Article
Thanks to changing lifestyles and housing needs, and by taking into account forward-looking approaches such as upgrading, densification, or new forms of housing, this segment offers a great deal of potential. As the oldest Swiss real estate fund and Switzerland’s largest fund for residential properties, Credit Suisse Real Estate Fund Siat, participates in these developments.
August 27, 2020
Residential properties are characterized by robust yields. In addition, their performance tends to be less volatile than that of other asset classes. Some portfolios that can look back on particularly long histories include properties in central locations that are virtually impossible to get hold of today. The diversified portfolio of Credit Suisse Real Estate Fund Siat (CS REF Siat) comprises more than 170 properties, seven of which have been in the fund portfolio since as long ago as 1938.
Real estate funds allow investors to participate in a portfolio put together and managed by experts, benefiting from the know-how they can offer. What is more, real estate funds are liquid, shares in listed fund can be traded daily, and investments are possible starting from low amounts.
The value of residential properties is determined by supply and demand. Key questions include: “How much is being built?” and “What sort of growth are we seeing in the residential population?” A factor that is crucial to construction volume is the interest rate level, as it determines the loan conditions for developers. Population growth, in turn, is heavily reliant on net migration. Both indicators are subjected to a precise analysis by real estate portfolio managers.
Other factors taken into account include location, architecture, standard of finish, and form of housing, for example. Alongside commercial aspects, social and cultural developments are also key factors. A trend towards larger apartments in the countryside or towards city living can have a significant impact on the market and, as a result, on yields. By way of example, we are currently witnessing a stable trend towards sustainable living. Weighing up these factors is something that requires long-standing experience and in-depth market knowledge.
In order to generate attractive yields, new greenfield construction is not the only option. Structural upgrades or complete renovations are ways of tapping into considerable potential in existing locations. With right measures, ecological objectives can be achieved or an old building can be turned into one that meets the housing needs of today. Innovative projects are forging new paths in a whole range of locations, for example by increasing structural densification, creating mix-use properties, and making entire neighborhoods more attractive.
This is the environment in which CS REF Siat strives to strike a balance. The fund focuses on high-yield residential properties (as well as selected commercial properties) in economic hubs on the one hand, while also focusing on qualitative growth and the ongoing renewal of the properties in its portfolio.
This creates a broadly diversified portfolio with a strong presence in all regions of Switzerland. Two-thirds of the return on the portfolio comes from residential use. The market for residential properties in prime locations and using forward-looking approaches (upgrading, densification, new forms of housing) is intact – providing the fund with ideal conditions.
Risks
Limited liquidity compared with larger listed investment products.
The values of properties may fluctuate, for example due to the following:
Source: Credit Suisse, unless otherwise specified
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The key risks of real estate investments include limited liquidity in the real estate market, changing mortgage interest rates, subjective valuation of real estate, inherent risks with respect to the construction of buildings and environmental risks (e.g., land contamination).
Credit Suisse Real Estate Fund Siat is an investment fund established under Swiss law in the category of “real estate funds,” in accordance with the Swiss Federal Act on Collective Investment Schemes. The fund management company is Credit Suisse Funds AG, Zurich. The custodian bank is Credit Suisse (Switzerland) Ltd, Zurich.
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