Information on Direct Property Investments in Switzerland

Hedging against Property Contingencies

Property investment creates risks as well as opportunities.

Future risks and fortuitous events (including force majeure) are particularly difficult to assess. Such events impact on:

  • Market conditions and general conditions
  • Property prices
  • Property management
  • Amortisation
  • Liquidity (Illiquidity risks)

The following changes may create uncertain situations:

  • Market value of property
    • Market prices on the construction, portfolio, housing and investment markets
    • Changes to the fabric
      • Ageing
      • Destruction
    • Unexpected expenditure
      • Soil remediation
      • Development zoning contributions
      • and so on
    • Capitalisation rates
    • Valuation methods
    • Different needs and habits of property users
      • Residential property
        • Larger windows
        • Larger apartments (several children)
        • Larger floor space
        • Floor plan configuration (spatial planning, open plan areas)
      • Office properties
        • Technical innovation, functional requirements, work processes, occupational health and safety, environmental aspects
        • Compliance with the requirements for conventional types of office buildings
          • Linear form
          • Rectangular form
          • One-room cluster type or two-room cluster type
          • Atrium structure
          • Point block
          • Oval type
          • Campus
        • Efficient use of space
        • Office designs
          • Facilitation of individual floor plan systems
          • Open plan office
      • Commercial property
        • Open plan halls that facilitate individual interior work (e.g. high-bay warehouses, workshop equipment, production lines), rather than (brick-walled) areas
  • Property Expenses
    • Maintenance costs
    • Operating costs
    • Interest rates
    • Taxes
  • Property income
    • Gross income

 Hedging against contingencies is only possible to a limited extent, in particular through:

  • Buildings insurance
    • Fire, storm and tempest, water damage and breakage of glass
  • Earthquake insurance
    • Consequential or actual damage from earthquakes
  • Cost stabilisation
    • Financing with fixed interest rate (fixed-rate mortgages)
    • Market-oriented interest rate (LIBOR mortgages)
    • Interest rate derivate (cap / floor)
    • Repayment options