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Living and Commuting: Where's the Least Expensive Place to Live?

Credit Suisse Publishes Study on Disposable Income in Switzerland

Living costs are not the same everywhere in Switzerland. Swiss households can optimize their budgets by moving to a different location. Substantial savings can be achieved, sometimes by moving only within a short distance. Taxation is only one criterion for assessing whether a municipality is a financially attractive place to live. Freely disposable income, which takes account of all the costs relevant to a particular residential location, is a more comprehensive indicator. Since 2006, the economists at Credit Suisse have calculated the freely disposable income for a variety of exemplary household types in the approximately 2'700 Swiss municipalities. The latest calculation of freely disposable income in Switzerland at municipal level, the so-called RDI indicator, now additionally considers commuting costs.

The selection of the "right" place to live is governed by a variety of criteria. Apart from residential location, local amenities, availability of suitable properties, emotional criteria and personal contacts in the locality, financial factors play a key role. According to the economists at Credit Suisse, the analysis of the tax burden alone oversimplifies the situation. Other mandatory charges, e.g. health insurance premiums or the level of tax on imputed rent for homeowners, also need to be taken into account when assessing the financial attractiveness of residential locations. Other important factors include location-dependent fixed costs such as rents, real estate prices and, not least, commuting costs.

Key Optimization Parameter: Freely Disposable Income
Freely disposable income is the pivotal financial criterion in the choice of a residential location. It denotes the amount available to households for private consumption, after summing up all income components and deducting all mandatory charges and fixed costs. Given that this value varies according to the features of specific households, the economists at Credit Suisse have calculated the freely disposable income for a wide range of exemplary household types in the approximately 2,700 Swiss municipalities, and have created an indicator for the freely disposable income in the Swiss cantons and municipalities (Regional Disposable Income or RDI indicator).

Cantonal Rankings: Uri in the First Place
In previous calculations Appenzell Innerrhoden took the top position in the cantonal rankings (Figure 1) for financial residential attractiveness, but this year it has been displaced by Uri. Since 2009, middle-class households in Uri have benefited from a considerable reduction in the tax burden. At the same time, their housing costs are comparatively low. On the RDI indicator scale, the mainly urban cantons of Geneva, Basel-Stadt, Vaud, Basel-Landschaft and Zurich continue to have values below the average. High rents and real estate prices along with the relatively high mandatory charges – particularly in the cantons of Western Switzerland – make living in the urban centers an expensive proposition. The low-tax canton of Zug has lost one position in the cantonal rankings due to an above-average rise in rents and property prices. The opposite is true in the canton of Jura, which has fallen five places in the 26-canton rankings: Despite boasting by far the lowest housing costs nationwide, its financial attractiveness is dogged by persistently high mandatory charges.

Freely Disposable Income in Municipalities: Commuting Can Pay Off
In calculating the freely disposable income in the Swiss municipalities, the economists at Credit Suisse now additionally consider the travel costs to the nearest center, for both public transport and private motor vehicles. As the RDI indicator at municipal level shows (Figure 2), living costs in peripheral urban areas are significantly lower than in the centers, despite higher commuting costs. This has shown that considerable savings can sometimes be achieved even by relocating only within a short distance, e.g. from a city center to a suburban municipality. Areas of conurbations are particularly attractive to households seeking a sizable living environment that does not entail an excessively long commute to work. The Lake Geneva region is a case in point: Even when allowing for commuting costs, those municipalities in the canton of Fribourg that enjoy good transport links to the urban centers of Lausanne, Vevey and Montreux are considerably more appealing from a financial point of view than the neighboring municipalities in the canton of Vaud. Municipalities in the cantons of Aargau, Schaffhausen, Thurgau and Schwyz enjoy a similar advantage over the Greater Zurich Area.

Polarization in mountain regions: Expensive Tourist Resorts, Low-Cost Peripheral Areas
In terms of financial residential attractiveness, the overall picture is less uniform in Switzerland's mountainous regions. Of particular note are the internationally famous tourist areas and resorts, such as the Upper Engadine, Davos, Grindelwald, Zermatt, Bagnes/Verbier and Gstaad-Saanen, whose RDI values are well below the national average. This is mainly attributable to the high demand for second homes at these locations and the consequent price pressure on the household budgets of the local population. Not surprisingly, the highest RDI values are found in the peripheral municipalities of Central Switzerland and of the canton of Graubünden, which are not known as traditional tourist resorts.

Analyze Your Home Municipality
By analyzing the financial appeal of residential locations, the economists at Credit Suisse endeavor to make the regional differences between Swiss municipalities and cantons as transparent as possible. This allows private individuals to undertake soundly based, reliable assessments of the residential appeal of their present or future home locations.