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Mortgages – In Switzerland, fewer and fewer people can afford a house News

Wednesday, August 23rd, 2017 | Economy

The desire for a house of their own becomes more and more an unfulfillable dream space. In the second quarter, family house prices rose by 2.8 percent. But also the portability and the own funds requirements make "the happy few" out of those who can still finance a family home, so a few lucky ones.
A study by Raiffeisen shows how well a household has to earn in order to be able to afford certain objects. In the most expensive municipalities in Switzerland, ie coveted sites or urban agglomeration areas – this is still the most popular residential location, as a search finder shows – a medium-sized single-family house costs 1.75 million francs on average.
With a 5% interest rate, a household income of around 300,000 francs a year must be available in order to be able to finance a house. On the assumption, it is self-evident that a maximum of a third of the income for housing is spent.
Increased equity requirements
This does not mean that equity must also be made available. As 20 to 30 per cent of equity is no longer a rarity, it would take around 350,000 to 500,000 Swiss francs (the Raiffeisen study assumes 20 per cent of equity capital).
A comparison with the income distribution in Switzerland reveals which buyer layer is used in our example: The criteria for the medium-sized family house in a coveted situation currently only meet a total of three percent of Swiss households. Compared to that part of the population living in the rent, it would be only one percent. This example also reveals the hurdle of the portability calculation with the interest rate of five percent. At current market interest rates of 1.25 percent – corresponding to a fixed-term mortgage fixed to five years – 150'000 francs would be sufficient for such a house.
In a dual-income household – even without children – such an income is at least realistic. If one were to use only the 1.25 percent of the mortgages mentioned above, a quarter of the households could finance such a single-family house in a top location. Tenants would be able to do so.

Ratio of required income and prices of housing conditions, each with a calculatory interest rate (blue) and a five-year fixed-rate mortgage (yellow). Graphic: SRED, Raiffeisen Investment Office
The result of the current financing costs is that interested persons are increasingly looking for less coveted regions. In other words, "normal" or less well-earned are pushed into the countryside. After all, a good 150,000 francs yearly income is still enough to finance a house at an average price level even at a 5 per cent interest rate. With a little over 100,000 francs enough income is available to get a house in the lowest price class, the least coveted regions.
However, this price decline leads to compensatory movements, which subsequently also make living in marginal areas more and more expensive. Here, the situation collides with the fact that construction activity is decreasing not only in urban areas, but also in the countryside: the supply is becoming increasingly scarce, because fewer single-family homes are also being built. In 2005, 15,000 building permits were issued. Last year, the figure was slightly more than half.


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