While each flat might be worth 1M CHF, it doesn’t mean that the whole block of 10 apartments does cost 10M CHF. Since the Genossenschaften usually get land from the communities they do build their own buildings and with a 10 apartment building you’re at about 6-7M CHF construction costs. So suddenly the 1’500 per months are still some 2.5% annually.
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Looks like the Swiss Federal Court just tipped the scales for the real estate business by lifting some price constraints. All with the objective to allow pension funds to increase their investment returns. It will lead to low rents going up towards market average, which might result in an increased price level for all rents. More difficult for mustachians to find good deal but better returns for owners of rental flats. This is what inflation looks like. As @Bojack is looking for something above average, the prices in that range might increase only moderately. Maybe the renter’s association can overturn this verdict?
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Well, my boss (who works a lot in the area of mortgages) told me I could get a 10 year fixed mortgage with 0.7% interest. And that if he were in my place, he would buy a flat. The other guy just did it last year and he’s also very happy with the savings. When I told my boss: what if the market crashes, he said: that’s what I’ve been told for 30 years.
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Is it based on market value or actual purchase price? Given that most houses/buildings don’t flip often it sounds like it’s often in the interest of the renter (3% over the price of a property 20 years ago doesn’t sound like too much).
Doesn’t a 5 year fixed mortgage make more sense?
They tend to be ~0.2% cheaper so you are better of as long as the rates for 5 year mortgages don’t raise by more than 0.4% in the next 5 years.
It’s about who is responsible for the risk. My boss has had a LIBOR mortgage since forever and he never let the bank guy convince him otherwise. I just think, judging by how low it is, it’s almost for free. It would be nice to get a guarantee that you will be able to keep this interest for 10 or 15 years. In that time period, I would even be able to pay off the whole flat, should the interest rates explode. I guess the worst thing would be to be forced to sell at a bad price.
But sure, you can play this gamble. Take a shorter duration or even LIBOR…
If real estate crashes (or if your revenues decrease drastically btw), the bank is entitled to ask you to amortize partly. Then everybody shall be prepared to that situation with an emergency fund.
If the market crashes and I do not need to sell the flat I live in : no change. I just need to monitor the interest rates evolution and the date I need to renegotiate the mortgage.
If the market crashes and I do need to sell : well indeed bad luck.
Alternatively, if I need to move out of the flat for any reason : I can always rent it out. But I would probably need to amortize 5% of the flat value (to increase the Eigenmittel from 20 to 25%). Unless we end up in an disaster situation, I do not see the rents decrease drastically and quickly.
So long as you do not sell, you do not loose or win…
I disagree. This ruling with allow increases in prices. The owner lobby clearly stated in an interview that the yields are too low.
A concrete example:
"A numerical example from the Swiss Tenants’ Association shows that for a house with four apartments, the admissible rent per apartment under the old legal situation was CHF 1,344.00 per month. With a net yield of 3.25%, a rent of CHF 1979.00 would now be admissible. This means a rent increase of CHF 635.00 per month and CHF 7608.00 per year.
50% increase !!!
Il sera plus difficile de contester la hausse de loyers dits abusifs - rts.ch - Economie.
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I’m quite afraid that the market will be even more distorted with people renting the same flat for years with really low price and new flat with high prices for the same m2. People will tend to move even less.
LIBOR is dead, long live SARON!
Just sayin’ 
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Not an expert here. But I once had a plan B to found a Genossenschaft if I can’t find affordable housing. It looks like the government is willing to support good ideas with cheap loans and/or cheap land. More than housing as an example offered a low energy concept many found irresistible and worthy of awards.
Moustachians could likewise come up with a concept around unemployed but financially independent people (who might have a bias against them when trying to rent), who might want to spend their time building their own or growing their own, i.e. participate during construction phase, later utilize workshops and gardens. Pantries would offer a good volume of space to allow storage of food purchased in bulk and maturing your own cheese, growing your own mushrooms, making your own beer. Part-time work and business meetings could be conducted from a business center / co-working space. As a member of the Genossenschaft you have a say, your cash contribution will pay interest, your rent is 20-30% lower than market rates. Just an idea. Too utopic?
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I always ask myself what would happen if I own one or more properties here and then decide to move out and rent them out. I guess nobody would complain?
Foreigners from the EU/EFTA need an authorisation to buy real estate only if they don’t live here.
Foreigners from third countries need an authorisation anyway.
It’s nice, as a fantasy
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In a way it’s monetary inflation being transmitted one step further (here from RE prices to rents). Interesting example of the Cantillon effect.
Actually these things are already existing and working in Switzerland. On a small scale and not necessarely FIRE people, but models where different housing units with a social mix aspect (old, young) and communitarian (public guest rooms available for everyone -> one room less needed per appartment/Public workshop etc./even saw one with a bar where concerts and all were done)
I kind of fancy this idea, You buy some big chunk of land, make some tiny houses out of containers on it (kids come you add something, kids go you can remove it). I guess this has to wait until my before FIRE career is over since this will make it difficult to move.
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Didn’t want to open a new thread for this related question:
My parents are thinking about building appartments on some land they own.
I wasn’t able to find any serious calculator to assist them in deciding whether it is a good idea or not.
They were just able to get some basic estimates for what the bank would be willing to lend and some preliminary financial numbers through their architect (required own capital, required income, how much of the rent to put aside for future renovations, etc.).
But the calculations thusfar don’t take into account opportunity costs of the required capital, deprecation/appreciation of land next to the new appartments, risks of mortgage fluctuations after 10 years, etc. (I suspect there are also considerations I’m missing.)
Is there something (even a short book/guide) for how to take all these considerations into account?
When I once inquired with a architect he was able to project the whole contstruction costs the average squaremeter of the 7 projected apartments and the average sales price to current market situation and therefore calculate a net profit in the case of just building and selling the apartments right away. There should be some calculation model available by the architect/bank on what the profitability needs to be so it’s a good deal. In general the rental market is rather over saturated at this point but the buyers market is still pretty active (obviously depending on the location).
Housing in Switzerland, especially in big cities, is quite expensive since everyone wants to live near where they work, not to mention investors want to buy Swiss real estate because Swiss franc stays strong relatively to other major currencies.
Merry Christmas 
everyone.
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