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ePaper created 2015-04-21, 16:47:46 | version 1.37.0
47management report The covered bonds and Pfandbrief market will again be well supported in 2015 and offer attractive funding levels to issu- ing banks. High demand generated by the ECB’s bond purchase program will, however, place an additional burden on the sec- ondary market. Moreover, it cannot be ruled out that traditional Pfandbrief investors will turn to alternative asset classes and forms of investment in view of the level of yields and spreads that have been reached in the interim. Property and property financing markets The overall conditions in the European property markets will most likely remain generally favourable. This applies especially to Germany as it is viewed as a safe investment location by in- vestors. Furthermore, high demand for property and property financing will remain intact and receive additional support from unchanging low interest rates. In addition, the German residential property market will be bol- stered by the robust economy and the favourable developments noted for employment and incomes. For this reason we antici- pate that demand for houses and condominiums will remain strong and will exceed supply, especially in the major metro- politan areas as the number of housing permits has flattened recently. The Bundesbank views this, however, as just a tempo- rary corrective phase. This is why it may be anticipated that prices will rise at a similar pace as noted last year, including those in B and C locations. Furthermore, we do not expect to see a nationwide housing bubble developing in the residential property market in 2015. However, in some regionally and locally limited cases – espe- cially in major metropolitan areas – the danger of exaggerated exuberance does exist. Against this background, demand for property financing will remain brisk as interest rates stay low. Experts anticipate that the volume of lending in the residential property financing sec- tor will rise by more than 2 percent, which is equal to the level noted in the previous year. The cooperative banking sector has a good chance in this environment to again grow faster than the overall market in 2015. This estimate is driven by the Volks- banken and Raiffeisenbanken’s close local and personal proximity to their customers, who also continue to have a very high opin ion of the banks’ expertise. There are no foreseeable signs of lending standards softening. The residential property market in Switzerland is expected to show signs of easing in 2015, although prices will, however, remain at a high level. Property experts predict that prices for single-family houses will only rise by 0.8 percent and by just 0.2 percent for condominiums. Currently there are no clear in- dications visible as to how the property market will be influ- enced by the unpegging of the Swiss franc to the euro. Experts are divided with one group predicting higher demand for prop- erty as the franc is viewed as a safe and strong currency, while others believe the strong franc will dampen the outlook for the Swiss economy and therefore reduce demand for property. Driven by favourable economic conditions, as well as visibly stronger gains in wages, we anticipate that the residential prop- erty market in the USA will continue to recover. Strong demand seen for rental blocks of apartments could continue in the mid- term, although there is a chance that the completion of new properties could also lead to a cooling of this market segment. Major property brokers expect investments in German commer- cial property to continue to grow in 2015 with the volume of transactions anticipated to top € 40 billion. This outlook is sup- ported by the ongoing low level of interest rates, favourable financing conditions and the high level of liquidity available in the market. It is also very likely that the share of transactions involving foreign investors will increase again. Experts also an- ticipate that investors’ appetite for risk will also increase. For this reason investor interest will no longer be solely focused on top properties in top locations (core properties) as these are barely being offered. As a result, the share of core-plus (prop- erties in locations with potential for future development) and value-add properties (undervalued markets and properties with potential to increase in value) will rise and in general cause the level of returns to remain at a low level. Following the strong fourth quarter noted for the office rental market in 2014, it is not anticipated that demand will remain strong. Instead, the market is expected to remain stable at a