If you want to increase housing, and make rents cheaper, you need to make it more attractive as an investment.
Instead of rents at 3000 per month earning 1.5% on a place costing 2.4m, better target a rent at 1500 per month earning 5% and costing 360k.
To do that you need to build more and make building new property cheaper. Increase supply so that prices fall. Rent controls simply choke off new build and reduce supply and end up with people desperately hanging onto existing properties and not being mobile simply because of market distortions.
Who is “people”? In Spanish tourist towns “people” pay more than 100% of their income for a rental apartment or have to sleep on the streets since rentals are over regulated. In central american countries you get a standard house for around $5-10 a week, which is less than 20% of the income.
Houses are a bit of land and some stones, some cables and a lot of work. None of that is rare and if market would be at force flats would be dirt cheap. Every time we try to correct a situation by regulating the market the situation gets worse. Every time!
All markets are regulated to some extent, no exceptions.
Switzerland is one of the oldest social democracies with its own very special set of regulations. These are a fundamental part of the culture and heritage. You can argue and disagree about what these regulations should look like and if they need changing in some aspects, but regulations are unavoidable fact of life. I see no contradiction between rent controls and freeing up some more building land/increasing housing density etc etc. Property investment is viable here. It is just a different game to that played in other countries.
I think the only regulation that makes sense is one that inhibits forces to disturb the market. Capitalism is exactly that, the markets only make the capital winning less. So they try everything, corner goods, arrangements with or buyout of competition, lobbying politics and so on. That is where regulation is needed.
The market should be left out of this because it is a democratic process that sets prices with billions of transactions every day.
Now, regulation that hinder the market for one or another participant are bad and usually have very bad consequences. We will see, but indeed we have already seen. Switzerland has the most bureaucratic construction rules in the world and that limits the offer, what makes prices go up.
Switzerland did vote on Kanton and national level; we don’t want all the land filled with houses and that is understandable. Did somebody tell the voters that that means much higher prices because the market will not be in balance any longer and that their children or grandchildren will never ever in their life be able to buy a home? I think someone did tell, but was ignored. Now that people have to suffer the consequences they want to make it even worse with more of the same…
Every regulation should be checked if they allow the free market to develop. Because the free market is the only real democratic thing that exists since way before the Greek started some rare form of democracy.
Of course, it’s a sub-optimal policy, just look at the scarcity of free places to rent.
The issue here is that an unregulated market would rise prices until offer meets demand. People with low income would be unable to afford in city centers anymore. This happens in any city around the world. Even in proudly socialist France, the center of Paris sees low-income people leave for cheaper rent in the suburbs while middle class (or higher) income people move in.
I guess Swiss Exceptionalism manifests here. Switzerland is a very special place where ideally low income residents should afford rent in city center. Municipal, cantonal and federal governments implements policies that make real estate investment unattractive after being supported by popular vote. So, law says that low incomes must be able to afford rent in city center, and here we are. In this specific issue, Swiss cities are more socialist that the socialists regardless of side of the Röstigraben.
The current rent yields are the result of pension funds accepting even a 2% return (when all they need is 1.5% + admin costs). If we wouldn’t have the institutional capital we’d be looking at healthy rental yield / property values.
Limiting the rental yields just further prices out private investors. Institutional investors on the other hand have no problem with that, but that won’t lower the prices or expand cheap housing at all, it’s just an initiative in favor of the PK lobby.
Yes, you need to have 2-4% empty flats and rents will drop automatically, you can’t force a low price on goods with a limited supply, has never worked and will never work… macro economics 101.
Exactly!
It’s a pretty average rate for all kinds of residency spending calculation (mortgage affordability, rent, etc.) it’s about what the “avg joe” is ready to spend. A couple earning 20K is very likely to spend between 4K and 6K on housing, etc.
I personally never spend more than 1500 CHF on housing and I don’t plan to do so lol.
Yes that’s a good thing! Idk where in the UN Charta does it say “you have a right to live in the most expensive city in the world on a minimum wage salary”?
People acting like moving 30’ by car away to pay 1/3 in rent is breaking the geneva convention…
I personally see no utilitarian value in this, it’s purely ideological. “poor” in Switzerland is still very well off anyway.
My mistake. No law says that explicitly, but it is implicit in max 3.5% yield of construction expenses, no rent increase unless renovation, so no investment and no free places to move in.
The system works nice for people with a lifetime job that will have frozen rent for decades. Everyone else is screwed up. Found a job in another place that pays better? You have find a new apartment in this crisis so people stays in the sub-optimal job, too much friction.
For a long time, the UK was the opposite to Switzerland in that people didn’t want to live adjacent to their work place in the city and preferred to live out in the suburbs. Unsurprisingly, property and rental prices out there shot up accordingly. The property prices will just follow the demand.
Again, 3.5% is UNLEVERED, for any retail investor that will lever this, it’s easily double on a gross basis, and the interest expenses are tax deductible.
Appreciation helps you massively, as it’s equity. Most people build wealth through real estate and their own-occupied homes. Also your yield on invested capital stays the same, the appreciation does not change the money you put down. The current yield (i.e. the one calculated on current values, that are now higher), is going down, and that is a great metric for liquid securities which you can sell at low yields, to get into cheaper high yield options again.
