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Old 05.02.2020, 09:17
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

I think another way to justify a house purchase is to treat it as the bond component of your portfolio. Current you get -ve yielding CHF bonds. Looking at owner occupied property as if it were an irredeemable bond with 3% yield, this could be attractive for someone who is looking for a 'risk-free' perpetuity.
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Old 05.02.2020, 09:51
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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we wanted the kids to have a house to grow up in. I dont expect we'll make any money when we sell it but if you add it up over the mortgage term i expect we won't actually lose any. in that time we've had a house we can shape into our own, the kids have drawn on the walls, we've installed new bits, taken some old stuff down, changed some things. It's all dependent on what you are into really, we quite enjoy it.
To me, those are the absolute best reasons to buy a house.
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  #23  
Old 05.02.2020, 10:00
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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To me, those are the absolute best reasons to buy a house.
kids can also grow up in a rented house.
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Old 05.02.2020, 10:02
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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kids can also grow up in a rented house.
However the kids are more likely to be in poverty, poverty is lower in families who own their own homes
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Old 05.02.2020, 11:49
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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Why? What would you do with 200,000 CHF then that's better than paying the downpayment of a flat you can rent for 2000.- CHF per month?
Oh, let me think.....any of the many investment opportunities that are likely to yield a lot more than 3% and don't involve taking a massive amount of leverage, capital risk, taxes and fees?
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  #26  
Old 05.02.2020, 12:02
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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Oh, let me think.....any of the many investment opportunities that are likely to yield a lot more than 3% and don't involve taking a massive amount of leverage, capital risk, taxes and fees?
500% leverage with a 20% deposit, that’s insane gearing than say investing in Fundsmith. No CGT on investments in CH unlike property
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Old 05.02.2020, 12:09
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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kids can also grow up in a rented house.
Yes, but for 5000 CHF per month and it's not your house. you can't knock down a wall, install a new kitchen, chop down some trees, re-lay the patio.

Financially it's much safer to rent and invest your money, I agree.
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Old 05.02.2020, 12:19
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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500% leverage with a 20% deposit, that’s insane gearing than say investing in Fundsmith. No CGT on investments in CH unlike property
Own house is not an investment. It is consumption. Same as it has financially no sense to drive BMW instead of Dacia or wear Rolex instead of cheap quartz watch.

Obviously, investments in property is totally different thing, with all financial rules in play. People who are trying to combine both rarely succeed.
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  #29  
Old 05.02.2020, 12:41
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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The Bank valued it for more than purchase price, much more......
Banks often do.

Real prices are driven by emotions, gut feelings and sometimes luck.

Banks value properties based on formulas and excel voodoo.

The two don't always produce the same result.
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Old 05.02.2020, 12:47
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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Will they soon? In next 10, 20, 30 years? The central banks are now effectively setting the mortgage interest rates and not supply and demand.
So if price of money suddenly skyrocketed on the market what prevents a central bank heavy hand intervention to avoid a recession if they have already broken all the taboos?
Personally I think mortgages may eventually follow the trend of interest on savings and go into the (nominally) negative.

That will send house prices even further into the astronomical, and potentially expose home owners to even greater risk.
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  #31  
Old 05.02.2020, 13:04
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

We are so relieved we didn’t, the Landlord offered us first chance of buying our old apartment at, what turned out to be, a very inflated price. Luckily we were in no position to say yes. Lucky because a month or so later, after a lifetime with the company, OH was made redundant whilst on sick leave. Long story short, we decided to leave Switzerland and move to our house in France.

We have friends who had to leave due to redundancy although they were lucky in that a good job was found abroad. They were unlucky in that they had only owned their property for 3 years and had to pay the bank a large sum for early closing of the mortgage.

If you know absolutely that you will be staying then consider buying, if not, that’s a whole different thing for which I do not know the answer.
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Old 10.05.2020, 20:12
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

As I am likely about to move to Geneva I am looking at renting for a year and then likely buying something. I always bought in London, and despite the low yields have done quite well (albeit I always bought at 5%+ gross as a rule, or your 20 ratio, but that's simply because I could).

Looking at the price in Geneva it is a bit worrying, but then comparing to London it's not that scary. I think people tend to forget the fact that you can gear at what I understand is 80% LTV in Gevena with interest deductions available. I am not sure how CGT is treated but I wouldn't be surprised if you could get some relief when it comes to sell if you make a profit. While I used to use a 20 ratio, this is also from a time when interest rates were much higher, given the drop in rates I would revise this number down, especially given you can fix for 20 years.

Again this is my unqualified opinion having done real estate in London and Paris, and only starting my Swiss journey.

I am also terrified at the economic prospects for the world economy, and Switzerland tends to be one of those safe havens supposedly. Rather than keeping CHF at a negative rate in the bank, I will look at shifting some of my Gbp in CHF in real estate. I am happy to conserve capital and grow capital at a very low rate while enjoying the tax advantages of living in you real estate.
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Old 11.05.2020, 13:24
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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We are so relieved we didn’t, the Landlord offered us first chance of buying our old apartment at, what turned out to be, a very inflated price. Luckily we were in no position to say yes. Lucky because a month or so later, after a lifetime with the company, OH was made redundant whilst on sick leave. Long story short, we decided to leave Switzerland and move to our house in France.

We have friends who had to leave due to redundancy although they were lucky in that a good job was found abroad. They were unlucky in that they had only owned their property for 3 years and had to pay the bank a large sum for early closing of the mortgage.

If you know absolutely that you will be staying then consider buying, if not, that’s a whole different thing for which I do not know the answer.
There is a 3rd way here. Keep the property & rent it out assuming that is a legal & financial option. Legally it is for EU Citizens. Financially is a different story.
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  #34  
Old 11.05.2020, 13:25
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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Personally I think mortgages may eventually follow the trend of interest on savings and go into the (nominally) negative.

That will send house prices even further into the astronomical, and potentially expose home owners to even greater risk.
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  #35  
Old 11.05.2020, 15:25
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Re: Price to Rent Ratio: Should I adjust for the Swiss Market?

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Looking at the price in Geneva it is a bit worrying, but then comparing to London it's not that scary. I think people tend to forget the fact that you can gear at what I understand is 80% LTV in Gevena with interest deductions available. I am not sure how CGT is treated but I wouldn't be surprised if you could get some relief when it comes to sell if you make a profit. While I used to use a 20 ratio, this is also from a time when interest rates were much higher, given the drop in rates I would revise this number down, especially given you can fix for 20 years.
Switzerland doesn’t have capital gains tax in pretty much any situation, except for real estate, where capital gains are heavily penalised to discourage property speculation. As with most taxation topics, this is devolved to the cantons to deal with, so you would need to research Geneva. In my canton the tax rate is actually accelerated if you sell within five years of purchase and the full relief (although there would still be a tax to pay and it isn‘t indexed) only after 40 years.
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