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Old 06.01.2011, 10:02
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Explanation for the Swiss Housing System?

If you want to buy a house in Switzerland, prices are starting in the 1 million CHF range and upwards. 60 to 70% of the populatuion here rents. In most of the rest of the world, people buy their own home, pay it off over 20 years or so, and then own it. In Switzerland, when you consider typical household incomes are in the 100-200k CHF range, to pay off a 1 Million CHF in your lifetime is impossible (without someone dumping a large sum of cash in your lap). So banks accommodate this by allowing you to split homeloans into 2 parts, and leaving the larger part to never be paid back, ie: you can just keep paying interest on it forever. That's pretty much unheard of in the rest of the world, but seems something unique to Switzerland in order to allow average families to buy a house that they otherwise couldn't afford.

Why is that? Ok, it's easy to say "that's just how it is here" or "Switzerland is an expensive place to live, deal with it", but that's not really an explanation for why the system is like this. Is it set up to keep foreigners from snapping up Swiss property? If yes, there could be other laws put it place to stop that (and there already are some actually, depending on Kanton). And why are house prices hig accross the whole country pretty much? I can see a house being expensive near Zürich or Geneva, but 1 million CHF for an average house 30 min outside BERN??

Anyway, I don't mean this to be a rant, but I'm curious to know, on a higher-level, why the Swiss housing system is geared to make people owning their own home unattractive? Not just the hiogh cost, but then "eigenmietwert" actually punishes you by making you pay more taxes once you home is paid off (huh ) Usually owning your own home is not just an investment, but makes you deeper into the community, by having a stake in it, and things like that. I'm a little confused by the system here...
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Old 06.01.2011, 10:11
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Re: Explanation for the Swiss Housing System?

A property owner is charged rental tax ( Imputed rental value ). Eigenmietwert in DE.
Interesting article from Swissinfo.
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Old 06.01.2011, 10:31
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Re: Explanation for the Swiss Housing System?

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Interesting article from Swissinfo.
Yea, that article points out pretty much the same as I did, from the buyer/renter perspective ie: it's so expensive here, people never pay off their properties, most rent because the high-costs of ownership...

...but my question, is why is the whole system here geared in this way? Which is very different from most of the rest of the world, where home-ownership is the norm... why is it discouraged here with high prices and penalty taxes? And not just in major cities, but accross the whole country?
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Old 06.01.2011, 10:41
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Re: Explanation for the Swiss Housing System?

My explanation is to keep providing an income to the bank.

I would say 100% of houses have a mortgage in Switzerland, and if you are an owner of a house without a mortgage, you pay much more taxes because of it.

So if all 100% of houses have a mortgage, who is making all the money. The banks. And of course, Switzerland is a financial service industry. So it is best to keep the banks happy, and keep the country running.

great system /sarcasm.
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Old 06.01.2011, 10:42
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Re: Explanation for the Swiss Housing System?

To answer you question, it's all part of the country's capitalistic policy which is not all the time in favor of our rights to live as human.

Switzerland is a totally money driven country, keeping the real estate market stable or always on the rise is one way to go for them by securing low offers and guaranteeing high demand.
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Old 06.01.2011, 12:13
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Re: Explanation for the Swiss Housing System?

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My explanation is to keep providing an income to the bank.

I would say 100% of houses have a mortgage in Switzerland, and if you are an owner of a house without a mortgage, you pay much more taxes because of it.

So if all 100% of houses have a mortgage, who is making all the money. The banks. And of course, Switzerland is a financial service industry. So it is best to keep the banks happy, and keep the country running.

great system /sarcasm.
Couldn't have said it better!
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Old 06.01.2011, 12:21
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Re: Explanation for the Swiss Housing System?

Its amazing how much crap thinking goes on on the EF
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Old 06.01.2011, 12:25
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Re: Explanation for the Swiss Housing System?

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Its amazing how much crap thinking goes on on the EF
Please do explain.
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Old 06.01.2011, 12:30
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Re: Explanation for the Swiss Housing System?

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To answer you question, it's all part of the country's capitalistic policy which is not all the time in favor of our rights to live as human.

Switzerland is a totally money driven country, keeping the real estate market stable or always on the rise is one way to go for them by securing low offers and guaranteeing high demand.
How about something more human-centric: a conscious choice to prevent out-of-control real estate bubbles caused by wild speculation in a limited market by making owning expensive, but renting affordable. Affordable in the limited Swiss context, certainly - don't go comparing to Oklahoma, here.

Seems to me it's working.

//ata
Disclaimer: all critical thinking behind this notion provided by the more economically minded half.
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Old 06.01.2011, 12:36
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Re: Explanation for the Swiss Housing System?

From discussions with Swiss friends over the years, I might guess that attitudes to risk play a part in the preference for renting.

