Go Back   English Forum Switzerland > Help & tips > Housing in general  
Reply
 
Thread Tools Display Modes
  #81  
Old 06.02.2019, 08:53
krlock3's Avatar
Forum Legend
 
Join Date: Feb 2006
Location: Zürich
Posts: 3,117
Groaned at 48 Times in 35 Posts
Thanked 2,426 Times in 1,152 Posts
krlock3 has a reputation beyond reputekrlock3 has a reputation beyond reputekrlock3 has a reputation beyond reputekrlock3 has a reputation beyond reputekrlock3 has a reputation beyond reputekrlock3 has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

This is wrong. It is 63% rolling and 17% repayment in my recollection. The 17% mortgage is not at such a high rate as you say. The ability to repay is based on a 5% interest rate but it is 3x earnings not 5x. On a 1m mortgage, it is 200k not 800k. Because it is based on 3x earnings not 5x it will be a lot less than 200k earnings required. The mortgage is tax deductible but you forgot that implied rental value is added like income (Eigenmietwert).

Please be careful with your statements!

Quote:
View Post
I'm a bit late to this and have not read all the comments, so apologies if I repeat what has been said.

A bank will loan 80% of the distress value of the property following their valuation. Typically this will then equate to 65% of the sale price. The 15% can the be financed with another mortgage but at a much higher interest rate, typically 2.75 - 3%

The they calculate your ability to repay the interest based on an interest rate factor of 5%, and they would expect you to earn 5 times that amount.

Ona chf 1m mortgage you'd have to come up with 800k and be earning chf 200k to get it, even though interest rates are currently around 1.35% on a 10 year mortgage.

The one big advantage though, that I can't see being mentioned, is that the interest you pay is tax deductible, whereas what you pay in rent is not.
Reply With Quote
The following 2 users would like to thank krlock3 for this useful post:
  #82  
Old 06.02.2019, 09:31
Guest
 
Posts: n/a
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
My annual interest payment (on which I get tax relief) is approx. 4,700 CHF. I have approx. 15,000 added to my taxable earnings for Eigenmietwert, certainly no tax advantage there.
Just because the interest rate you were offered is exceptionally low, and the assumed rentable income reasonably high doeen't mean you're not getting a tax break, just that it's not as large as it might have been.

Last edited by Guest; 06.02.2019 at 23:22.
Reply With Quote
  #83  
Old 06.02.2019, 10:30
Phil_MCR's Avatar
Forum Legend
 
Join Date: Oct 2009
Location: Basel
Posts: 14,952
Groaned at 295 Times in 199 Posts
Thanked 19,026 Times in 8,002 Posts
Phil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
The one big advantage though, that I can't see being mentioned, is that the interest you pay is tax deductible, whereas what you pay in rent is not.
the interest is separate from the house. deductible also if you buy a house and rent it out to somebody else.

renting a house is tax free, where as living in your own house is taxable.
Reply With Quote
This user would like to thank Phil_MCR for this useful post:
  #84  
Old 06.02.2019, 20:51
jaudi's Avatar
Forum Veteran
 
Join Date: Sep 2007
Location: zurich
Posts: 574
Groaned at 4 Times in 4 Posts
Thanked 495 Times in 231 Posts
jaudi has a reputation beyond reputejaudi has a reputation beyond reputejaudi has a reputation beyond reputejaudi has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Firstly, 0.8% is not that much lower than can be achieved by searching online.
It is lower than you will normally see partly because 50% of it is a Libor tracking rate - it is not all fixed. Actually the employee discount I mentioned is not that great a benefit as the commercial rate of the particular bank is not super competitive in the first place.

Secondly the point is that the 'tax break' is more than offset by a different tax (you'll find that x% of 15,000 is rather more than x% of 4,700). This will be true for many people currently considering the historically low interest rates. It is rather odd to consider a tax break as a benefit but ignore the corresponding tax which is intentionally there to make home owners pay extra for the privilege of not paying rent. In the current scenario I would benefit by the long discussed reform of eigenmietwert.
Reply With Quote
This user would like to thank jaudi for this useful post:
  #85  
Old 06.02.2019, 23:21
Phil_MCR's Avatar
Forum Legend
 
