Go Back   English Forum Switzerland > Help & tips > Housing in general  
Reply
 
Thread Tools Display Modes
  #21  
Old 01.01.2019, 19:29
miniMia's Avatar
Forum Legend
 
Join Date: Apr 2007
Location: romandie
Posts: 9,999
Groaned at 99 Times in 90 Posts
Thanked 8,933 Times in 4,451 Posts
miniMia has a reputation beyond reputeminiMia has a reputation beyond reputeminiMia has a reputation beyond reputeminiMia has a reputation beyond reputeminiMia has a reputation beyond reputeminiMia has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Is there a standard expectation for downpayment/ deposit in Switzerland? Does it vary by whether you are a Swiss citizen or non-EU citizen etc?

As an example, as a non-US citizen and a non-green card holder I had to put down a 20% downpayment in order to qualify for a mortgage in Bay area.
That surprises me. I know no one in the US foreign or domestic that had to put down 20%.

In Switzerland you need 20% down.
Reply With Quote
  #22  
Old 01.01.2019, 19:38
Senior Member
 
Join Date: Aug 2010
Location: Zürich
Posts: 467
Groaned at 4 Times in 3 Posts
Thanked 384 Times in 221 Posts
ThomasSSS has an excellent reputationThomasSSS has an excellent reputationThomasSSS has an excellent reputationThomasSSS has an excellent reputation
Re: Advisable to buy property in Zurich?

Quote:
View Post
Off course you can just pay your house off at once if you please..
Actually, this brings up another very important point for people used to the US system to be aware of. In most US states, state law requires that you be allowed to repay your mortgage at any point without penalty, and what you say is literally true.

In Switzerland, this is not the case and it is normal for there to be a penalty based on the interest that the bank loses due to your prepayment. Therefore it is dangerous to assume that you can just pay it off and walk away - if rates drop (not that I see how they can get much lower than where they are now) you might need to pay a penalty similar to the remaining interest in order to terminate the mortgage early.

Last edited by ThomasSSS; 01.01.2019 at 19:52.
Reply With Quote
This user would like to thank ThomasSSS for this useful post:
  #23  
Old 01.01.2019, 20:02
Belgianmum's Avatar
Forum Legend
 
Join Date: Jan 2010
Location: Neuchâtel
Posts: 10,210
Groaned at 121 Times in 110 Posts
Thanked 14,501 Times in 6,395 Posts
Belgianmum has a reputation beyond reputeBelgianmum has a reputation beyond reputeBelgianmum has a reputation beyond reputeBelgianmum has a reputation beyond reputeBelgianmum has a reputation beyond reputeBelgianmum has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Maximum demanded

..
Also not true.

They can request 35% as that is the amount that has to be paid off at retirement age.
Reply With Quote
This user would like to thank Belgianmum for this useful post:
  #24  
Old 01.01.2019, 20:13
Forum Legend
 
Join Date: Mar 2016
Location: Leimbach, Zürich
Posts: 4,767
Groaned at 281 Times in 220 Posts
Thanked 5,121 Times in 2,614 Posts
EdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Who demands 30% for a primary residence?
If you pay 35% then you won't need to make any capital repayments, unless the value falls.
I said I thought and did all but present it as a fact, meaning I can easily be wrong.
Reply With Quote
This user groans at EdwinNL for this post:
  #25  
Old 02.01.2019, 09:00
Newbie 1st class
 
Join Date: Oct 2018
Location: MOUNTAIN VIEW
Posts: 13
Groaned at 0 Times in 0 Posts
Thanked 4 Times in 4 Posts
Calito has no particular reputation at present
Quote:
View Post
Taxes are high on fully owned properties. Thats why one pays the morgage off to the bank over a lifetime. The bank owns it in the meantime.

https://www.ch.ch/en/real-estate-foreign-national/
Am I reading this link correctly? As a third country national I cannot buy property with the intention of renting it out? That is, it won't be owner occupied.

Quote:
Third-country nationals
You do not require a permit to buy a main residence (e.g. single-family house or owner-occupied flat) or building land where you live if you meet the following requirements:

** You hold a valid residence permit, generally a B permit for foreign nationals.
** You will live in that main residence for as long as you hold residence in that location.
** If you wish to build on the land that you have purchased, you must do so within one year.

