Real estate market easing Swiss mortgage rates down
The decline in inflation leads to a drop in interest rates, particularly applied to construction.
Over the past four weeks, mortgage rates have fallen significantly in Switzerland. The twelve providers whose guide rates for fixed-rate mortgages are regularly collected by the magazine “Finanz und Wirtschaft” have all adjusted their credit rates downwards. And sometimes significantly. All durations are affected.
For ten-year maturities, indicative rates fell by an average of 0.38 percentage points. Zürcher Kantonalbank and Swiss Life lowered their rates by 0.46 percentage points for ten-year fixed-rate mortgages. Zurich insurance even reduced its indicative rate by 0.48 points for five-year mortgages. By way of comparison: on the market, the average decline is 0.32 points for a period of five years.
Fixed mortgage rates in %
Mortgage interest rates of 3% or more for ten-year contracts seem a thing of the past, for now at least.
Last month, all but one establishment still demanded rates of 3% or more. Now there are only three to do so: Hypo Lenzburg, Raiffeisen and PostFinance.
Rates below 2% are again possible for short maturities. Swissquote and the online platform Hypomat, behind which the Cantonal Bank of Glarus is located, offer them.
Inflationary pressure is easing
The general downward correction shows that the inflationary environment has eased. In Switzerland, annual consumer price inflation fell in October for the second consecutive time. It amounts to 3%. It thus remains well above the National Bank's price stability target of 2%.
Last week, National Bank President Thomas Jordan again stressed that the key interest rate should be raised again in December. But inflation is on the path predicted by the currency's guardians, who expect it to fall to 2% and lower next year. The pressure to set the key rate much higher is therefore diminishing.
It remains to be seen whether the large decline in mortgage rates recorded today really constitutes a trend reversal. After July's correction, this is only the second downward monthly correction this year. Overall, ten-year mortgages are still more than twice as expensive as they were at the start of the year.
SARON yields at 3 months and actuarial yields at 10 years and in percentage
Market expectations regarding the evolution of interest rates are reflected in the futures markets.
Short-term interest rates measured in 3-month SARON terms in Switzerland are forecast to increase by 0.75 percentage point over the next twelve months .
If this assumption is confirmed, the cost of Saron mortgages will also increase by 0.75 percentage points. Nevertheless, it is the long-term fixed mortgages that have experienced the strongest rise in rates, since they are in line with the development of long-term rates on the capital market.
PORTUGAL – BRAKE ON GOLDEN VISA – VENTURE CAPITAL INVESTMENT
2022 Solutions and Changes
GOLDEN VISA and ARI are doing well, investments more than doubled in September 2022, however the brake on GOLDEN VISA in the metropolitan areas of Lisbon and Porto is fueling other means of obtaining a residence permit (ARI),namely venture capital investment.
Currently, under the new regime, "203 applications are awaiting analysis for capital transfers of 350,000 euros or more, for the acquisition of participation units in investment funds or capital funds -risk-based capitalization companies, which are incorporated under Portuguese law”.
The Securities Market Commission (CMVM) is very attentive to this new way of obtaining a residence permit, and considers that venture capital investment is made without respecting all the rules aimed at preventing the entry of money of illicit origin in Portugal, in particular through real estate.
Despite the new legislation, it is still possible to invest in real estate under the ARI. There are still real estate and capital transfer opportunities for foreign investors in Portugal, under the Residence Permit for Investment (ARI) regime.
What changed in 2022
The changes generally represent an increase in the minimum amounts of capital investment, as well as limitations of the geographical areas of application of the real estate investment, for housing purposes , are applicable:
Property investment :
A minimum amount of Euros 500,000.00, for accommodation purposes , will only be allowed in Portugal, Azores and Madeira.
A minimum amount of 350,000.00 euros, with rehabilitation works , for residential purposes, is only allowed in Portugal, the Azores and Madeira.
Capital transfers :
The transfer of capital of an amount equal to or greater than 1 million euros will be subject to a minimum investment of 1.5 million euros ;
The minimum amount of investment in capital transfers intended to be applied to research activities developed by public or private scientific research institutions, integrated into the national scientific and technological system, increases from EUR 350,000.00 to EUR 500,000. EUR .00;
The minimum investment amount in capital transfers for investments in private equity fundswill be increased from
€350,000.00 to €500,000.00;
The minimum amount of investment in capital transfer for the incorporation of a company in Portugal, associated with the creation of five permanent jobs, or for the strengthening of the social capital of a Portuguese company, with the creation or maintenance of these jobs, goes from €350,000.00 to €500,000.00.
