Robbed private tenants!

class=”sc-97fd9fa8-0 jNFKxv”>

Real estate companies and institutional investors face repeated robbery charges over rents. But figures from the Federal Statistical Office show something else: the biggest robberies are among private individuals. Across Switzerland, they collect an average of four percent more from institutional investors and 1.5 percent more from real estate companies.

This phenomenon is also currently occurring in Upper Valais. The Lonza boom is causing massive immigration and housing shortages there. While corporate service providers raise their rents moderately, many private individuals scrape the entire amount when it comes to new leases. A 28 square meter studio in Visp – 49 years old! – costs CHF 1,100 per month. The bathroom and kitchen are still in their original condition. Four years ago, tenants could rent comparable properties for CHF 700 to 800.

Three to six times the allowable amount

The property is for sale for CHF 190,000 and is declared by the owner as an investment property with low additional costs. Anyone who buys it can earn a golden nose with it.

With a low equity ratio, a buyer can earn a net return of 10 to 20 percent after deducting costs and mortgage interest. With the current owner, it should be significantly more, as such properties could have been bought much cheaper a few years ago.

In Upper Valais, the number of old rental apartments offered at terrible rents has increased greatly in recent years. According to the current case law of the Federal Supreme Court, a maximum net return of 3.25 percent will be allowed. However, private individuals in particular seem to have the least hesitation in adjusting their rents to market rates when new tenants are hired, thus generating excessive income.

Landlords also scam centers

However, there are such rip-off rentals all over Switzerland. “Those who aim for this can easily achieve a net return of 10-20 percent and above, especially in individual properties. Walter Angst (61), co-director of the Zurich Tenants’ Association, says institutional investors have large mixed portfolios of them.

The square meter prices of apartments in Zurich have increased by more than 220 percent in 15 years. Private landlords who rent a 15-year-old flat today at almost market price are getting a significantly excessive return.

intention or ignorance?

Landlords with one or two rental properties may tend to get the most out of it. “Institutional investors are definitely more cautious and at the same time more professional,” says Donato Scognamiglio, 53, president of real estate consulting firm Iazi.

Linda Rosenkranz (43) protects the private sector: “Especially for private individuals, it is very difficult to calculate the allowable returns if they even know the legal provisions. This is another argument for the government’s interest rate controls,” said the Secretary General of the Swiss Tenants’ Association.

Faceless real estate entrepreneur at Visp

As another example from Visp shows, real estate companies have repeatedly exceeded the target: the company has been buying old apartments cheap for several years and then renting shared rooms at exorbitant rates. With a loan-to-value ratio of 65 percent, 30 to 40 percent returns await you on shared flats.

However, the best-known case in Switzerland concerns an institutional investor. He asked for more than 2,000 francs per month for an old flat of 101 square meters in Vaud. The tenants objected, and the Federal Supreme Court finally set the rent at CHF 1,390 in fall 2020.

10.5 billion is too much?

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. However, this number is unlikely to correspond to 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 the average net return will be within the allowable range of 3.25 percent.

“There is a black sheep in everyone”

“Among all owner groups there are certainly black sheep with excessive rent. But there are other reasons for high rents in general, such as high land prices,” says Scognamiglio.

When it comes to real estate in the city of Zurich, land prices sometimes make up 40 to 60 percent of the purchase price. Institutional investors play a key role here. Other investments have yielded virtually no returns for years due to the low interest rate environment. Investors poured billions into the real estate industry and pushed prices up. They also regularly perform major upgrades or replace new ones. As an example of investment property in Wollishofen shows, with high property prices, they can charge 4455 and even 7590 Francs rent for 3.5-room apartments in Zurich, and legally.

Source :Blick