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  #41  
Old 14.03.2015, 17:35
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Re: housing prices... where are they going?

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- if your 2nd-pillar is under financed, one could pay additional money in there (which can be subtracted from the taxable income, to some point)
- or you could take money out of it (subject to tax) to lower the mortgage and then pay it back to lower taxes
- 3rd-pillar contributions should be max-ed out for you and your partner every year
- if you can't afford and max-out a 3rd-pillar for you and your partner, there's a problem somewhere in your calculation

Can you please elaborate on the 3rd pillar, as not familiar with it in all details?

Regarding 2nd pillar it's clear.
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  #42  
Old 14.03.2015, 17:47
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Re: housing prices... where are they going?

Recalculating the model with 3-, 4-, or a 5 year mortgage from Swissquote, homegate.ch or hypomat.ch will show a totally different picture, resp. how beneficial it can be to buy vs to rent. Looking 20 or 10 years ahead, so many variables can change, it is hard to make any meaningful comparison btw rent and buy, and the outcome of the calculations become rather useless imho.

In general I also see certain risks/a bubble in parts of the real estate market (certain regions) yet mostly in the 1.5m+ range, where I see apartments/houses for sale much longer than a few years ago. Or newly announced projects not selling even one apartment. In my view it's easier to overpay with a few hundred kCHF on such a property, but then again people who can 'easily' afford these, might not care at all
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  #43  
Old 14.03.2015, 18:02
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Re: housing prices... where are they going?

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I made a slight mistake in my previous calculations, and to correct myself I have calculated a longer term, 20 year, optimistic-pessimistic scenario. Optimistic for the first 10 years (fixed rate 1.2% which is representative of today), and Pessimistic for the next 10 years (fixed rate 4.0% which is 1% short of the 5% bank stress scenario).

Home price: 1,000,000
Downpayment: 200,000
Hypothek 1: 680,000 (interest only part)
Hypothek 2: 120,000 (to be amortized in 15 years)
Rate (0-10y): 1.2%
Rate (10-20y): 4%
Monthly expenses: 600
Equivalent rent: 2,500 (for "comparison" vs. home ownership)

As before, ignoring the impact of taxes, as assuming eigenmietwert is more or less offset by interest payment.

In years 0y - 10y
-----------------
Mortgage payment: 1,410
Total payment (with nebenkosten): 2,010

In years 10y-15y
---------------
Morgage payment: 3,060
Total payment (with nebenkosten): 3,610

At the end of year 15, the balance of the morgage is 680,000 (i.e. Hypothek 2 is fully paid).

From year 15 to year 20:
------------------------
Mortgage payment: 2,270 (which is interest only on balance of Hyp 1)
Total payment: 2,870

If at the end of year 20 the home is sold for the same price (1,000,000), the P/L is:

1,000,000
- 200,000 (downpayment)
- 680,000 (hypothek1 balance)
- (600,000 [rent] - 642,000 [mortgage payments rounded])
~= 80,000

Overall, a small profit, albight very risky indeed (could go either way depending on interest rates and house value in 20 years).
Thinking you will get a 10 year fix in 10 years for 4% is optimistic it could be 8 to 10% by then.
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  #44  
Old 14.03.2015, 18:25
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Re: housing prices... where are they going?

If it's only about money, then go get a tent (cheap at Coop with silly points) see a farmer and come to arrangement, you'll be quids in, even make Onnasis seem like a pauper !

However a lot of people buy a house with other things in mind, such as comfortable living, pleasure of doing things to your property, planning modifications etc etc.

Renting is an option but generally quality of living is not so good as living in a purchased property, also risk you may be asked to leave.

Prices go up and down, you'll never hit the bottom or the top of the market with any accuracy, you should aim for +/-10-15%. Whilst prices are under some pressure actually, the long term outlook is probably more up than down here, land is at a premium, and they quit making that with Palm Islands in Dubai.