Join Date: Oct 2009
Location: Basel
Posts: 14,952
Groaned at 295 Times in 199 Posts
Thanked 19,026 Times in 8,002 Posts
Phil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

while eigenmietwert is hated by many. i think this is actually a great tax: it ensures (in theory) neutrality between renting and owner-occupation as well as encouraging efficient utilisation of housing resources.
Reply With Quote
The following 3 users would like to thank Phil_MCR for this useful post:
  #86  
Old 07.02.2019, 09:30
Forum Veteran
 
Join Date: Mar 2010
Location: Greater Zürich Area
Posts: 1,012
Groaned at 134 Times in 84 Posts
Thanked 828 Times in 440 Posts
EPMike has a reputation beyond reputeEPMike has a reputation beyond reputeEPMike has a reputation beyond reputeEPMike has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
the interest is separate from the house. deductible also if you buy a house and rent it out to somebody else.

renting a house is tax free, where as living in your own house is taxable.
you rent a house with taxed money and living in yiur own house is taxable by its renatal value.

Quote:
View Post
while eigenmietwert is hated by many. i think this is actually a great tax: it ensures (in theory) neutrality between renting and owner-occupation as well as encouraging efficient utilisation of housing resources.
I am surpized by this comment. The previous one gave the impression you got it wrong. After all both Eigenmietwert is quite fair. Owners and renters pay basically the same tax for the same house. Now if one decides to buy for whatever reason, then that is his business. And all interest rates are tax deductible, not just mortgages.

Nevertheless, as an owner, if I could vote I would vote for to abolish Eigenmietwert, but that is just the selfish me
Reply With Quote
  #87  
Old 07.02.2019, 09:48
krlock3's Avatar
Forum Legend
 
Join Date: Feb 2006
Location: Zürich
Posts: 3,117
Groaned at 48 Times in 35 Posts
Thanked 2,426 Times in 1,152 Posts
krlock3 has a reputation beyond reputekrlock3 has a reputation beyond reputekrlock3 has a reputation beyond reputekrlock3 has a reputation beyond reputekrlock3 has a reputation beyond reputekrlock3 has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
Nevertheless, as an owner, if I could vote I would vote for to abolish Eigenmietwert, but that is just the selfish me
Yes, but if they do abolish it, I believe that there will be other rules that are not so nice... making it more difficult to claim for renovations unless a first time buyer, for example.
Reply With Quote
This user would like to thank krlock3 for this useful post:
  #88  
Old 07.02.2019, 10:27
Forum Legend
 
Join Date: Sep 2006
Location: na
Posts: 11,392
Groaned at 37 Times in 33 Posts
Thanked 27,128 Times in 8,374 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: Low Low interest rates -housing bubble? - inevitable price correction?

While Eigenmietwert first got me hoppin' mad, on reflection I started to see it as a fairer tax... in comparison to the typical property tax regimes I have paid in other countries.

Eigenmietwert is coupled with one's income, not just property value. Back home, property taxes were based solely on the assessed value of the property - meaning many young couples could afford the house but not the taxes and so could not get on the property ladder or elderly on fixed incomes had to sell their paid-off homes because the tax was out of their means.

With Eigenmietwert one pays less when one earns less - I see that as a more sensible system.

But that's all water under the bridge now that parliament has decided to do away with Eigenmietwert, as well as significantly limit mortgage interest and other deductions. At least from what I have read this seems to be a done deal. (Someone please correct me if I am wrong.)

Under the new system if what I understand is correct those who have taken out large mortgages due to affordability with low interest rates could find themselves in a less favourable position. The details of the abolition of Eigenmietwert are not yet finalised, AFAIK, expected sometime this quarter. How one approaches financing a house, or even determination of affordability, might change with these changes. Or not, YMMV.

I just fear that without Eigenmietwert revenue other methods of property taxation might be considered in the future... and having experienced the joys of paying painful property taxes elsewhere while we pay relative peanuts in Eigenmietwert, I would have preferred the status quo.
Reply With Quote
This user would like to thank meloncollie for this useful post:
  #89  
Old 07.02.2019, 10:51
Phil_MCR's Avatar
Forum Legend
 
Join Date: Oct 2009
Location: Basel
Posts: 14,952
Groaned at 295 Times in 199 Posts
Thanked 19,026 Times in 8,002 Posts
Phil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
But that's all water under the bridge now that parliament has decided to do away with Eigenmietwert, as well as significantly limit mortgage interest and other deductions. At least from what I have read this seems to be a done deal. (Someone please correct me if I am wrong.)
i would also be interested to know the current status. last i heard, the main homeowner lobby agreed in principle to this. makes sense to push through now while interest rates are low. i'm sure we'll hear squealing when rates go up and costs become non-deductible.
Reply With Quote
The following 3 users would like to thank Phil_MCR for this useful post:
  #90  
Old 09.11.2019, 09:16
Geminder's Avatar
Member
 
