The "belt of fat" triumphs: Clever homebuyers and investors should steer clear of the cities.
In Zurich, investors are paying top prices for properties with low returns. Economists are calling for a rethink. This is because the opportunities lie in the suburbs. Part 2 of the real estate series «Out of the city».
In a recent article, it is highlighted that investing in suburban areas, or the "Speckgürtel," can be a more profitable option for savvy homebuyers and investors compared to urban locations. Economists are calling for a shift in mindset, as opportunities are believed to lie in the suburbs.
Two examples are provided: Langendorf in Solothurn and Wichtrach in Bern. Both locations feature large multi-family houses with good rental yields, though they are not as highly sought after as properties in the city center. In Langendorf, a recently listed property netted only three or four interested buyers despite its lack of demand, while in Wichtrach, a desirable multi-family house was sold by a specialized insurance company to an investor seeking such properties.
The financial returns for these suburban properties are noteworthy. In Langendorf and Wichtrach, returns were 3% and 4% net of all costs, respectively. In contrast, similar properties in Zurich would not even be sufficient to purchase the land, as they often cost four to five times as much. Over the past few years, a mistaken belief has prevailed that a good investment involves buying expensive urban buildings.
However, real estate economist Andreas Loepfe argues that the "prime locations" success dogma is one of the most stubborn prejudices within the industry, based on weak numbers. Zurich's property market is less stable than peripheral markets, with prices and rents fluctuating more. The longer an investor waits to recover their investment due to the high initial cost, the more volatile the investment becomes.
The list of fallacies is extensive, with Loepfe noting that "what everyone desires is systematically overpaid." Overall, he advises that long-term stable returns are best achieved with properties in less conspicuous locations. While location is crucial, investing too much in premium locations can be harmful, resulting in lower returns and heightened sensitivity to interest rate changes.
Written by urgent.news from NZZ Wirtschaft's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
