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CAPITAL GROWTH CONTINUES TO DRIVE RESIDENTIAL INVESTMENT RETURNS IN SWITZERLAND

MSCI Index Reveals 6.6% Return, Property benefiting from Swiss monetary move

MSCI Inc. (NYSE: MSCI), a leading provider of investment decision support tools worldwide, including indexes, portfolio risk and performance analytics and ESG research, has recorded total return of 6.6% in 2015 in Swiss Property investment, as indicated in the IPD Wüest & Partner Switzerland Annual Property Index.

The total return marks a rise from 5.2% in 2014, reflecting continued strong growth in the Swiss properties sector. The strength of Swiss property market signals that the sector benefited from the Swiss National Bank’s (SNB) move last year to scrap franc’s peg to the euro, and lower interest rates. The figures showed that government bond yields and property yields both declined in 2015 from 2014, to -0.04 from 0.38%, and to 4.4% from 4.8%, respectively. The spread between the government yield bonds and property yields increased to 4.45% in 2015 from 4.4% the year before.

The strong total return was fuelled by robust capital value growth, which rose to 2.4% from 1.0% in 2014. This capital value growth marks the second highest growth in the 3-, 5-, and 10-year average.

Residential properties remained the strongest sector in 2015, representing 47% of the measured universe in the index. Total return in this segment rose to 8.4% from 6.1% from the year before. The capital value growth in residential properties reached 4.1, marking the best performance since the index began.

Moreover, office property returns recovered in 2015, achieving total return of 5.0%, compared to 4.2% in 2014. However, office property total returns remained below the 5-year average of 5.1%, and the 10-year average of 5.8%.

Across the different sectors, rental growth weakened slightly. Net income return dropped to 4.1%, from 4.3% in 2014.

Justus Vollrath, Executive Director MSCI, explained: “Swiss property market enjoyed another robust year as the market continues to attract capital. The strong capital growth is a result of increased yield compression following investor demand. This is especially true for the major cities of Switzerland, such as Zurich, Bern, Basel or Geneva.

“What’s particularly interesting is that the move by Swiss central bank to unpeg the Swiss franc and lower interest rates led to slight widening of spreads between government bond yields and property yields. This created an additional incentive for investors.

“We also see that the residential market showed particular resilience and enjoyed exceptionally strong capital value growth.”