You will require a permit in order to purchase the following types of apartment:
** Holiday apartment
** Housing unit in an apparthotel (hotel with flats)
** Second home
Quote:
View Post
The 20% minimum down payment is the same for all cantons. At least 10% of that has to be cash but the rest can be from the pension fund.
Is there an advantage to using pension fund as downpayment? Thinking of the equivalent 401k in US - this is typically advised against as the growth of the retirement account gets stunted from what I have heard.

Quote:
View Post
20% is the normal minimum, 10% can instead be a pledge against a pillar 2 pension fund, (meaning that you only need 10% cash on hand) but that isn't relevant until you've built up such a Swiss fund.
Any advantage to using 10% from a pension fund? That is, assuming 20% can be provided as cash downpayment - is there any reason using the pension fund would be advantageous?

Quote:
View Post
It is normal to amortize down to 65% loan-to-value, and then pay only interest. This means that when the mortgage terminates (10 years is the longest fixed mortgage I've seen advertised) you need to refinance.
Sorry, unable to parse this - if you only pay interest after amortization to 65% ltv, then when do you pay off the principal?

Quote:
View Post
For this reason they have an affordability criteria based on what happens if interest rates go to 5% - will making a 5% p/a interest payment on the remaining balance be more than 1/3 of your pre-tax income? A subtle point that matters for some is how much of your bonus and stock grants should count for this purposes, and different banks can do this differently.

So if you have 20%+ down, e.g. because you sold a place and had real equity in it, you can work backwards to see how much you can afford. Also, you might get a lower rate if you can put 35% down and avoid amortization.
Do you mean to say if 35% is paid upfront as downpayment, you can just pay interest for ever (refinancing at the end of each loan term) without paying the remaining principal ever? Are the taxes on a fully owned property that high?

I feel like I am missing a critical piece of information for this to make more sense

Quote:
View Post
There is a comparis database showing that advertised apartment purchase prices in Zurich went from 6k/m^2 in 2007 to around 10k in 2012 and since then have more or less slowly risen past 12k/m^2. Whether this is a sign of strength, or a sign of a potential bubble is left as an exercise for the reader.
Interesting - my understanding of the US market is the 2008-2009 recession caused a pretty significant dip in prices but the market has recovered significantly since then. Especially California. So a similar dip did not happen in CH due to recession? (Comparis link is timing out for me, I'll keep trying).

Quote:
View Post
That surprises me. I know no one in the US foreign or domestic that had to put down 20%.

In Switzerland you need 20% down.
miniMia - this has been a requirement since I bought back in July 2015. Not sure how it was prior to that. Also, this is part of the difference between getting a conventional loan vs a jumbo loan.

Quote:
View Post
Actually, this brings up another very important point for people used to the US system to be aware of. In most US states, state law requires that you be allowed to repay your mortgage at any point without penalty, and what you say is literally true.

In Switzerland, this is not the case and it is normal for there to be a penalty based on the interest that the bank loses due to your prepayment. Therefore it is dangerous to assume that you can just pay it off and walk away - if rates drop (not that I see how they can get much lower than where they are now) you might need to pay a penalty similar to the remaining interest in order to terminate the mortgage early.
Ah, did not realize that.
This seems disadvantageous and in favor of banks - does this incentivize banks to keep interest rates low?

Last edited by 3Wishes; 02.01.2019 at 11:57. Reason: merging consecutive replies
Reply With Quote
  #26  
Old 02.01.2019, 09:24
Medea Fleecestealer's Avatar
Forum Legend
 
Join Date: Jul 2011
Location: Misery, but not the SoT one
Posts: 20,008
Groaned at 349 Times in 264 Posts
Thanked 14,564 Times in 8,366 Posts
Medea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Am I reading this link correctly? As a third country national I cannot buy property with the intention of renting it out? That is, it won't be owner occupied.
Yes, that is correct. Non-EU B permit holders can only buy property to use as their main residence and are not allowed to rent it out. Of course if you move out of the country then you could rent it, but not while you're a resident of Switzerland. If/when you get a C permit that restriction is removed, but that would be some years down the line, if ever.
Reply With Quote
  #27  
Old 02.01.2019, 09:29
Newbie 1st class
 
Join Date: Oct 2018
Location: MOUNTAIN VIEW
Posts: 13
Groaned at 0 Times in 0 Posts
Thanked 4 Times in 4 Posts
Calito has no particular reputation at present
Re: Advisable to buy property in Zurich?

Quote:
View Post
Also not true.

