property-maintenance-expenses-how-to-save-up-for-them
Articles

How to Save Up for Property Maintenance

Individual structural elements need to be renovated or replaced regularly to ensure your home retains its value over the years. It's never too soon for homeowners to start creating reserves to pay for these expenses. The favorable interest rate environment offers an opportunity to do just that.

Anyone wishing to preserve the value of their home should take good care of their house or apartment. That includes renovations and investments in the structure of the property, which occur at irregular intervals. The work often requires large sums of money, but not every homeowner has sufficient funds available.

Homeowners should be saving up for future property maintenance expenses today.

Estimates support this advice. Each year in Switzerland, between 12 and 16 billion Swiss francs would be required to carry out all the maintenance work on existing properties necessary to maintain good building stock.

Structural Elements: What Needs to Be Renovated and When

Poorly maintained properties lose value. That is why they should be well maintained and certain structural elements and appliances be renewed or replaced from time to time. Even though useful lives vary widely, there are some empirical guidelines. Carpets and wallpaper generally look worn after ten years. After roughly 15 years, a new stove and oven are needed. A heating system usually lasts about 25 years. It takes between 25 and 35 years before windows need replacing. Approximately every 30 years, the facade of a house should be replastered. These renovations cost money. Homeowners should begin saving now for property maintenance expenses and build up adequate reserves.

What Structural Elements Need Replacing and When

Source: Credit Suisse, Average Useful Lives of Building Elements

Structural Elements In years
Wallpaper, paint 5-10
Parquet flooring 20-40
Kitchen appliances 10-20
Heating and ventilation systems 20-30
Window frames 25-35
Slanted roof with tiles 50

The Favorable Interest Rate Environment Offers an Opportunity to Save

Current interest rates on mortgages are far below the long-term average. This considerably reduces the share of interest charges in many homeowners' household budgets. The difference between the 5% interest rate typically used by the banking sector to calculate affordability and the actual interest charges can be put aside for property investments. As seen in the sample calculation below, homeowners can thus quickly build up a tidy sum for maintenance on their properties.

Example of "Theoretical" Savings Potential in Swiss Francs*

* Excluding income from possible savings accounts or investments

Mortgage amount
500,000
Mortgage interest rate p. a. (in %), as of May 2018
1.8%
Imputed interest rate p. a. (in %) 5.00%
Mortgage term (in years) 10 years
Interest expenses p. a. (1.8%) 9,000
Imputed interest expenses p. a. (5.00%) 25,000
"Theoretical" savings potential p. a. (3.20%)* 16,000
"Theoretical" savings potential over mortgage term (3.20%)* 160,000