Owning is not free.
Especially if it's only an apartment.
There's the cost for the lift, the building manager, the guy who cleans the public areas every week etc.pp.
And then there's the repairs.

Newer apartments have energy-contracting: the heat-pump is only leased from your utility. This reduces the initial CAPEX, but increases OPEX.

So, it adds up over time, too.
But if interest rates start rising again, rents will rise, too
And the real-estate market would get even more illiquid as a result.

New rents only rise if the market can sustain it, interest rate is irrelevant. Current contracts may rise but notice can be given instead.

Yes, that is true.
You can always move.
It's doubtful that a market with rising interest rates would really absorb large rent-increases.
Especially, if the net-positive immigration stops (or turns into net-negative - then all hell will break loose).

This is accurate, but meaningless in the context of the discussion. A bank holds a small portion of its assets in RE for purely liquidity reasons. RE is less liquid than other assets it has access to in order to offset liabilities. Imagine a worse-case scenario in which there's a bank run and the assets of bank A are RE and assets of bank B are cash equivalents. Bank A will be run over, bank B will be bruised, but survive.

I'm not sure I understand why you think it is meaningless in the context of the discussion?

Expected return, risk and liquidity are all parts of investment. The considerations of risk and liquidity are precisely my point (or half of it).

The other half remains that RE expected returns are historically lower than equities. Simply put, one shouldn't expect the market to pay you for living in your own home. Or at least not as much as efficiently allocated capital in the hands of entrepreneurs.

RE returns lower than equities as it's historically safer market.
Regarding banks' assets in RE, you might as well consider what's their asset share busy in RE related mortgages, that's, at the end, RE investment too.
And the reason why they offer now good interest rates is because the risk related to this kind of investment it's very close to 0

I am not disagreeing with what you say, I disagree with that particular example in the context of a mortgage. The liquidity profile of a banks assets and liabilities are inherently antagonistic. A deposit in the bank (its liability) is very liquid, the loans it has handed out (its asset) are not liquid hence the reluctance of a bank to hold real estate, which would add illiquidity to its assets.
A family with salary is a fundamentally different unit from a bank and the liquidity requirements are different.

Did you realise defaults on RE mortgages were responsible for the financial crisis? The risk is a long way from ZERO, Banks have had to delay the requirements of BASEL III due to their over lending on property.

I'm reading two things in your answer. First, that it seems we agree that someone should consider not just expected return, but also risk and liquidity? Regardless if they are an individual buying a residential property or a bank buying other assets.

Second, I think there is a little bit of apples to oranges here. The original topic was about an individual "investing" in residential RE vs other assets. A bank providing RE mortgages is a very different investment from an individual buying a residential RE property.

Swiss local RE market was very far from being impacted by this. Hence I said that here the risk is very limited.

Correct, apples to oranges, the thread went a bit OT and I followed the crowd.
Nevertheless, I'm about to buy a property myself...so, I'm quite convinced it's overall an excellent investment

UBS almost went bankrupt as a result....... the risk is higher than you imagine.

because of their exposure on foreign markets (especially in other banks' capitals)

UBS had purchased some of the mortgages & held them on their balance sheet as assets. Nothing to do with counter party risks.

Is RE really an amazing investment as many people want to think it is ? Then billionaires would invest a large part of their wealth in it. For the record, and these are real data from UBS wealth management, billionaires in the USA have only 9% of their wealth in RE, whereas in Europe it's 21% and in Asia 18%

Where ordinary people invest up to 500% of their wealth in Switzerland or up to 2000% of their wealth in the UK, makes you think.

And where do you think they should book mortgages other than assets?!
UBS problems did not stem from the local (Swiss market). UBS and Credit Suisse for that matter are bigger than the Swiss National Bank to control as their exposure outside was disproportionate to their "local" market. Think Nestle - its HQed in Switzerland, but derives 2-3-4% of its sales from here so saying they have problem because of the stagnant Swiss market is factually incorrect.
A little more on the topic - we are owners ourselves and we made the plunge 6 years ago when we thought the market was already overvalued. Currently, in the complex where we live people are selling properties with a massive capital gain vs. what they bought 6 years ago when the complex was built. Is there a bubble? Yes. Will it burst? Probably. When? Thats the, literally, million dollar question.

UBS's problems stemmed from it's mortgage portfolio, thats RE.

You bought assuming you would find a greater fool, you have not yet realised any capital gain, a valuation is merely an opinion not a fact. As Swiss people like new, your property is 6 years old, that greater fool may or may not exist.

It beats investment in current negative yield bonds any time. Nice and low risk fixed income source for your portfolio. And buying at least the primary residence with pension money is a nobrainer in Switzerland - the only alternative to that is seeing seeing how the banksters slowly eat your hard earned money alive paying you just 1% so called interest

Typically more like 3% and ONLY on the sellers side, not the buyers side.