They can request 35% as that is the amount that has to be paid off at retirement age.
Could you explain this please? So banks would like you to have gotten to a 65% ltv ratio by retirement age. But if at that point everyone switches to paying only interest and interest rates are low - then why would anyone pay down more than 35%?
Reply With Quote
  #28  
Old 02.01.2019, 09:32
Forum Legend
 
Join Date: Sep 2006
Location: SZ
Posts: 9,457
Groaned at 23 Times in 22 Posts
Thanked 20,965 Times in 6,721 Posts
meloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Just a reminder that the current system of Eigenmietwert and deductions will be changing, likely an announcement will be made in the next months.

I bring this up because (expected) caps on mortgage interest and other deductions might change one's strategy on financing one's mortgage.

See ASITUS' post #3 here:
https://www.englishforum.ch/housing-...den-costs.html
Reply With Quote
This user would like to thank meloncollie for this useful post:
  #29  
Old 02.01.2019, 09:37
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 17,565
Groaned at 279 Times in 228 Posts
Thanked 14,901 Times in 8,296 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Am I reading this link correctly? As a third country national I cannot buy property with the intention of renting it out? That is, it won't be owner occupied.
Correct.
Reply With Quote
  #30  
Old 02.01.2019, 10:03
NotAllThere's Avatar
Forum Legend
 
Join Date: Oct 2008
Location: Baselland
Posts: 10,686
Groaned at 163 Times in 142 Posts
Thanked 15,128 Times in 6,127 Posts
NotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Taxes are high on fully owned properties.
Just checked for my community, and a CHF1'000'000 property would attract 0.46% at Cantonal, + 48% of that at community. Which comes to about 6800 a year.

Then notional rent adds around 20K to your taxble income.
Reply With Quote
This user would like to thank NotAllThere for this useful post:
  #31  
Old 02.01.2019, 10:05
Forum Legend
 
Join Date: Sep 2006
Location: SZ
Posts: 9,457
Groaned at 23 Times in 22 Posts
Thanked 20,965 Times in 6,721 Posts
meloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
This seems disadvantageous and in favor of banks - does this incentivize banks to keep interest rates low?
Just to point out one difference in social/economic mindset vis-a-vis the US:

Home ownership is not necessarily seen as a social good/social goal here as it is in the States where much of US economic policy is designed to encourage it. Rather, renting is the norm here, something like 70% of the population rent life long. In Switzerland home ownership is still the exception thus there is less political/economic will to create systems benefiting home owners.
Reply With Quote
The following 4 users would like to thank meloncollie for this useful post:
  #32  
Old 02.01.2019, 11:21
Senior Member
 
Join Date: Aug 2010
Location: Zürich
Posts: 467
Groaned at 4 Times in 3 Posts
Thanked 384 Times in 221 Posts
ThomasSSS has an excellent reputationThomasSSS has an excellent reputationThomasSSS has an excellent reputationThomasSSS has an excellent reputation
Re: Advisable to buy property in Zurich?

Quote:
View Post
Any advantage to using 10% from a pension fund? That is, assuming 20% can be provided as cash downpayment - is there any reason using the pension fund would be advantageous?
It means that you need less cash in hand, which is probably the primary justification for it - the ability to buy a place you might not otherwise be able to afford.

On the other hand, it means a larger face value of the loan. So more interest for the bank, the potential of losing your pension fund if things go badly, and more amortization is required during the life of the loan.
Quote:
Sorry, unable to parse this - if you only pay interest after amortization to 65% ltv, then when do you pay off the principal?
At the end you are required to pay off the principle. In practice this usually means refinancing. This is viewed as desirable because of taxes - instead of property taxes, you get an imputed extra income (unless you rent out for real income). This fictitious income increases your taxes, but mortgage interest can be deducted from it, so there is a tax benefit for always having a mortgage.

On the other hand, there is an agreement (I assume a regulation) that you are scheduled to amortize down to 65% by retirement age. There is nothing to keep the bank from asking for more amortization.
Quote:
Do you mean to say if 35% is paid upfront as downpayment, you can just pay interest for ever (refinancing at the end of each loan term) without paying the remaining principal ever? Are the taxes on a fully owned property that high?
Pretty much - long term mortgages here are interest only with a balloon capital payment at the end.