Real estate is proven globally to be in the very long term the absolute best risk-adjusted investment, and in some cases, even in outright performance regardless of risk.
Somehow, we’re supposed to protect the property owners because they don’t have it good enough?
What the actual f*** are we even discussing?
Another short-sighted comment.
You think commuting by car to come into Zurich is an affordable endeavor? Have you tried parking for a working day? For some people it could cost more than what they earn during that day. Not to mention the traffic issues.
People want to have their expensive property, leased by good earners, and that’s OK.
My only question is:
Who is going to make their coffee and stuff their supermarket shelves and deliver their shopping, if the low-lifes are living an hour away in the only affordable neighbourhoods?
I cannot fathom, with a clear display of how America has basically fully collapsed as a society, any European with half a mind thinks that uncontrolled capitalism is somehow good for everyone, and not just for the very very few that control the vast majority of the capital…
I mean, is everybody a billionaire here? Or are you the typical hopefuls that consider themselves temporarily unfunded billionaires?
The car suggestion was pretty rural, for any city center public transport is the best option. That doesn’t make the search for lower rent any less valid.
Gentrification is not nice or not fair, but what is the acceptable solution?
TBH, I’m a gentrifier back home and probably in Switzerland too because I pay way below 30% my personal income, mind the wifey’s income. It can be argued that we could afford a more expensive apartment and leave this one available for someone with lower income. But…what to do when the low income people want to live in Zürich city and I take the train to Zürich? Force us to live in an apartment which accounts for 30% of our combined income so we leave the cheap one free?
Gentrification is uncontrolled capitalism but beyond public housing I have not seen any other working solution. But, that’s a no-no in Switzerland.
About 90% of office jobs could be done from home - at least all non client facing work and even that could be done with enough willpower. That’d mean that I could live in Jura or Teufenthal or whatever, but my stupid clients still force me to be paid to be there. This is not an RE problem, it’s an adaptation problem for companies.
Yes, but you won’t get a 3.5% rental yield on an attractive property. You may get that in Thurgau, not in Zurich, forget that.
Yes, because most people don’t have the discipline to follow an ETF savings plan, not because property is a massive wealth generator or has exceptional returns, quite the contrary. Recent historical phenomena aside.
Are you trolling right now? You keep talking like you’re an investment banker, but this is actually very important, your ROI is calculated not only from your base investment. but from ANY time in the future. If your home has appreciated 20% but your rental yield stays the same (nominally) or minimally higher, it’s a net loss in opportunity. With stocks, you don’t have this argumentation, the expected return is applied in the future and on top of older returns.
This is not true, as the average retail investor can’t diversify local risks away, especially not in Switzerland.
I simply stated that I wouldn’t want to be a landlord and I’d rather prefer other investments. The low rental yield of most properties in Switzerland (again, not 3.5% but much lower in attractive cities) is the result of PKs accepting low returns, not because of greedy land lords.
Then go commute by whatever public transport you have… cry me a river, Zurich is one of the most expensive places on the planet, what the fuck is the value of Syrian refugees having subsidized housing near Bahnhofstrasse? If anything, we should use socially weak people to populate difficult areas, so at least some economical incentives get created.
This is quite easily solving itself, as living just a few train stations outside of Zurich is infinetly cheaper, both to buy and to own.
We do have quite controlled capitalism in the rental market, but you know what the US doesn’t have? A shortage of newly built appartments and picky landlords. We have artificial supply barrirs, because Hansueli doesn’t like the color of my roof and draggs it to the ECHR to lose and delay my project by 25y
Thank god Switzerland is catering to wealth instead of demonizing it. I see absolutely 0 disadvantages in it for the average person, whoever thinks that life is better in socialist Europe where you pay 50%+ of your income (your employer also pays taxes for you btw.) is better, kinda fell on their head. I’d rather live 1h away from Zurich, make 4K and save 2K than live in Germany, but you do you.
Hansueli doesn’t like loud studends, good luck challenging your project until the galactic court of the milky way, just takes 300’000 y until the verdict is enforcable .
Gentrification is used as a weaponized term, but almost anyone would rather live among office workers rather than night shift factory workers who speak a foreign language. It is what it is.
I remember a few articles during Covid where many people who had full remote jobs moved away into more rural / nature facing places, where both COL is cheaper and personal happieness is reported higher.
I have the impression that the opposite happens. The night shift drivers for Planzer have to learn Swiss German to be employed while there’s plenty of flexibility for office workers. Take your time to learn, company pays courses, etc. The factory workers are the ones who get mad at those damned expats too full of themselves.
I use gentrification because I don’t see the weaponization. As I mentioned above, I may be one of them.
Add to that the neighbors’ ability to effectively blackmail the builder by misusing the courts, claiming that the new build has a detrimental effect on theirs. This can delay the build for years on end, so the builder often pays the ransom thereby making the next blackmail all the more likely.
so people stays in the sub-optimal job, too much friction.
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