Join Date: Jan 2009
Location: The Dark Side
Posts: 221
Groaned at 11 Times in 8 Posts
Thanked 104 Times in 60 Posts
Geminder has annoyed a few people around hereGeminder has annoyed a few people around hereGeminder has annoyed a few people around here
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Salaries here are stagnant. Employing people here just on the face value of gross salary (excluding office space and social costs etc) is huge compared to a lot of other countries. It’s also historically a low inflation country.

In addition to this, the next time there is a global crash, more people will again seek the safety of the franc...but since the last recession it didn’t reset...which means the franc goes even higher and salaries (vs RoW) seem even more expensive to companies looking to hire globally

If anything salaries will have to go down
Reply With Quote
  #91  
Old 09.11.2019, 09:45
AbFab's Avatar
Forum Legend
 
Join Date: Sep 2006
Location: Zürich
Posts: 8,659
Groaned at 383 Times in 263 Posts
Thanked 13,030 Times in 4,457 Posts
AbFab has a reputation beyond reputeAbFab has a reputation beyond reputeAbFab has a reputation beyond reputeAbFab has a reputation beyond reputeAbFab has a reputation beyond reputeAbFab has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

The facts are simple:

when I arrived here in 1989 the population of Switzerland was 6,600,000 today it is 8,500,000 - an increase of over 27%.

All the additional 1.9 million inhabitants have to be accommodated- naturally they did not all buy their property, but are a massive driver as people move up the housing market.

Unless the population falls or even flatlines, regardless of interest rates, prices will climb...
Reply With Quote
  #92  
Old 09.11.2019, 10:13
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 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: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
Unless the population falls or even flatlines, regardless of interest rates, prices will climb...
Prices rise based on ability to pay & nothing else. Salaries are not rising in CH, many are significantly lower than 20 years ago.
Since rent coats & purchase costs are restricted to 35% of income, future rises are severely restricted.
Reply With Quote
The following 2 users would like to thank fatmanfilms for this useful post:
  #93  
Old 15.11.2019, 21:06
Newbie 1st class
 
Join Date: May 2016
Location: Rotkreuz
Posts: 29
Groaned at 1 Time in 1 Post
Thanked 11 Times in 8 Posts
bailout has no particular reputation at present
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
Prices rise based on ability to pay & nothing else. Salaries are not rising in CH, many are significantly lower than 20 years ago.
Since rent coats & purchase costs are restricted to 35% of income, future rises are severely restricted.
Wages have grown in real terms 8/10 last years, in nominal terms 10/10 years. Yes, wages don't grow 10% yoy like they do in some countries in Eastern Europe, but I don't know where this story of stagnant wages comes from. Maybe this is the case in some circles (i.e. expat jobs in early 2000s vs. now), but is definitely not the case for the median wage in Switzerland.

On housing prices, real estate in general is one of the safest assets you can hold, and that goes doubly so for Swiss real estate. The reason prices will still continue to rise are quite simple: SNB will keep interest rates low for many more years to come, as they have been doing now for over a decade. We haven't seen CHF/EUR consistently above 1.2 since the depegging happened. This will be the first thing that will need to happen.

Investors (especially pension funds) still need exposure to real estate as *residential* real estate still yields something like +1% to +3% p.a. , which is infinitely more attractive than buying government debt with a negative yield of -1% p.a. @ 10 years.

Keep in mind that the Swiss Franc and Swiss real estate is in extremely high demand on a global level. In CH we even have the price-dampening effect of Lex Koller, whereby foregin nationals cannot just up and buy real estate to their heart's (wallet's) content. If this were lifted, I'd venture a guess that prices would shoot up significantly in some locations (i.e. Zurich, Geneva, Zug)
Reply With Quote
This user would like to thank bailout for this useful post:
  #94  
Old 17.11.2019, 10:48
Guest
 
Posts: n/a
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
There is nothing stopping anyone renting a place that is more than 35% of income.



Sure we all know this, but the rule of thumb here is not more than 35% of your salary and landlords check this as it is a very good indicator whether you will be able to afford the rent or not
Reply With Quote
This user groans at for this post:
  #95  
Old 17.11.2019, 10:57
Guest
 
Posts: n/a
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
Not all landlords check. Also quite easy for rent to be far higher than 35% through loss of job.



