Between stability, housing protection and growth pressure
The Basel real estate industry is facing a paradox. The economic fundamentals are stable, demand is high and there is theoretically enough land available. However, strict regulations and sluggish processes are slowing down the production of new living space. A picture of the mood from the current panel discussion in Basel.
Current mood in the Basel real estate industry
The current situation is ambivalent. On the one hand, Basel enjoys great economic stability and a strong real economic basis, as current market analyses confirm. On the other hand, the shoe is on the other foot when it comes to the actual production of living space. In an international comparison with Paris, San Francisco or London, for example, the cost of housing is still moderate in relation to wages in Basel. But the mood is gloomy. Housing production is not doing well. This is not so much due to a lack of investors, but rather to complex planning processes and home-made hurdles.
The challenge of housing protection
A central topic of the debate is Basel’s “housing protection”. The law, originally intended to ensure the social compatibility of renovations and protect tenants, is proving to be an obstacle to investment in practice.
The criticism is that although the housing protection is well-intentioned, it actually reduces supply. If refurbishments become uneconomical due to excessive requirements, they simply do not take place. Although adjustments have already been made to the ordinance, for example to facilitate energy-efficient renovations, the uncertainty remains. Fewer new apartments are coming onto the market, while immigration continues. This is exacerbating the very shortage that was supposed to be combated. Anyone looking for an apartment today, whether due to family matters, a job change or a move, will find a dried-up market and high prices. The regulation thus protects the existing stock, but puts those who want to enter the market at a disadvantage.
Lessons for other cantons
A look across the border shows that Basel currently serves more as a warning than a role model in terms of regulation. The introduction of strict protective provisions is reminiscent of past mistakes (interest rate and regulatory policy 40 years ago). The lesson for other cantons is therefore that supply should not be artificially reduced when it is increasing.
Another phenomenon is the conversion of office space. What was hardly conceivable four years ago due to yield expectations has suddenly become attractive due to rising interest rates and changing office markets. However, these transformations usually do not create affordable living space, but rather high-priced offers.
Basel in the Switzerland of 10 million
Switzerland is growing and Basel is growing with it. The city has enormous potential in the form of former industrial sites (e.g. Klybeck Plus) and transformation areas. Investors would be willing to develop and densify these areas. But the problem is the length of time involved. Planning processes, such as the one for the Klybeck site, take 5 to 6 years before construction can even begin.
For a Switzerland with 10 million inhabitants, there is no alternative to inner densification. Compromises have to be found, as was the case with the “climate cardinals” initiative. Areas over 30,000 m² should be allowed to be built on more densely, but must meet strict ecological and social criteria. It is important to understand the investor side here, especially pension funds. These manage trust funds for retirement provision and cannot simply cross-subsidize living space. Planning security is the hardest currency here.
Future and solutions
What does the future look like? Above all, the sector is calling for acceleration and flexibility. As in Germany, we should discuss the planning turbo and mechanisms would be needed to drastically shorten approval procedures. The real estate of the future must be flexible. What is an office today must be able to be an apartment tomorrow and perhaps an office or logistics space the day after tomorrow. Fragmented monostructures are no longer in keeping with the times. The fear of growth must give way to a desire for design. Quality is created through good internal densification and a mix of uses, not through stagnation.
The means and the capital would be available to alleviate Basel’s housing shortage. What is lacking is a regulatory environment that enables rather than prevents investment and a planning process that keeps pace with the speed of social change.