I don’t get this “for free”. This flat is “dropped” in Züri, where land costs a lot and that’s where the extra 1500 comes from. It’s not for free, the pension fund has to buy that land. The way I imagine this plays out: Helvetia has some millions to spend, they find a premium parcel in Zürich with some low quality buildings from 60s. They buy it out, raze the land, build something modern and sexy and then request only 2.4% annual rent relative to invested capital.
What I wonder is why they build here at all if the yields are so low. Are they not able to raise the price even higher? People are killing each other to get these flats anyway. Maybe there is some rent control sh*t and they can’t ask whatever they want? But why don’t they go and build where the land is cheaper and yields higher, closer to 4%? My only idea is that if they put a few more buildings in, say, Aarau, then pretty soon they would have trouble to find the tenants. After all, there are only so many people who want to commute that long to Zürich.
That was compared to the costs mentioned. That’s the extra price tenants accept to pay to have the privilege of living in Zürich. Most owners (individuals, families or funds) don’t need to buy the land because they already own it, for generations. Eventually they will build an extra block on a piece of garden they already own (something I see all around me). They would be silly to sell such cash machines!
That’s such an illogical statement. If the price is right, it’s not silly to sell. If you’re looking at 2% yield on the sell price you’re getting, then maybe it would be smarter to sell and buy some ETFs? Especially if you exclusively own real estate, for diversification. If your cash machine brings 2% per year then it’s not such a great cash machine.
Btw the grandma of my gf owned a block of flats in Zurich. After she died, her 4 children inherited it. Since neither of them could buy others out, nor did they want to manage it together, they sold it and shared the money. I’m sure it’s not an isolated case.
At least in the core urban centers, I don’t think it’s very common. I wonder if numbers are available somewhere (I really had the impression vast majority of units are owned by funds and similar actors).
Depends what your needs are. A pension fund needs to have ~guaranteed cash flow to distribute (often bond/real estate), with the current interest rates not sure bonds deliver much. They can’t gamble significant amount on equity (for that to make sense they’d need to be massively over capitalized so that a market crash wouldn’t make them fail).
Alright. But for an individual mustachian who has an alternative: rent for 3000/month or buy for 1’500’000, I guess rent is the obvious option, right? Getting a mortgage for 1’200’000 seems quite risky, even with a high income. I just mean to say, these 3000+ rents are not so absurd once you consider the alternatives and true costs.
If you get 20000 CHF a month in rents you don’t care about the 2%. It’s only the problem of the next buyer if he buys at such a high price or low yield. Plus, if you bought the block 20 years ago, it was for 1/2 or 1/3 the price, so you still get actually 4% or 6% yield.
That’s a very good point. Maybe you can buy cheap land in a small town, but since this town is mostly inhabited by elderly people and most lucrative jobs are in big cities, you shouldn’t expect this land to appreciate. In Zurich it’s a different story, so probably some models they use show that the price will keep going up. That’s why they go for it and swallow lower yields, they make up the difference in land appreciation.
But I wonder what happens if these models break, say suddenly people start working from home office and Zurich becomes so crowded that it’s no longer pleasant to live in a block with windows facing another building. There has to be a limit to this madness, but maybe this limit is 50 years away and we’ll all be dead by then
At least brokers are nervous. In the “Züriseezeitung” I get full page ads, or insert booklets, telling that (in a nutshell):
Don’t worry, price only go up (with a chart: index 100 in 2006, 205 in 2020). Price growth is “robust” (hum). Linear extrapolation bias expected to be activated on the readers’ side.
Mortgage rates are there to stay very low (probably true).
Don’t worry, buy, because you can sell anyway easily at a higher price.
My parents bought land around 25 years ago in order to build their house on it.
The land is located in a village with 6000 people living there.
Bought for 300CHF/qm, comparable plots are now selling for 1500CHF/qm
So in my opinion also land in a small town will definitely go up in the future. There are more and more people looking to buy outside of big cities. It’s actually quite difficult to even get a good plot around here without having off-market contacts.
If an area has experienced population growth in the recent decades then the increase of land price is understandable. 1500 CHF/sqm already seems like a lot. My feeling was that the perspectives for tows under 100k and over 1h to a big city are not good. At least that’s how it’s gonna be in Poland, maybe in Switzerland it’s different, since everything is so close to each other and so connected.
Good access to the Autobahn, around 30mins to the next city.
I thought a city starts at 10k people.
Yes, it definitely experienced some population growth, especially in the past few years we’ve seen a huge increase in new apartment buildings.
I guess the “Steuerfuss” of a municipality also has a bit of an influence on real estate prices. The municipality is more attractive (especially to high earners) which results in more demand
In 1980 there were 6.3m people in Switzerland.
In 2015 there were 8.3m. That’s 32% growth over 35 years.
In 2050 there should be 10.0m. That’s 20% growth over 35 years.
Looks like some strong growth, still. Not as strong, but there is also less and less free place left.
Is describes the amount of space of a piece of land that can be built on in percent. E.g. 40% on a 1000sqm land means you can’t have more than 400sqm of usable space (e.g. 2x 200sqm apartments).
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and Zurich becomes so crowded that it’s no longer pleasant to live in a block with windows facing another building. There has to be a limit to this madness, but maybe this limit is 50 years away and we’ll all be dead by then 
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