Zug City Council Aims to Expand Real Estate Portfolio with Multi-Million Franc Credit Line

Buying houses made easy: The Zug city council wants to be able to get more involved in the real estate market in the future. For this he applied to the large municipal council for an amount in the millions.

Owning your own property is considered a surefire investment in Switzerland. Owning a house promises a good return for years to come, or a roof over your head according to your own ideas. No wonder, then, that the real estate market has almost dried up. And no wonder that property prices have risen sharply in recent years (zentralplus reported).

The city of Zug also appreciates the value of its own real estate. That is why it pursues the strategy in the real estate market of buying properties whenever possible instead of renting them. The city council is convinced that this will be cheaper for the city in the long term.

And the city council needs lots of its own properties. In addition to administrative buildings, the city needs school buildings and sports facilities. In addition, the city council wants to rent rooms and buildings to cultural institutions on good terms or hand over entire plots of land to housing cooperatives with building rights in order to promote the construction of affordable apartments.

If you add up the value of all buildings in the city of Zug and the undeveloped properties, you get a total of around one billion Swiss francs. But that’s not enough for the Zug city council.

City council wants to become more agile in the real estate market

That emerges from a new report and application. In it, the city council applies to the large municipal council for a credit line of 40 million francs for the acquisition of new properties. The special thing about it: The application is not about specific plots of land. Instead, the city council wants to have a reserve with the money, so to speak, so that it can access it quickly when the opportunity arises.

The city council has not yet set its sights on specific properties, says Urs Raschle, head of the finance department, on request. “But that’s exactly what it’s all about: With the framework credit, the city council wants to be able to react quickly and flexibly to offers when they arise.”

The current system is too rigid for the city council

Because the current handling is too rigid for the city council. Because the government’s spending power is only five million francs. In today’s real estate market, little can be done with that. If the city council wants to buy a more expensive property, the consent of the large municipal council is first required. And for applications of more than seven million francs, the loan is even subject to an optional referendum.

In other words: the wheels of politics grind too slowly for the city council. In the fast-moving real estate market, the city council is always lagging behind. He writes in the report and application: “In addition to the already dried up real estate market in the city of Zug, these points contribute to the fact that the acquisition of land by the city of Zug is almost impossible.”

Urs Raschle confirms that in recent years the city of Zug has repeatedly turned a blind eye to the purchase of a plot of land because he was not able to act quickly enough on the market. For reasons of confidentiality, however, Raschle cannot give any examples.

Buying houses made easy

That should change with the 40 million loan. The city council would thus have the opportunity to strike the market quickly and easily without having to wait for parliamentary approval. In the future, only an opinion from the business audit committee of the municipal council would be mandatory. However, this would not have a direct influence on the purchase.

The city council has properties with a value between five and twelve million francs in mind. In individual cases, the purchase of more expensive plots of land should also be possible. Parliament should still have the last word on the purchase of large properties such as the Zurlaubenhof or the Göbli. However, there is no fixed limit from which Parliament has the last word again.

Only when the credit has been exhausted would the current processes apply again. In this case, however, the city council reserves the right to apply for a new loan. Buying houses made easy.

The City Council’s proposal is not new in Zug. Until 2017, the canton also had such a credit line for the purchase of land reserves. When the canton last applied for such a loan in 2011, the amount was comparatively cheap at CHF 14 million. The city council seems to be making big plans.