Hans R. Holdener, Founder of Helvetica, in an interview

No crash, no recession, no overpopulation. Some things are quite different than they appear at first glance. Especially about the Swiss real estate market often borderline or even wrong theses are spread, says Helvetica's founder Hans R. Holdener.

Interview: Fredy Gilgen

Fredy Gilgen: Hans R. Holdener, you are considered a contrarian thinker in the industry. Aren't you simply trying to be provocative with your unconventional statements?
Hans R. Holdener: Not at all, but only those who swim against the tide will reach the source. And I always find it important to really think things through to the end.

The cat is now out of the bag. The SNB has raised the key interest rate by 0.75 percent. Where is the journey heading?
For more than a year, I have been saying that the SNB should raise interest rates more aggressively and faster, but also that it would then have to correct them back down much faster.

For years, prophets have been predicting an imminent crash in the Swiss real estate market. The UBS bubble index has also been in overvalued territory for years. But you say: A crash will not happen.
No, the fundamental drivers of the market are simply too strong for that. For example, the population in our country continues to grow steadily. According to the Federal Statistical Office, it will rise to over 10 to 11 million by 2045. The land available for construction, on the other hand, is also steadily decreasing. Not least because of the excessive regulatory frenzy of the authorities. Densified building, for example, continues to be difficult to achieve in this country. If planning, building applications and building permits are constantly decreasing, but the demand for housing continues to increase, the logical result is rising rather than falling real estate prices.

According to your thesis, the Swiss real estate market has actually been undervalued for 10 to 15 years.
Yes, I stand by this thesis. Since the beginning of the year, we have seen a cooling in the transaction market. The timing for real estate transactions has basically never been as good as it is today. The market has been showing deflationary tendencies for 15 years, and it's not getting any cheaper.

Does that also apply to investors in real estate funds?
Certainly, the massive price losses of around 20 percent in listed real estate funds are not justified and certainly offer very attractive buying opportunities for long-term investors. Some of the funds now even have discounts in the double-digit percentage range, i.e. they are trading below the net asset value of the properties held. After this historic price decline, I consider investments in listed real estate funds to be extremely attractive. For our Helvetica real estate funds, I am very confident that we are in a position to generate sustainable growth. The robust Swiss economic data, continuing high migration, declining construction activity and rising inflation rates all favor this. And in the long term, Swiss real estate is rightly regarded as crisis-resistant.

The abrupt rise in interest rates doesn't worry you?
Interest rates have risen as expected, and that's a good thing. The majority of real estate owners are very conservatively financed, so this step can be taken very well. On the buyer side, we expect a more cautious investment policy, which should lead to a slowdown in the transaction market. In the medium term, however, the market should have to settle at a slightly lower level. For project developers, however, it may become incoherent. The fact that buyers are currently no longer willing to pre-finance a project for years to come is healthy and also necessary.

You disagree with the theory that housing in Switzerland is becoming more and more expensive. How do you justify that?
Compared to other countries, housing is actually inexpensive. In our country, wages have risen faster than rents in recent years. And far too few homes have been built. Demand far exceeds supply.

You then complain about the decreasing competence in the industry
Yes, that is very regrettable. The pension funds are dismantling their own real estate departments more and more without need and are relying more and more on investment consultants who rely exclusively on their analyses and only know the market from a distance. I think this is a pity.

The reference interest rate introduced by the authorities almost 15 years ago, which is binding for the adjustment of residential rents to the mortgage interest rate, does not get good marks from you.
This mechanism is a strange construction and leads to great inefficiency in the market. Downward and upward rent adjustments can only occur at a very slow pace, which I think is unfortunate. The tenant market is very well protected, which I think is right. But what would be fair is a normal adjustment to the Landex index of consumer prices analogous to that for commercial rents.

You don't think the return of inflation, which many people are complaining about, is a big problem?
A very long-term perspective is appropriate here. The Swiss inflation rate has been virtually zero for the past 15 years. And many people have become accustomed to this. Now, inflation rates have exploded, especially abroad. In our country, however, there is no need to worry. In the very long term, over 50 years and more, the inflation rate in Switzerland was almost 2.5 percent. That was quite normal for decades. The economy can live very well with inflation rates of 2 percent, as history has shown.  Even better than 0 percent, which is dangerously close to deflation.

In your view, there will not be a recession?
A downturn in the economy seems rather unlikely to me in the medium term. The rock-solid Swiss economy can cope with inflation and much higher interest rates without drifting into a long-term recession.

You also vigorously contradict another frequently heard assertion, the claim that our country is overpopulated.
A quick look abroad is enough. The population density in London is 90 percent higher than in Zurich. In Tokyo, it is even 222 percent higher. The city of Paris even has 20,500 inhabitants per square kilometer, which is 310 percent more than Zurich. Even Copenhagen and Brussels clearly beat Zurich in this respect. When people tell me that the population density in Zurich is extremely high, I say: look at the facts.

Presumably this is even more true in the countryside?
Switzerland is built up, even overbuilt, and soon there won't be a green plant left. Anyone who flies over Switzerland in an airplane can see for themselves that this is not the case. Only 7 percent of the country is built over. And entire regions such as Emmental, Oberaargau and various Alpine regions have been shrinking for years.