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  #41  
Old 03.01.2019, 08:39
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Re: Advisable to buy property in Zurich?

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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 +/-
All you, you, you eh?

It's a good example though, if you earned 100k let's say, and wanted to buy a place for 1,800,000 chf, then they'd demand you put down 1.5m or around 83% of the property price in order to keep theoretical monthly payments acceptable.
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  #42  
Old 03.01.2019, 10:36
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Re: Advisable to buy property in Zurich?

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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.
Case in point:

Our apartment cost 465k, but the taxable value is around 200k. With a 315k morgage, it has negative value for tax purposes!

Tom
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  #43  
Old 03.01.2019, 10:42
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Re: Advisable to buy property in Zurich?

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Case in point:

Our apartment cost 465k, but the taxable value is around 200k. With a 315k morgage, it has negative value for tax purposes!

Tom
Yeah, we get the same, though the house taxable value is creeping up year on year. But still a negative atm and every little bit helps.
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  #44  
Old 03.01.2019, 10:44
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Re: Advisable to buy property in Zurich?

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Case in point:

Our apartment cost 465k, but the taxable value is around 200k. With a 315k morgage, it has negative value for tax purposes!

Tom
I think this is quite common. The taxable value and the fake rent is much lower than market value.
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  #45  
Old 03.01.2019, 12:48
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Re: Advisable to buy property in Zurich?

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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/
There is no novation in mortgages. There is not even assignment when the bank forecloses, as the property is sold and proceeds are distributed according to seniority of debt ownership.

That is, the owner OWNS the property, and the bank OWN the loan.
Two separate contracts.

If the property is forced to sale, the loan might get covered and might not.
You don't rent the property from the bank, you rent the capital for the house.

There is a distinction.

The same distinction is with companies and shareholders. The fact that someone is 100% shareholder of a company doesn't mean they own the company's assets. The company owns its assets, and the shareholder owns the company.

I know it looks like semantics, but these distinctions are there for a reason
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  #46  
Old 03.01.2019, 15:11
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Re: Advisable to buy property in Zurich?

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All you, you, you eh?

It's a good example though, if you earned 100k let's say, and wanted to buy a place for 1,800,000 chf, then they'd demand you put down 1.5m or around 83% of the property price in order to keep theoretical monthly payments acceptable.
This is why the 2 properties I own I bought for cash, I don't earn enough to borrow any money .
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  #47  
Old 03.01.2019, 15:12
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Re: Advisable to buy property in Zurich?

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I think this is quite common. The taxable value and the fake rent is much lower than market value.
Or to look at it another way, House prices & rents are too high.
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  #48  
Old 03.01.2019, 17:15
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Re: Advisable to buy property in Zurich?

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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).
Which recession? Must have been a pretty local phenomena

Now, there was a dip in 2009, but even then the population increased by more than 80 thousand in that year. In general the population increased from 7.5 mio in 2007 to 8.4 mio in 2017! A million of people needing a home to live in.

The real worst case scenario is not high interest alone, but high interest with emigration out of Switzerland. That will most likely be a situation where the Swiss economic is not in its best state either. This might never come. Or it might happen for various reasons: Change in politics, abolishment of Swiss/EU agreements, Basel earth quake, Beznau nuclear incident.

Be aware that all the people and companies that came showed mainly one thing: They are willing to move to an another country. If they did it once they might do it again.

https://www.bfs.admin.ch/bfs/de/home...ndprodukt.html
https://www.bfs.admin.ch/bfs/de/home...oelkerung.html

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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.
To save 2000 in tax you must pay 4000 to 6000 in mortgage interests. There is only a net advantage if you invest in a good performing investments (stock, funds) instead of paying back the mortgage. If done correctly you might have still a 500k mortgage but also 1M in your portfolio.
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  #49  
Old 03.01.2019, 22:50
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Re: Advisable to buy property in Zurich?

There's still a lot of new properties in the pipeline, despite a growing number of vacant apartments (for rent), especially at the higher end of the market, where rents are actually falling outside the big cities.

There are still tens of thousands of people coming to Switzerland each year (net), and they're looking for housing - but mostly close to large cities.
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Old 04.01.2019, 08:25
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Re: Advisable to buy property in Zurich?

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There's still a lot of new properties in the pipeline, despite a growing number of vacant apartments (for rent), especially at the higher end of the market, where rents are actually falling outside the big cities.