It all comes down to do you want to make money or do you want to live comfortably within your own castle.
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  #45  
Old 14.03.2015, 18:37
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Re: housing prices... where are they going?

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Thinking you will get a 10 year fix in 10 years for 4% is optimistic it could be 8 to 10% by then.
could be 8 to 10% but will it be?
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  #46  
Old 14.03.2015, 18:58
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Re: housing prices... where are they going?

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There's even more complexity, because:
- interest rates are so low, the interest doesn't come close to the Eigenmietwert in most cases (unless you earn a lot and have a lot more money than the 20% downpayment, so the bank could allow you to leverage to the theoretical maximum)
Stupid newbie question but you've got me wondering now: is Eigenmietwert normally written as a monthly or yearly figure? Ours seems too high for one and too low for the other.

If it's the monthly figure, it's way above local market rates (especially given the age and condition of the house) and maybe I need to ask for a reassessment.

If it really is the annual figure, it's way below market rates, even given the aforementioned age and condition. It's also only about 20% of what we pay in mortgage interest, which is why your comment has me second-guessing.
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  #47  
Old 14.03.2015, 19:01
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Re: housing prices... where are they going?

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If it's only about money, then go get a tent (cheap at Coop with silly points) see a farmer and come to arrangement, you'll be quids in, even make Onnasis seem like a pauper !

However a lot of people buy a house with other things in mind, such as comfortable living, pleasure of doing things to your property, planning modifications etc etc.
Money is not only about making profit, but also about affordability and being able to make mortgage payments in the long run, should things turn sour.

In the last decade a lot of people in US, Ireland, etc. have bought their homes just for that - comfortable living, planning modifications, and so on - only to find out later that they could not (easily) make payments and needing to sell/default/etc.

Farmer and tent sounds nice, but "Baurecht" is not cheap either in this country.
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  #48  
Old 14.03.2015, 20:40
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Re: housing prices... where are they going?

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could be 8 to 10% but will it be?
Well the banks don't think so because you can fix for 15 years at 2%
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  #49  
Old 14.03.2015, 20:55
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Re: housing prices... where are they going?

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Money is not only about making profit, but also about affordability and being able to make mortgage payments in the long run, should things turn sour.

In the last decade a lot of people in US, Ireland, etc. have bought their homes just for that - comfortable living, planning modifications, and so on - only to find out later that they could not (easily) make payments and needing to sell/default/etc.

Farmer and tent sounds nice, but "Baurecht" is not cheap either in this country.
Didn't even mention the word profit, i did mention how you could potentially save money though.

I expect at the end of the day renting or buying will cost about the same, just buying far more pleasure when you sitting on the terrace built with your hands sipping a G&T... Wow, i did that
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  #50  
Old 14.03.2015, 21:05
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Re: housing prices... where are they going?

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Thinking you will get a 10 year fix in 10 years for 4% is optimistic it could be 8 to 10% by then.
it could be, but then again...

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  #51  
Old 14.03.2015, 21:33
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Re: housing prices... where are they going?

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Stupid newbie question but you've got me wondering now: is Eigenmietwert normally written as a monthly or yearly figure? Ours seems too high for one and too low for the other.

If it's the monthly figure, it's way above local market rates (especially given the age and condition of the house) and maybe I need to ask for a reassessment.

If it really is the annual figure, it's way below market rates, even given the aforementioned age and condition. It's also only about 20% of what we pay in mortgage interest, which is why your comment has me second-guessing.
Here in SZ (usual caveats about cantonal differences apply) Eigenmietwert is an annual figure. It is figured as a percentage of the theoretical market rate, I don't have the paperwork to hand, but 65% some how sticks in my mind. Additionally, your assessed rate might or might not accurately reflect the current market depending on how recent the last assessment was.

The number derived from whatever formula is used is then added to your income, and you will then pay tax based on your bracket.