Exceptions
The geographical limitations that will occur in real estate investment for housing purposes, by "pushing" investment inland and towards the islands, will allow that there are still several investment opportunities, with great potential, that will allow the promotion and development of certain areas of the country;
These limitations on real estate investment will apply "only" to properties intended for residential purposes , meaning that foreign investors will be able to continue to invest throughout the country, including Lisbon, Porto and the coast, in properties that are not intended for residential purposes (commerce, services, other), even after January 1, 2022;
The planned changes do not affect the possibility of renewing the ARI or the granting/renewal of residence permits for family reunification (provided that the investor's file has been submitted in accordance with current law).
The risks facing European real estate in the coming months
Demand for new homes is affected by rising interest rates and inflation. And margins squeezed by construction costs, predicts S&P.
Property developers and builders must prepare for difficult times across Europe. According to S&P, a number of external factors are likely to affect the new construction sector over the next 12 to 18 months. Rising interest rates, inflation and energy costs due to the Russian-Ukrainian conflict could have consequences for the European real estate sector.
Interest rates and inflation, how they affect the real estate market
According to S&P, the current conditions could lower the volume of sales. The market is heavily dependent on mortgages (70% of housing built is paid for with mortgages in Europe), which are influenced by interest rates and banking conditions.
Uncertainty can lead families to postpone the purchase of a new home, because the rise in property prices, linked to inflation, as well as the cost of living, is not accompanied by a increase in real wages. Portugal, for example, has the largest gap between house prices and wages in the OECD, with the cost of housing exceeding labor income by 47.1% in the first quarter of 2022.
In addition, the conflict between Russia and Ukraine, as well as global supply chain issues, are driving up costs and shortages for builders, potentially delaying and making projects more expensive.
Housing prices in Europe
To maintain profit margins, S&P says cost optimization plans and strong cash reserves are needed. In addition, among the factors underlying the prices, there is a problem of new housing stock. In Portugal, for example, the demand for real estate assets in the face of supply has caused house prices to explode, generally in the country, in recent years.
Prognosis on European real estate
Here are the main trends identified by S&P for the coming months in the new construction sector:
Rising interest rates and weakening purchasing power are expected to reduce demand for new homes in Europe, a market that relies heavily on mortgages, although government incentives can serve as a stimulus.
In addition, rising construction costs, energy costs (which account for 5-10% of price increases), labor shortages, land scarcity, and supply chain issues continue to hamper the delivery of housing units.
Tighter environmental and safety requirements are driving demand for new construction, but also creating additional costs and technical challenges for builders.
It is therefore expected that in the last quarter of the year, European property developers and builders will already start to come under increasing pressure on revenues and margins, as it will be difficult to pass on rising costs to end customers. .
The bulk of the impact is not expected to be felt until 2023. However, most S&P-rated European property developers are expected to overcome headwinds and maintain credit metrics in line with annual ratings, thanks to strong balance sheets and good levels of liquidity.
Foreigners have been and are driving the strong growth of Portuguese real estate in recent years.
Portugal remains one of the best countries for retirees.
Since COVID and the upheavals caused by it, it has become very popular also for temporary stays by remote workers
The legal regime of entry, stay, exit and expulsion presents interesting new features which will no doubt appeal to some of you.
The decree of the Assembly of the Republic, promulgated by the President of the Republic on August 4, 2022, makes the 10th amendment to the law on environmental protection. Lei n.º 23/2007 The law on foreigners, of July 4,
The new law on foreigners in Portugal was approved by the Portuguese Parliament on July 21, 2022.
Main novelties of the new law on foreigners in Portugal?
Apart from the measures concerning the Community of Portuguese-speaking countries which benefit from a special and more favorable status, the creation of a residence and temporary stay visafor remote workers is, in our opinion, worthy of interest.
Residence Visa
This type of visa allows its holder to reside in Portugal in order to work there,even remotely, for aperson or a company having its residence or its registered office outside the national territory.
Temporary stay visa
This visa is granted for the duration of the stay and is valid for multiple entries into the national territory.
Residence visa for job seekers
The visa for " procura de trabalho " allows its holder to enter and stay in Portugal to seek work and authorizes him to carry out a dependent work activity, until the expiry of the visa or until the grant of a residence permit.
This visa is valid for 120 days and can be extended for another 60 days.
At the end of the 180-day period, if the holder has not yet signed an employment contract and applied for a residence permit , he must leave the country and is only allowed to apply for a new visa to seek employment. one year after the expiry date of the previous visa.