What when you apply to rent the object.......but i'm sure you know best
Reply With Quote
This user would like to thank for this useful post:
This user groans at for this post:
  #96  
Old 01.09.2021, 10:23
Member
 
Join Date: Sep 2019
Location: Vaud
Posts: 124
Groaned at 33 Times in 20 Posts
Thanked 215 Times in 86 Posts
keyboardandmouse has an excellent reputationkeyboardandmouse has an excellent reputationkeyboardandmouse has an excellent reputationkeyboardandmouse has an excellent reputation
Re: Low Low interest rates -housing bubble? - inevitable price correction?

https://www.swissinfo.ch/eng/risk-of...sists/46856700

Housing market has risk of slump, but message is still low interest rates for now to continue.
Reply With Quote
  #97  
Old 01.09.2021, 10:47
Phil_MCR's Avatar
Forum Legend
 
Join Date: Oct 2009
Location: Basel
Posts: 14,952
Groaned at 295 Times in 199 Posts
Thanked 19,026 Times in 8,002 Posts
Phil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
https://www.swissinfo.ch/eng/risk-of...sists/46856700

Housing market has risk of slump, but message is still low interest rates for now to continue.
I think UBS has been saying this since 2009 (if not earlier). One day they might be right.

Last edited by Phil_MCR; 01.09.2021 at 12:24.
Reply With Quote
The following 8 users would like to thank Phil_MCR for this useful post:
  #98  
Old 01.09.2021, 11:04
scrabblegrey's Avatar
Member
 
Join Date: Jan 2016
Location: Baden - East corner of my sofa
Posts: 221
Groaned at 25 Times in 15 Posts
Thanked 200 Times in 117 Posts
scrabblegrey is considered knowledgeablescrabblegrey is considered knowledgeablescrabblegrey is considered knowledgeable
Re: Low Low interest rates -housing bubble? - inevitable price correction?

From the swissinfo article:
Quote:
While the average price of residential property was 6.5 times annual income before the Covid-19 pandemic, it is now estimated at around 7.1 times annual income
I still wonder why the average price is similar to 40 years of renting, while in other countries (DE, IT) the ratio is more price of the apartment/house = 20 years of renting it.

Which God is moving the throttle to decide this ratio? Keynes, Hayek or Brüning?
Reply With Quote
  #99  
Old 01.09.2021, 11:16
amogles's Avatar
Forum Legend
 
Join Date: Mar 2008
Location: Zurich
Posts: 12,361
Groaned at 338 Times in 274 Posts
Thanked 26,263 Times in 11,000 Posts
amogles has a reputation beyond reputeamogles has a reputation beyond reputeamogles has a reputation beyond reputeamogles has a reputation beyond reputeamogles has a reputation beyond reputeamogles has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
From the swissinfo article:


I still wonder why the average price is similar to 40 years of renting, while in other countries (DE, IT) the ratio is more price of the apartment/house = 20 years of renting it.

Which God is moving the throttle to decide this ratio? Keynes, Hayek or Brüning?
In Switzerland a significant portion of all rental properties are not owned by privately but by housing associations (Baugenossenschaften) who operate on a not for profit or even non profit basis meaning all surplus is ploughed backed into the properties. I think from memory they jointly own 30 or 40% of all rental properties in Stadt Zürich for example. This keeps rents low for people living in such apartments and, in the places where people have choice, limits the amount of profit private landlords can make. It also keeps average rents low.
Reply With Quote
The following 2 users would like to thank amogles for this useful post:
  #100  
Old 01.09.2021, 11:47
Forum Legend
 
Join Date: Jul 2020
Location: Frick, Aargau
Posts: 2,876
Groaned at 62 Times in 50 Posts
Thanked 4,070 Times in 1,901 Posts
HickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond repute
Re: Low Low interest rates -housing bubble? - inevitable price correction?

Quote:
View Post
From the swissinfo article:


I still wonder why the average price is similar to 40 years of renting, while in other countries (DE, IT) the ratio is more price of the apartment/house = 20 years of renting it.

Which God is moving the throttle to decide this ratio? Keynes, Hayek or Brüning?
Lower interest rates most likely.
Reply With Quote
The following 2 users would like to thank HickvonFrick for this useful post:
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
Are IT contract rates really so low? nickatbasel Employment 8 20.04.2010 08:36


All times are GMT +2. The time now is 05:57.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2022, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0