Many of my colleagues have come to the conclusion that yes, buying is cheaper, often much cheaper, than renting. But but but... what if? What if there is a disaster, what if something unexpected happens? It seems that renting is a certainty, you know exactly what you must pay every month. The higher cost of renting seems to be an acceptable price premium in exchange for that certainty.

Hard for me to understand, coming from a society where home ownership is the holy grail. But there ya go...


(Of course, a handful of anecdotes does not a dataset make. I could be talking b*ll*cks. )
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Old 06.01.2011, 12:51
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Re: Explanation for the Swiss Housing System?

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My explanation is to keep providing an income to the bank.

I would say 100% of houses have a mortgage in Switzerland, and if you are an owner of a house without a mortgage, you pay much more taxes because of it.

So if all 100% of houses have a mortgage, who is making all the money. The banks. And of course, Switzerland is a financial service industry. So it is best to keep the banks happy, and keep the country running.

great system /sarcasm.
In a way true, the current system keeps money coming into Swiss government in the form of high taxes on paid off homes, or in case of unpaid mortgagues then money from interest to the banks. So I would say the current system is geared to benefit more the govt and banks rather than the people, who want to simply buy a (somewhat affordable) house to live in. However, since Switzerland is a direct democracy, I assume this current form of housing is acceptable to them? Otherwise they could make an initiative and re-write some rules?

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How about something more human-centric: a conscious choice to prevent out-of-control real estate bubbles caused by wild speculation in a limited market by making owning expensive, but renting affordable.
The current system works against the average, simple family who wants to buy their own house and live in it. There's other ways to prevent "flipping" houses besides making the prices extraordinarily high. For example, there's some kind of law here that says if you sell a home less than 5 years after you bought it, you have to pay taxes ont he income. They could strengthen these kinds of laws, for example, by saying you must live in the property as well or get taxed harder, or any secondary properties get taxed harder, etc.. This would make "flipping" properties not worth it, but still allow "normal" families to buy a house to live in themselves.
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Old 06.01.2011, 13:11
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Re: Explanation for the Swiss Housing System?

Or it could be, you know, supply and demand. Small country, lots of people with lots of money want to be here, naturally prices are high.
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Old 06.01.2011, 13:25
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Re: Explanation for the Swiss Housing System?

I understand the "preferring to rent" mindset, I never used to have sleepless nights over "what if something breaks?" or "what if the cost is much higher than we calculated, what if we forgot something?" but I am definitely being attacked by anxiety now. And I only move in six months, better fill up on the tranquilisers now, it's going to be a tough ride. And then there'll be house owners' meetings, setting out house rules, fights over these rules, finding out that the neighbours' downstairs took part in an experiment that either gave them the hearing of a dog (i.e. they complain when you cough) or destroyed their eardrums (i.e. you can't hear yourself cough)... If you rent, you can just move away if all these things bother you too much.

The other thing is that rents were not as high in the past as they were now. I remember we had a 5.5 room apartment in Witikon that cost CHF 1700 per month in the 90ies, that would be unthinkable now. A lot of houses are owned by housing associations, so their rents are much more humane, more so than if you owned a place but if you manage to get into a place like that, you never leave unless they kick you out because you don't fulfill their criteria, such as a minimum occupancy or a maximum salary. There is also simply not enough property to buy for everyone who wants to buy one, anything within a reasonable price range has so many people going for it, that the price then usually ends up being higher anyway. At least with new builds the price is fixed, but there you have to get off the mark pretty quick and trust that it will turn out how you imagined.

As for buying a whole house for yourself (and you could STILL have troublesome neighbours!), there is simply not enough room for all the houses that people would want, so again, more people wanting to buy than people selling.
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Old 06.01.2011, 13:28
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Re: Explanation for the Swiss Housing System?

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Or it could be, you know, supply and demand. Small country, lots of people with lots of money want to be here, naturally prices are high.
I can understand that around major cities like ZH and GE, but seriously, 1 Million CHF for an average house 30 minutes outside of Bern (?!) Are people really that desperate to buy a house outside of Bern?

If you took a million bucks to any other country in the world, pretty much, you could buy something really, really sweet with that kind of bread. Here in CH, a million bucks gets you an average house not really that close to a major city (I've lived in Bern a long time, despite being the capital, it's not a major city ). Is that really supply and demand in effect?
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Old 06.01.2011, 13:39
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Re: Explanation for the Swiss Housing System?

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Its amazing how much crap thinking goes on on the EF
Agreed.

Here are some more crap thoughts:

Firstly property is NOT expensive in Switzerland. The value of the Swiss franc, however is. Compare UK house prices (London v Zurich) the value of the GBP. If we still had CHF3.50 = GBP 1, or better still in the 1950s when a 20 franc note was nicknamed the 'pound' as a pound was worth the same.

