and defensive assets are likely to see increased demand from investors, benefitting prime properties in popular locations. We expect this trend to be positive for the luxury hotel sector, especially in such high-end destinations as the Swiss Alps, with yields expected to begin increasing already this year.

Overall, CBRE is predicting investment volumes growth of 8.5% in 2021, as general uncertainty in markets subsides and travel restrictions are lifted. It also expects to see a continuation of the low interest rate environment across Europe and discounts from distressed sales in various areas of the real estate market, which could provide attractive investment opportunities in the near term.

In summary, the outlook for European real estate in 2021 is positive, despite the effects of the coronavirus pandemic. If you are looking to make an investment in real estate this year, your best bet is to go for high quality, prime locations and look for discounts to the sale price. This could be the year of opportunities for real estate investors!

This year has been full of negative outlooks and terrible predictions for different areas of business and investment. But as we finally come to the end of 2020, we would like to end this year on a positive note – and luckily, property experts share our view.

Despite the pressure on some parts of the real estate market from the pandemic, it seems that in general 2021 will be a good year for real estate investors, as a result of historically low interest rates across Europe and a continuing economic recovery, according to experts from Credit Suisse.

In its real estate outlook for 2021, Credit Suisse said: “With valuations in listed markets still below pre Covid- 19 levels, we expect the asset class to deliver positive, mid- single-digit returns in 2021.”

Undoubtedly, the pandemic has changed our lives. But we as humans have learned to adapt to new circumstances, and so has the real estate market. A number of sectors will therefore emerge as winners in 2021.

According to a report by PwC, Emerging Trends in Real Estate Europe 2021, “logistics and housing are particular beneficiaries, with data centres, life sciences buildings, energy infrastructure, and industrial property or warehouses benefitting from relatively stable demand. Communication towers/fibre have also benefited as life continues to shift online.”

Switzerland remains strong

Meanwhile, the Swiss real estate market is in a particularly strong position to benefit both on the commercial and residential side. Switzerland offers a unique combination of natural beauty and a potential for a strong financial return from property investment.

In particular, the Swiss hotel market is set to benefit as people across Europe look for a quiet, secluded destination to have a healthy holiday with the entire family, without long flights and crowds.

For those wanting to invest in this area of the market, we have observed that some sellers are willing to reduce prices by as much as 30% for a quick sale. Many of them are simply unable to wait until the pandemic is over to sell their hotel businesses, for example as a result of old age. Therefore, now could be the perfect time to invest.

Across other areas of the Swiss real estate market, however, prices have in fact been on the rise this year, despite the pandemic, and this is only likely to continue.

In fact, according to analysts, it is only the office market in Switzerland that has seen any lasting negative effects from the pandemic, as many companies transition to home office models or reduced office working.

Supportive interest rate environment

At the same time, the low interest rate environment in Switzerland is expected to continue for even longer as a result of the pandemic, with the Swiss National Bank keeping its policy rate at -0.75%.

This, of course, is good news for property buyers looking for a mortgage, with mortgage rates in Switzerland at historic lows. Today it is possible to find Libor rates easily under 1%, and often as low as 0.5%, while 10-year fixed rate mortgages are available at 1.32% or lower.

For all these reasons, we also continue to see strong demand for residential real estate in Switzerland, especially for luxury chalets in Alpine regions.

For example, this year alone we have seen the sale of four out of five chalets priced at CHF 5.5 million each at a new 4-star spa residence in Grindelwald (canton Bern). We expect next year to follow the same trend.

In summary, we are pleased to share this positive outlook for the real estate investment market in 2021 based on predictions from industry experts. We foresee price growth and attractive investment opportunities in many sectors. The Swiss real estate market has remained particularly resilient throughout 2020 and will continue to be a smart place to invest in 2021.