Not only has building become more expensive, but many customers have also recently expressed difficulty in finding a financial partner at all. Banks, insurance companies and pension funds have been cautious. Now things are starting to ease – but not on a broad scale.
Why he suddenly had to pay so much more for his mortgage since the takeover of Credit Suisse (CS) was Sergio Ermotti recently at a lecture. The UBS CEO thought for a moment and then said: “You must have paid too little at CS.”
“This is a completely normal process”
The answer could hardly satisfy the questioner. But it shows the dilemma in which the combined major bank finds itself. UBS has taken over a large number of mortgages from its former competitor and now has to significantly reduce costs. This is because CS went in too low with the prices, because the interest rate turnaround and inflation in general drove up prices. In addition, there is Basel III – the regulation requires, among other things, higher equity requirements in the real estate market and the activation of the anti-cyclical capital buffer.
In such situations, you don’t make any friends as a bank. But according to Romain DequesneCEO of the leading mortgage broker ResolveUBS has no other choice: “This is a completely normal process. Which bank can afford to have too many risks on its books?” he says.
Market suffered from shock
UBS has become a heavyweight through the integration of CS. It accounts for around 3 percent of the Swiss real estate market and is also one of the largest providers on the local mortgage market.
If such a large player also exercises restraint, this has consequences. “The CS integration brought a lot onto the market. This led to a state of shock at times,” says Dequesne.
Noticeably few building permits
“We note that UBS is currently acting much more cautiously than was the case with Credit Suisse,” confirms the Bank WIR and adds: “There is no competition for large projects, and with retail customers we hear from customers that UBS, for example, demands significantly higher margins when extending Saron mortgages.”
The result: other players such as cantonal banks, regional banks, digital banks as well as pension funds and insurance companies also put the brakes on.
The consequence: significantly less was built. “The annual total of building permits in 2023 was around 32,700 residential units, around a third below the long-term average,” says UBS in a Message at the end.
Relaxation in the fourth quarter
This has continued so far this year, with vacancy rates falling and asking rents skyrocketing.
Now things are starting to ease. “In contrast to insurance companies and pension funds, banks are regaining their courage. We expect things to ease in the fourth quarter,” says Resolve CEO Romain Dequesne. However, there is no widespread improvement. These are the consequences:
- While the rental housing market is more or less characterized by shortages across the board, the situation varies in commercial real estate. “In the office market, a differentiated development is expected to continue, depending on the respective regional conditions and employment trends,” writes CSL Real Estatea subsidiary of Migros Bank“It is becoming increasingly clear that locations are becoming the focus – and that people are no longer simply buying everything,” says WIR Bank.
- The situation also remains difficult with regard to construction development. “Business is shifting from institutional providers to the private market,” says Resolve CEO Dequesne. Hotel or commercial projects are almost impossible without private investors because they have often become too risky for the banks. “But there are solutions and the banks are also open if the relationship with the customer is not just limited to the mortgage.”
- Affordability for people who need their own property in old age also remains a problem. “Many older people can hardly afford their mortgages anymore because of the increased demands,” says Dequesne. This will only get worse. “We already receive two to three inquiries about this every month, and the trend is increasing,” he says. The issue is particularly big in the Zurich area, where many buildings are still owned by the older generation.