The effect of the imputed income is essentially a progressive property tax. High earners are affected by it more than low earners, since they will be in a higher tax bracket.
Quote:
Interesting - my understanding of the US market is the 2008-2009 recession caused a pretty significant dip in prices but the market has recovered significantly since then. Especially California. So a similar dip did not happen in CH due to recession? (Comparis link is timing out for me, I'll keep trying).
The graph on that page (you'll need to enter a Zurich post code, e.g. 8002, to see the graph) has some slight drops for some years, but nothing worth the name crash and the overall trend is as a said. Swiss real estate and currency can move up when the rest of the world has trouble. The term 'flight to safety' comes to mind.
Quote:
Could you explain this please? So banks would like you to have gotten to a 65% ltv ratio by retirement age. But if at that point everyone switches to paying only interest and interest rates are low - then why would anyone pay down more than 35%?
My understanding is that for the most part people don't pay down more than 35%, though of course the optimum economic decision would depend on what else you have to do with your money.

Last edited by ThomasSSS; 02.01.2019 at 11:33.
Reply With Quote
The following 3 users would like to thank ThomasSSS for this useful post:
  #33  
Old 02.01.2019, 16:30
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 17,565
Groaned at 279 Times in 228 Posts
Thanked 14,901 Times in 8,296 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Just checked for my community, and a CHF1'000'000 property would attract 0.46% at Cantonal, + 48% of that at community. Which comes to about 6800 a year.

Then notional rent adds around 20K to your taxble income.
A notional 1,000,000 property probably costs 1,400,000 so your wealth tax will likely be significantly lower as you will probably have a negative net worth on paper. Remember that any loan is deducted from assets before calculating net worth.

Come retirement if your income is too low you will not be able to refinance so the property needs to be sold.
Reply With Quote
This user would like to thank fatmanfilms for this useful post:
  #34  
Old 02.01.2019, 17:08
Junior Member
 
Join Date: Jun 2015
Location: London
Posts: 68
Groaned at 19 Times in 6 Posts
Thanked 102 Times in 32 Posts
Brian1985 has made some interesting contributions
Re: Advisable to buy property in Zurich?

I neither own property or wish to own property in Switzerland so I hope my advice is unbiased.

If your'e coming from an Anglo-Saxon market like the US, Canada or the UK you will be used to the idea of fully paying off a mortgage over a set time period. Here in Switzerland mortgages are mostly perpetual (incentivized by the tax code) and the bulk of the principal never gets repaid. Best to fully understand how the system here works before doing anything.

For example, say you buy a CHF 100,000 apartment. You put down 20% (CHF 20,000) and you take out a first mortgage of 15% (CHF 15,000) which gets fully repaid over a number of years, and a second mortgage of 65% (CHF 65,000) which remains outstanding. The way the system works is that (i) house prices would need to fall by 35% before the bank would take a hit on the CHF 65,000 second mortgage which is unlikely to happen outside of a shock to the system, and (ii) the power of inflation in house prices erodes the value of the debt. So, for example, if the house doubles in value over a 20 year period, and is now worth CHF 200,000, the debt is still the same at CHF 65,000 which increases the collateral coverage for the bank.

The downside is if prices fall you can face a margin call from the bank, and can be asked to top up your equity. Not sure how aggressive the banks are at enforcing these margin calls so I can't help on that front. But you could be faced with a cash call and not have the cash to meet that call....

The main "black swan" risk today is what will happen to inflation in Switzerland. Currently there is little to no inflation due to the strengthening of the Swiss Franc relative to other currencies. If this was to change and we started to get some inflation, we could see the SNB (our version of the Fed) start to hike rates. As you can see in the US with the Fed starting to raise rates, generally asset prices fall when rates go up....hence Mr. President is not very happy with the current Fed Chairman. A good case study is to look at the housing crash in Switzerland in 1991 when the SNB was forced to hike rates from 3.5% to 7% in 2 years. House prices took a massive hit and many home owners faced margin calls they could not make.

Final thing is, as usual, it's all about location. There are loads of empty apartments sitting around the silver coast where the builders refuse to lower the price because they don't understand the basic economics of supply & demand. At the same time, in high demand places like Zollikon (the Hamptons of Zurich) you still see people lining up to outbid each other many times over the asking price.
Reply With Quote
The following 11 users would like to thank Brian1985 for this useful post:
  #35  
Old 02.01.2019, 19:02
Newbie 1st class
 
Join Date: Oct 2018
Location: MOUNTAIN VIEW
Posts: 13
Groaned at 0 Times in 0 Posts
Thanked 4 Times in 4 Posts
Calito has no particular reputation at present
Quote:
View Post
Just checked for my community, and a CHF1'000'000 property would attract 0.46% at Cantonal, + 48% of that at community. Which comes to about 6800 a year.

