 | | | 
07.02.2017, 21:27
| Forum Legend | | Join Date: Apr 2008 Location: Zurich
Posts: 3,887
Groaned at 78 Times in 57 Posts
Thanked 4,150 Times in 2,241 Posts
| | Re: Mortgage in Switzerland
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.
| 
07.02.2017, 21:32
|  | Forum Legend | | Join Date: Apr 2010 Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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.
| This user would like to thank fatmanfilms for this useful post: | | 
07.02.2017, 21:47
| Forum Legend | | Join Date: Apr 2008 Location: Zurich
Posts: 3,887
Groaned at 78 Times in 57 Posts
Thanked 4,150 Times in 2,241 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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).
| 
08.02.2017, 08:52
|  | Forum Veteran | | Join Date: Oct 2011 Location: BL
Posts: 1,149
Groaned at 202 Times in 147 Posts
Thanked 3,855 Times in 1,422 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 2. Consider why it is that banks/insurance companies/billionaires only hold a small portion of their assets in RE. | | | | | 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.
| The following 3 users would like to thank gaburko for this useful post: | | 
08.02.2017, 09:26
| Junior Member | | Join Date: Nov 2016 Location: Zurich
Posts: 52
Groaned at 13 Times in 9 Posts
Thanked 31 Times in 18 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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.
| 
08.02.2017, 09:56
| Junior Member | | Join Date: Nov 2012 Location: Winterthur, ZH
Posts: 43
Groaned at 1 Time in 1 Post
Thanked 60 Times in 34 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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
| 
08.02.2017, 10:04
|  | Forum Veteran | | Join Date: Oct 2011 Location: BL
Posts: 1,149
Groaned at 202 Times in 147 Posts
Thanked 3,855 Times in 1,422 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | I'm not sure I understand why you think it is meaningless in the context of the discussion? | | | | | 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.
| 
08.02.2017, 10:04
|  | Forum Legend | | Join Date: Apr 2010 Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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 | | | | | 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.
| 
08.02.2017, 10:24
| Junior Member | | Join Date: Nov 2016 Location: Zurich
Posts: 52
Groaned at 13 Times in 9 Posts
Thanked 31 Times in 18 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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'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.
| This user would like to thank BenjaminButton for this useful post: | | 
08.02.2017, 11:35
| Junior Member | | Join Date: Nov 2012 Location: Winterthur, ZH
Posts: 43
Groaned at 1 Time in 1 Post
Thanked 60 Times in 34 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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. | | | | | Swiss local RE market was very far from being impacted by this. Hence I said that here the risk is very limited.
| 
08.02.2017, 11:36
| Junior Member | | Join Date: Nov 2012 Location: Winterthur, ZH
Posts: 43
Groaned at 1 Time in 1 Post
Thanked 60 Times in 34 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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. | | | | | 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
| 
08.02.2017, 11:42
|  | Forum Legend | | Join Date: Apr 2010 Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | Swiss local RE market was very far from being impacted by this. Hence I said that here the risk is very limited. | | | | | UBS almost went bankrupt as a result....... the risk is higher than you imagine.
| 
08.02.2017, 11:45
| Junior Member | | Join Date: Nov 2012 Location: Winterthur, ZH
Posts: 43
Groaned at 1 Time in 1 Post
Thanked 60 Times in 34 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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)
| 
08.02.2017, 11:47
|  | Forum Legend | | Join Date: Apr 2010 Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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.
| 
08.02.2017, 12:16
| Banned | | Join Date: Feb 2014 Location: The World
Posts: 1,380
Groaned at 282 Times in 153 Posts
Thanked 1,115 Times in 636 Posts
| | Re: Mortgage in Switzerland
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%
| The following 2 users would like to thank Capo for this useful post: | | 
08.02.2017, 12:21
|  | Forum Legend | | Join Date: Apr 2010 Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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.
| 
08.02.2017, 12:25
|  | Forum Veteran | | Join Date: Oct 2011 Location: BL
Posts: 1,149
Groaned at 202 Times in 147 Posts
Thanked 3,855 Times in 1,422 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | UBS had purchased some of the mortgages & held them on their balance sheet as assets. Nothing to do with counter party risks. | | | | | 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.
| This user would like to thank gaburko for this useful post: | | 
08.02.2017, 12:37
|  | Forum Legend | | Join Date: Apr 2010 Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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.
| 
08.02.2017, 12:42
| Forum Veteran | | Join Date: Feb 2012 Location: CH
Posts: 2,300
Groaned at 87 Times in 73 Posts
Thanked 2,002 Times in 1,123 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | 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% | | | | | 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
| 
08.02.2017, 13:43
|  | Forum Legend | | Join Date: Feb 2006 Location: Zürich
Posts: 3,123
Groaned at 48 Times in 35 Posts
Thanked 2,431 Times in 1,156 Posts
| | Re: Mortgage in Switzerland | Quote: | |  | | | Real estate agent costs? Typically 5 %.
Assorted other moving costs, etc. | | | | | Typically more like 3% and ONLY on the sellers side, not the buyers side.
| This user would like to thank krlock3 for this useful post: | |
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests) | | Thread Tools | | Display Modes | Linear Mode |
Posting Rules
| You may not post new threads You may not post replies You may not post attachments You may not edit your posts HTML code is Off | | | All times are GMT +2. The time now is 00:40. | |