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Rents are increasing. Those looking for flatness in cities form long queues while cruising. Those who succeed in their search have to dig in their pockets a lot more than they did a year ago – up to 3.1 percent across Switzerland and 10 percent in Zurich, as Homegate’s current rent index shows.
This is frustrating for tenants. But even with some homeowners, joy must be limited. For months, they have been accused by left parties and the tenants’ association of defrauding the country’s tenants. Members of the Swiss Parliament will be elected in the autumn and rents are a key issue in the election campaign, as they are highly emotional. In case you’re surprised: Tenants in this country, on average, spend almost a quarter of their income on flats, after deducting taxes and health insurance premiums. This is much more than neighboring countries. Blick explains why tenants in Switzerland often have less leverage.
How many refunds are allowed?
How much snow can splash out without a rental? Leftists regularly bring up the cost of rent. As the name suggests, this is based on the costs incurred by the homeowner. Investors and representatives of homeowners associations like to argue with supply and demand, i.e. market rents. In principle, both are wrong. As the Federal Supreme Court determined in a leading decision in October 2020, 2 percent plus the reference interest rate net yield is allowed – previously the reference interest rate premium was 0.5 percent. With the current reference interest rate, the allowable net return is 3.5 percent.
Why is there a yield limit?
The federal court clarifies the yield cap with spears of unequal length: For the court, it’s clear that the landlord has more power in most cases when it comes to determining the rent. About 85 percent of the Swiss population lives in urban areas. And especially in the centres, living space is often very scarce and the rate of rental apartments is particularly high. For example, it is 91 percent in Zurich. In such a market, landlords can continue to raise rents and actually charge as much as they want. However, shelter is a basic need. At the end of the day, everyone needs a roof over their head. Therefore, there is a maximum return.
This applies to old buildings.
This maximum return depends on the construction costs or the purchase price of a property. For an old property – 50 years old – only very low rents should be charged. As this would be disproportionate to the rents of new buildings, traditional local and neighborhood standards apply in tenancy law for properties over 30 years old. They are therefore based on market rents. However, in an existing tenancy, the rent cannot be continually adjusted to the customary location and neighborhood.
Here, too, the Federal Supreme Court weakened tenant protection in a June 2021 ruling: In the event of a large rent increase, the landlord no longer has to prove that the location and neighborhood are exactly as accustomed to comparable properties. It suffices, based on similar objects, to sow suspicions that the increase may be abused.
Parliament continues to erode tenancy law
Landlords often use tenant change to raise rents. The initial lease can be challenged under certain conditions. But in German-speaking Switzerland this is extremely rare. Repeatedly low in western Switzerland. Most tenants don’t want to deal with their landlord in the first place. The sudden increase in the number of transactions is a nightmare for real estate companies. Parliament therefore decided to tighten the requirements for a challenge: only an emergency should suffice as a justification. In addition, the criteria for proving that the rent is a custom for the settlement and district will also be relaxed.
Problem with market value
The legislation in tenancy law is not entirely free from contradictions: According to the Federal Supreme Court, owners must calculate the maximum allowable net return against the purchase price. The capital invested can be adjusted for inflation. However, according to legal requirements, real estate companies have to report their buildings by market value. If the value of the property increases, its profitability decreases without an increase in rent. With rising prices, companies are forced to consistently generate higher revenues.
What happened to 10.5 billion Swiss francs?
According to the tenants’ association, landlords collected 10.5 billion francs in excess rent in 2021 alone due to excessive returns. This was the result of a study commissioned by the association. But as Blick reported in March, that number is unlikely to match reality. The study calculates a 6.5 percent net return for rental apartments over the past 15 years, measured by property stocks. However, as studies by Iazi and Raiffeisen have shown, in addition to rental income, about half of these returns come from value increases. This means that average net returns will be within the allowable range of 3.5. Percentage. But there are many black sheep with significantly higher returns.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