Then notional rent adds around 20K to your taxble income.
Is this 6800 a year separate from property tax in US?

Quote:
View Post
Just to point out one difference in social/economic mindset vis-a-vis the US:

Home ownership is not necessarily seen as a social good/social goal here as it is in the States where much of US economic policy is designed to encourage it. Rather, renting is the norm here, something like 70% of the population rent life long. In Switzerland home ownership is still the exception thus there is less political/economic will to create systems benefiting home owners.
Very interesting.

Thank you for all the details. Very interesting to read that unlike US owning property is not necessarily considered a common goal. From what I have read about Zurich, rents are not low either (though not as expensive as SF bay area) so its surprising that 70% of the population rents.

Quote:
View Post
It means that you need less cash in hand, which is probably the primary justification for it - the ability to buy a place you might not otherwise be able to afford.

On the other hand, it means a larger face value of the loan. So more interest for the bank, the potential of losing your pension fund if things go badly, and more amortization is required during the life of the loan.

At the end you are required to pay off the principle. In practice this usually means refinancing. This is viewed as desirable because of taxes - instead of property taxes, you get an imputed extra income (unless you rent out for real income). This fictitious income increases your taxes, but mortgage interest can be deducted from it, so there is a tax benefit for always having a mortgage.

On the other hand, there is an agreement (I assume a regulation) that you are scheduled to amortize down to 65% by retirement age. There is nothing to keep the bank from asking for more amortization.

Pretty much - long term mortgages here are interest only with a balloon capital payment at the end.

The effect of the imputed income is essentially a progressive property tax. High earners are affected by it more than low earners, since they will be in a higher tax bracket.

The graph on that page (you'll need to enter a Zurich post code, e.g. 8002, to see the graph) has some slight drops for some years, but nothing worth the name crash and the overall trend is as a said. Swiss real estate and currency can move up when the rest of the world has trouble. The term 'flight to safety' comes to mind.

My understanding is that for the most part people don't pay down more than 35%, though of course the optimum economic decision would depend on what else you have to do with your money.

Last edited by 3Wishes; 02.01.2019 at 19:12. Reason: merging consecutive replies
Reply With Quote
  #36  
Old 02.01.2019, 20:04
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 17,565
Groaned at 279 Times in 228 Posts
Thanked 14,901 Times in 8,296 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
For example, say you buy a CHF 100,000 apartment. You put down 20% (CHF 20,000) and you take out a first mortgage of 15% (CHF 15,000) which gets fully repaid over a number of years, and a second mortgage of 65% (CHF 65,000) which remains outstanding. The way the system works is that (i) house prices would need to fall by 35% before the bank would take a hit on the CHF 65,000 second mortgage which is unlikely to happen outside of a shock to the system, and (ii) the power of inflation in house prices erodes the value of the debt. So, for example, if the house doubles in value over a 20 year period, and is now worth CHF 200,000, the debt is still the same at CHF 65,000 which increases the collateral coverage for the bank.
The first charge is for 65%, second charge for 15%, interest rate is higher on 2nd charge due to higher risk as it's payable after the first mortgage is paid in full.
Reply With Quote
The following 2 users would like to thank fatmanfilms for this useful post:
  #37  
Old 02.01.2019, 21:22
StirB's Avatar
Forum Legend
 
Join Date: Apr 2007
Location: Zurich
Posts: 3,129
Groaned at 97 Times in 87 Posts
Thanked 4,971 Times in 2,156 Posts
StirB has a reputation beyond reputeStirB has a reputation beyond reputeStirB has a reputation beyond reputeStirB has a reputation beyond reputeStirB has a reputation beyond reputeStirB has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Who demands 30% for a primary residence?
If you pay 35% then you won't need to make any capital repayments, unless the value falls.
Depends heavily on your (/combined) salary. If you want to buy an expensive place, and aren't pulling in trader money, they might very well demand more than 30% down - it's all pretty easy to simulate on the many mortgage calculators out there on the Swinternet.
Reply With Quote
This user would like to thank StirB for this useful post:
  #38  
Old 02.01.2019, 21:47
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 17,565
Groaned at 279 Times in 228 Posts
Thanked 14,901 Times in 8,296 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Advisable to buy property in Zurich?