So the actual amount you pay is generally quite a bit lower than market rental rates... And often fully offset by your mortgage deduction. (Hence the reason many people opt never to pay off their mortgages.)
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  #52  
Old 14.03.2015, 22:38
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Re: housing prices... where are they going?

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could be 8 to 10% but will it be?
I suspect so, when you can make 10-15% compound with equities over 10,20,30,40,50,100 years WTF will anybody lend money below 5% long term?
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  #53  
Old 14.03.2015, 22:44
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Re: housing prices... where are they going?

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Here in SZ (usual caveats about cantonal differences apply) Eigenmietwert is an annual figure. It is figured as a percentage of the theoretical market rate, I don't have the paperwork to hand, but 65% some how sticks in my mind. Additionally, your assessed rate might or might not accurately reflect the current market depending on how recent the last assessment was.

The number derived from whatever formula is used is then added to your income, and you will then pay tax based on your bracket.

So the actual amount you pay is generally quite a bit lower than market rental rates... And often fully offset by your mortgage deduction. (Hence the reason many people opt never to pay off their mortgages.)
65% of 200 plus % of market value sounds like a lot, of course those figures come from your posts in this thread.

I am staggered by how much your perception of the benefits of owning a property in CH have changed over the last couple of years. I guess the value of your home falling by 50% plus in a short time changes the numbers significantly.
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  #54  
Old 14.03.2015, 22:54
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Re: housing prices... where are they going?

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I suspect so, when you can make 10-15% compound with equities over 10,20,30,40,50,100 years WTF will anybody lend money below 5% long term?
Yes.

Risk/reward is key. Equities and real estate have different risk profiles (just as bank deposit vs. playing lotto, rewards are different but so are risks).

The other reasons are of course regulatory and capital requirements, which differ based on the type of investments the financial institutions make. So overall, there is a valid case for lending at a certain rate long term.
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  #55  
Old 14.03.2015, 23:00
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Re: housing prices... where are they going?

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65% of 200 plus % of market value sounds like a lot, of course those figures come from your posts in this thread.

I am staggered by how much your perception of the benefits of owning a property in CH have changed over the last couple of years. I guess the value of your home falling by 50% plus in a short time changes the numbers significantly.
Guess is not a word CH does business with but you probably already know that already.
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  #56  
Old 14.03.2015, 23:42
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Re: housing prices... where are they going?

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Can you please elaborate on the 3rd pillar, as not familiar with it in all details?

Regarding 2nd pillar it's clear.
https://en.comparis.ch/banken/vorsorge/default.aspx

https://en.comparis.ch/banken/vorsor...le3a-2014.aspx

It's more of a tax-saving scheme than an investment scheme (because the yields are so low - unless you opt for a fund-account instead of a pure savings account).
But still worth it, because it's an easy and risk-free way to save taxes without actually spending the money.

You can pay as much as you want into a so called "3a"-account - but only the first 6639 are deductible from your taxable income. If you are married, you can subtract the amount twice (provided both parties have actually paid).
The links should explain it sufficiently.
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Old 15.03.2015, 11:39
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Re: housing prices... where are they going?

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If you are married, you can subtract the amount twice (provided both parties have actually paid).
And provided both are employed.

Tom
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Old 15.03.2015, 11:52
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Re: housing prices... where are they going?

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And provided both are employed.

Tom
The 3rd Pillar has nothing to do with an employer. If married, you are taxed together jointly and you deduct both you Pillar 3s off your combined income.
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Old 15.03.2015, 11:55
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Re: housing prices... where are they going?

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65% some how sticks in my mind
My TI tax form states 60-70%, so 65% sounds right.

And the assesd value for tax purposes as more like 40% of market value, or less. (MIL's house was assesd at 600k, but sold for 1.8m)

Tom
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Old 15.03.2015, 11:59
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Re: housing prices... where are they going?

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The 3rd Pillar has nothing to do with an employer. If married, you are taxed together jointly and you deduct both you Pillar 3s off your combined income.
No, you cannot, I checked. Otherwise, I would have done so.

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