There are still tens of thousands of people coming to Switzerland each year (net), and they're looking for housing - but mostly close to large cities.
I think that's because of extremely low interest rates. Why do you want to pay 5k/mo - 60k a year to some random for a property worth ~2m IF (and only IF of course) you have the means to purchase it by paying a bank about 5k a year per million borrowed? You'd likely save 40-50k a year (esp if new build with low maintenance) and still have the likely upside of selling at a (small) profit in a few years, even if your stay is likely to be relatively short.
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  #51  
Old 08.01.2019, 10:30
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Re: Advisable to buy property in Zurich?

Well, several reasons.

Swiss property prices are relatively high, and many people do not have 20% of that or more in a liquid form (or do not have or want to use their pensions in lieu).

There is a definite risk of a property downturn in Switzerland, so the rent savings might be offset and you might see a loss instead of a profit.

There is a definite risk of interest rate rises in the mid term, again potentially offsetting savings.

The property market is not hugely liquid here... selling can take a long time or not go the sellers way.. again uncertainty, and perhaps especially relevant for expats who might decide to go back home or be posted elsewhere in a job. I know that some people can be lucky and sell their property in a week(!) but it is not the norm.

Next, you, as a 1%er might well be renting a 2m home and thus the saving might look attractive, but the average person is not renting a home of that value or looking at owning a property of that value.

Also, people here on a median salary are often simply going to struggle with meeting the banks requirements to get a mortgage unless they live in an area with cheap property, have significant other assets as collateral, or receive financial help from another means.

Finally, what you say about new builds needing less maintenance is true, but not everyone buys new builds, and when things do go wrong, costs are often high. Even new builds can face problems too.

In conclusion, yes, you can see significant savings in ownership vs renting and there is also upside, but it requires resources, effort, motivation, smart thinking and a bit of luck.
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  #52  
Old 08.01.2019, 10:36
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Re: Advisable to buy property in Zurich?

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Well, several reasons.

Swiss property prices are relatively high, and many people do not have 20% of that or more in a liquid form (or do not have or want to use their pensions in lieu).

There is a definite risk of a property downturn in Switzerland, so the rent savings might be offset and you might see a loss instead of a profit.

There is a definite risk of interest rate rises in the mid term, again potentially offsetting savings.

The property market is not hugely liquid here... selling can take a long time or not go the sellers way.. again uncertainty, and perhaps especially relevant for expats who might decide to go back home or be posted elsewhere in a job. I know that some people can be lucky and sell their property in a week(!) but it is not the norm.

Next, you, as a 1%er might well be renting a 2m home and thus the saving might look attractive, but the average person is not renting a home of that value or looking at owning a property of that value.

Also, people here on a median salary are often simply going to struggle with meeting the banks requirements to get a mortgage unless they live in an area with cheap property, have significant other assets as collateral, or receive financial help from another means.

Finally, what you say about new builds needing less maintenance is true, but not everyone buys new builds, and when things do go wrong, costs are often high. Even new builds can face problems too.

In conclusion, yes, you can see significant savings in ownership vs renting and there is also upside, but it requires resources, effort, motivation, smart thinking and a bit of luck.
Definitely, I was more playing Devil's Advocate as to why people might buy instead of rent, given the option. They are also some of the reasons why I have bought when I had the chance over here. As you say, even with new builds, there are enough headaches, but at least you have a bit of comeback and things generally get fixed if you put in the time to nag people!

Remember kids, investments can go down as well as up...past performance is not indicative of future results
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  #53  
Old 08.01.2019, 22:14
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Re: Advisable to buy property in Zurich?

I moved here from the Bay Area in 1987 (Sunnyvale). Rented for 22 years. Finally bought a house in 2009. We lucked out with the timing, though we bought out of necessity and not market timing (kids were young and we wanted them to have a garden to play in). So far it has been a financially positive move, but it could have gone so wrong had we bought at a slightly different time, or in a different area. Buying here is nothing like buying in the states. Do not even consider it unless you plan on living here for the long haul (20+ years). You have no way of knowing if you will culturally survive here until you've been here at least 5 years, and then you can still be wrong. Throw away your real estate mentality from the US, it doesn't apply here. When you buy here, you buy into the culture, and that's not always an easy purchase to live with.
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  #54  
Old 09.01.2019, 03:52
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Re: Advisable to buy property in Zurich?

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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.
Most foreigners - or any US non resident citizen on a local package who cannot provide a W2 wage form from their employer - needs to put 20% down. That was our experience in 2012 when we purchased our property in the US. The due diligence by the bank was analogous to a criminal investigation - I kid you not! You would think we were money launderers given the detail/minutiae the bank requested to process our mortgage application. And we put more than 20% down to avoid mortgage insurance (a prerequisite in the US if one puts under 20% down on the purchase price)

It worked out fine in the end but the process was beyond arduous...
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