Quote:
View Post
Depends heavily on your (/combined) salary. If you want to buy an expensive place, and aren't pulling in trader money, they might very well demand more than 30% down - it's all pretty easy to simulate on the many mortgage calculators out there on the Swinternet.
Not strictly true as I could borrow 800,000 on a property costing 1,100,000 but not 800,000 on a property costing 1,800,000 as apparently I could not afford the maintenance costs of 1% they factor in.

Remember purchase price is irrelevant as they lend based on their valuation which can be very different, both +/-
Reply With Quote
  #39  
Old 03.01.2019, 00:04
Senior Member
 
Join Date: Jan 2017
Location: St Gallen
Posts: 492
Groaned at 44 Times in 29 Posts
Thanked 261 Times in 153 Posts
Gramatyka356 has no particular reputation at present
Re: Advisable to buy property in Zurich?

Quote:
View Post
The effect of the imputed income is essentially a progressive property tax. High earners are affected by it more than low earners, since they will be in a higher tax bracket.
You mean the real owners, i.e. assuming no interest costs from the mortgage to cancel it out?
Reply With Quote
  #40  
Old 03.01.2019, 00:54
zmaster1911's Avatar
Senior Member
 
Join Date: Nov 2014
Location: Zurich
Posts: 269
Groaned at 6 Times in 4 Posts
Thanked 259 Times in 95 Posts
zmaster1911 is considered knowledgeablezmaster1911 is considered knowledgeablezmaster1911 is considered knowledgeable
Re: Advisable to buy property in Zurich?

Quote:
View Post
I neither own property or wish to own property in Switzerland so I hope my advice is unbiased.

If your'e coming from an Anglo-Saxon market like the US, Canada or the UK you will be used to the idea of fully paying off a mortgage over a set time period. Here in Switzerland mortgages are mostly perpetual (incentivized by the tax code) and the bulk of the principal never gets repaid. Best to fully understand how the system here works before doing anything.

For example, say you buy a CHF 100,000 apartment. You put down 20% (CHF 20,000) and you take out a first mortgage of 15% (CHF 15,000) which gets fully repaid over a number of years, and a second mortgage of 65% (CHF 65,000) which remains outstanding. The way the system works is that (i) house prices would need to fall by 35% before the bank would take a hit on the CHF 65,000 second mortgage which is unlikely to happen outside of a shock to the system, and (ii) the power of inflation in house prices erodes the value of the debt. So, for example, if the house doubles in value over a 20 year period, and is now worth CHF 200,000, the debt is still the same at CHF 65,000 which increases the collateral coverage for the bank.

The downside is if prices fall you can face a margin call from the bank, and can be asked to top up your equity. Not sure how aggressive the banks are at enforcing these margin calls so I can't help on that front. But you could be faced with a cash call and not have the cash to meet that call....

The main "black swan" risk today is what will happen to inflation in Switzerland. Currently there is little to no inflation due to the strengthening of the Swiss Franc relative to other currencies. If this was to change and we started to get some inflation, we could see the SNB (our version of the Fed) start to hike rates. As you can see in the US with the Fed starting to raise rates, generally asset prices fall when rates go up....hence Mr. President is not very happy with the current Fed Chairman. A good case study is to look at the housing crash in Switzerland in 1991 when the SNB was forced to hike rates from 3.5% to 7% in 2 years. House prices took a massive hit and many home owners faced margin calls they could not make.

Final thing is, as usual, it's all about location. There are loads of empty apartments sitting around the silver coast where the builders refuse to lower the price because they don't understand the basic economics of supply & demand. At the same time, in high demand places like Zollikon (the Hamptons of Zurich) you still see people lining up to outbid each other many times over the asking price.

thank you for this. this is probably the best explanation i have read on this subject...ever!
Reply With Quote
Reply




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Where is the best area to buy property [near Zurich]? Karin M. Housing in general 58 16.04.2018 10:42
I want to offer to buy the property I rent in Zurich... advice needed please! Chuff Housing in general 27 19.03.2018 20:09
used 2nd pillar to buy property in UK Cagliostro Leaving Switzerland 5 21.10.2015 20:44
Is it a good time to buy a property in Geneva? vali2014 Housing in general 12 15.10.2014 13:45
Selling a property in France to buy here LMG Finance/banking/taxation 9 09.05.2010 18:17


All times are GMT +2. The time now is 03:15.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2019, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0