How can the holder of this visa obtain a residence permit in Portugal?
If you have already formalized your employment relationship before the date of the aforementioned appointment and if you meet the general conditions, you can acquire a residence permit in Portugal.
This residence permit is valid for two years from the date of issue of the residence permit and is renewable for successive periods of three years.
Another of the main legal changes and which is closely linked to the creation of this new type of visa is the elimination of worker quotas in the visa for the exercise of a subordinate professional activity.
In addition to the creation of new types of visas, the following procedural measures should also be highlighted:
Facilitation of obtaining a residence visa for studies in higher education
When the applicant is admitted to a national institution of higher education, the granting of a residence visa to follow a higher education program is now exempt from the prior opinion of the European Commission. SEF .
The consulate directly consults the second generation Schengen Information System (SIS II) and can only refuse the visa if a refusal of entry and stay is reported in the SIS II.
b) The consulate immediately notifies the SEF of the granting of the visa, and the SEF can activate police measures on the national territory, within the framework of border control, or even cancel the visa.
Automatic assignment of provisional TIN, NISS and user ID for a stay visa
When the residence visa is granted, a prior residence permit is issued, containing information concerning:
Obtaining a residence permit;
Provisional assignment of tax and social security numbers and user number.
It is necessary to take some precautions, to define the possible opportunities and the risks incurred. Follow the few tips below:
Invest only if your cash flow is significant and if the expected return is attractive. These are the two essential criteria for your strategy to be successful.
Invest only if you have a substantial contribution. Subscribing to an 80% “buy to let” collateral is taking too much risk
Lead your reflection on the basis of the expected net return . Neglecting maintenance, miscellaneous costs or taxation could lead you to make the wrong decision
Don't invest all your money in real estate . Remember that the key is to have a portfolio of diversified assets in order to protect yourself from a downturn in the real estate market.
Never forget that in a PEP you are not the only decision maker. It would indeed be a shame if your plans were thwarted by a decision of the board of directors of your PPE. The latter can for example prohibit you from renting via sites such as AirBnB
If you have a contribution, nice returns can be obtained provided you make a good investment which means that you have to carry out a little study and try to reduce the risks as much as possible.
Investing in real estate following a “buy to let” strategy remains particularly attractive in Switzerland.
The global tax landscape is changing with repercussions for Switzerland and the companies based there.
According to the roadmap planned by the OECD and the G20 states, the first elements of a minimum tax should come into force on January 1, 2023.The Federal Council has therefore decided to implement the minimum tax through a modification of the constitution and to ensure, by means of a transitional order, that the minimum taxation can be introduced on January 1, 2024.Voters will be called upon to vote on this subject on June 23, 2023.Fiscally, Switzerland remains an attractive place for businesses and individuals alike, but with a view to the introduction of a global minimum tax on large companies, some cantons must prepare to tax large companies more. In view of the reforms envisaged by the OECD and the G20 countries, which plan to introduce a minimum profit tax rate of 15% for companies , the differences that exist between cantons which tax their companies low, such as Zug 11.85%, and Berne 21.04% which tax them heavily will decline. However, the minimum tax rate of 15% targeted by the OECD will only apply to companies with an annual turnover of more than €750 million.In French-speaking Switzerland, the cantons of Vaud and Geneva have set their corporate profit tax rate at 14%, Neuchâtel at 13.57%, Friborg at 13.87%, Valais 17.12% and Jura at 16%. %. Compared to the minimum rate of 15% planned by the OECD, the gap is not very high and these cantons will only have to make a slight adaptation to be in compliance with the rates planned by the OECD In German-speaking Switzerland , the canton of Zug is at the top of the ranking, with a rate of 11.9%, Nidwalden (12.0%) and Lucerne (12.2%). With a rate of 21.0%, the canton of Bern is at the bottom of the pack .
2022 profit tax rates in Switzerland In international comparison, companies are taxed low in Switzerland . Rates lower than those in low-tax cantons are only found in traditional offshore domiciles, in Guernsey, Qatar and a few countries in Eastern (southeast) Europe. Ireland remains Switzerland's main competitor in Europe. Internationally, large Swiss companies will also be subject to the same rules as those located in cities like Singapore, Hong Kong or Dubai, which will also have to increase their tax rate to 15%. There will therefore be fewer incentive factors which will encourage companies to move to such locations purely for tax reasons. For very large companies, tax competition between cantons will play a less important role as a factor in establishing themselves in the future. future. As for whether developments in corporate taxation will have consequences for personal taxation, only time will tell.
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