The problem is supply - there is almost no 'property market' - and the population of Switzerland has increased substantially over the last 20 years.

Home ownership has not reach critical mass in Switzerland and is regarded by the majority of Swiss who rent as impossible and such a commitment that it simply should be not be attempted.

Once having bought the Swiss generally don't ever move except to the old folks' home. Hence you will find developments with every family about the same age living there and none for sale.

The tax system is designed so that people provide for their futures in other ways than buying a house. The average Brit has only £500 savings - but 75% have a home that can always be sold and they can down-size tax free.

Finally, I read and article which stated that Bangeladesh as a home ownership rate of 95% and Germany under 50%. Home ownership and the profits realised from this - for doing absolutely nothing but live in it - do not help an economy.

The UK/US obsession with buying your own home has taken the urgency out of working and providing for retirement. A Swiss once described living here as being in a leaking boat that always needed bailing out. And so they could never relax...
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Old 06.01.2011, 13:52
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Re: Explanation for the Swiss Housing System?

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Firstly property is NOT expensive in Switzerland. The value of the Swiss franc, however is. Compare UK house prices (London v Zurich) the value of the GBP. If we still had CHF3.50 = GBP 1, or better still in the 1950s when a 20 franc note was nicknamed the 'pound' as a pound was worth the same.
i think housing affordability can be tied more directly to a % of the average income within the same country, and not looking at exchange rates outside of the country. Here in CH, average household incomes are 100-200k CHF, which makes property prices still out of reach basically. Comparitively, in the US or UK, people still manage to buy homes and pay them off over 20 years. I think that's the true measure of affordability.

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The tax system is designed so that people provide for their futures in other ways than buying a house.
How? In other countries, you work between the ages of 30-60 years old, pay off your home, then retire around 60 or whatever and live off your measly pension, which is enough to put food on the table, but not enough to continue paying rent/mortgauge.

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The UK/US obsession with buying your own home has taken the urgency out of working and providing for retirement. A Swiss once described living here as being in a leaking boat that always needed bailing out. And so they could never relax...
So when you reach retirement age in CH, then what, you have to keep working till you die then? Thats a good thing, or I'm missing something?
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Old 06.01.2011, 13:57
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Re: Explanation for the Swiss Housing System?

I don't see the point in owning a house when you retire, it just doesn't make sense, who needs all that space and expense.

It might make sense when you have kids at home, but I've never wanted to own one, and now that my kids are grown and (hopefully) will soon leave the nest, I really don't see the need for more than a couple rooms.

Tom
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Old 06.01.2011, 13:59
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Re: Explanation for the Swiss Housing System?

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I don't see the point in owning a house when you retire, it just doesn't make sense, who needs all that space and expense.
Well, you need someplace to live right? You could sell you house and buy a small apartment then. But if you rent all your life, you have nothing to sell when you're 65 years old...
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Old 06.01.2011, 14:14
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Re: Explanation for the Swiss Housing System?

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i think housing affordability can be tied more directly to a % of the average income within the same country, and not looking at exchange rates outside of the country. Here in CH, average household incomes are 100-200k CHF, which makes property prices still out of reach basically. Comparitively, in the US or UK, people still manage to buy homes and pay them off over 20 years. I think that's the true measure of affordability.
This link explains the above.
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The most sought after properties are detached houses, and historically in Switzerland, these cost about 8 times average annual household income. This makes owning a home in Switzerland expensive by international comparison. (In the UK, a home still only costs 5.5 times average income)

What makes homes still affordable, though are the relatively low mortgage rates available, which are well below the long term average of 5%, and can be found for as low as 1.5%.

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How? In other countries, you work between the ages of 30-60 years old, pay off your home, then retire around 60 or whatever and live off your measly pension, which is enough to put food on the table, but not enough to continue paying rent/mortgauge.

So when you reach retirement age in CH, then what, you have to keep working till you die then? Thats a good thing, or I'm missing something?
In Switzerland you provided through savings, investments and pension funds adequate income for your retirement to continue paying rent or mortgage....

<edit> but what you can't do in Switzerland is not be a property owner and not provide for your retirement...
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Old 06.01.2011, 14:18
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Re: Explanation for the Swiss Housing System?

It is about the big guys keeping things in their hands and control, not the little guys. Generally speaking this has served CH well without massive bubbles and busts, limited speculation, control over urban planning and development, and stable financial markets and interest rates.

Keep in mind a significant amount of the rental property is the banks, insurance companies, pension plans, and similar large organisations owning these. Add in the relatively small percent of homeowners, who necessarily have a significant mortgage, again owned by bank or financial co., due to the tax structure, inheritance laws, and also the cost. Thus nearly all controlled directly or indirectly by such big guys noted above.
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