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Old 14.08.2008, 15:24
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Is it worth it to buy a house in Switzerland?

I've read 70% of Swiss rent all their lives, and after a visit with a UBS financial advisor, I think I understand why

Average house prices in CH are extremely high (easily 1 Mill CHF and over, but maybe on the low end, let's just say a split house for 500k CHF), which means the "average" down payment of 100k CHF will result in a 400k CHF loan. Assuming a 20% down-payment of 100k, this remaining 400k loan is split to a "first mortgage" (15%=75k) and a "second mortgage" (65%=325k). The first mortgage has to be re-paid @ 1% a year for 20 years, which comes to something like ~1,700 CHF monthly (which can't exceed ~30% of your income). So really, it's the amount of the first mortgage (and of course down-payment) that limits what you can afford, and the second mortgage nobody seems to care about? ...or will get paid back in 100 years by your grandkids?

Also your taxable income is raised by whatever your house could be rented for. Ex: if the house could be rented for 3k CHF per month, 12x3k= 36k CHF added to your income taxes. But then you can deduct interest paid, home repairs, utilities, etc, so actually you can save money on taxes


So (according to this example) maybe 100k in principal is paid back over 20 years. And maybe 30k CHF saved in lower taxes. But when you factor other things like (up to) 20k CHF for real-estate transactions, home repairs, etc....I think you are rally only breaking even, or maybe gaining a little $ over 20 years? I guess if house prices in CH go up or down in a drastic way you can make/lose $. Otherwise, it's not really a financial difference if you buy or rent...I think? The major reason I see for buying would be to break free of living in apartment blocks and have the freedom to drill holes in your walls at 3am if you wish

If anyone has experience, or would like to correct me, or comment, or whatever, I'd appreciate it. I was thinking about buying a house here, but now I'm not so sure...maybe I'd just be better off continuing to rent...
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Old 14.08.2008, 15:33
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Re: Is it worth it to buy a house in Switzerland?

This subject has been covered a number of times before.

You omitted tax on profit on sale (Grundstuckgeweinsteuer) by the way.

However, what will renters be paying in 20 years' time? And what will the mortgage payments be? In the last 10 years I have seen rents go up and in the same period my mortage payments go down...
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Old 14.08.2008, 16:05
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Re: Is it worth it to buy a house in Switzerland?

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The major reason I see for buying would be to break free of living in apartment blocks and have the freedom to drill holes in your walls at 3am if you wish

...
That was my reason!!!!


And to shower after 10pm!!!
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Old 14.08.2008, 16:48
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Re: Is it worth it to buy a house in Switzerland?

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That was my reason!!!!


And to shower after 10pm!!!
...and to paint the walls any damn colour you choose!
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Old 14.08.2008, 17:12
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Re: Is it worth it to buy a house in Switzerland?

We finally just bought a house 3 weeks ago.
All clued up on the jargon and system. Different to UK.
The property market is not a fast one...by any means.
How many For Sale signs have you seen compared to the UK?
Don't expect to buy or sell a property quickly. Unless its newly built.
Don't buy a house as an investment as such. Expect to pay about 40% tax on any profit you make if you decide to sell up within 5 years and move back to the UK.

We decided to buy a house coz we got kids and have been here long enough to decide we are gonna stay in Switzerland. That is a good enough reason for most ex-pats.

good luck anyways
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Old 14.08.2008, 17:19
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Re: Is it worth it to buy a house in Switzerland?

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...and to paint the walls any damn colour you choose!
yeah, we painted all our walls white and there was nothing anybody could do about it.
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Old 14.08.2008, 17:25
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Re: Is it worth it to buy a house in Switzerland?

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If anyone has experience, or would like to correct me, or comment, or whatever, I'd appreciate it. I was thinking about buying a house here, but now I'm not so sure...maybe I'd just be better off continuing to rent...
Only consider it if you're expecting to stay at least 5 years here, due to the tax on profit. And don't expect to make staggering profit in a short time, it's a stable but slow market. In my case it made sense from a cash flow and investment point of view, but it's worth taking the time to investigate all angles. Also factor into account what your money (used for the deposit) could be earning you if not tied up in property.

Barbra.
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Old 14.08.2008, 17:26
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Re: Is it worth it to buy a house in Switzerland?

Of course if you go to a FA they will advise you financially.
If you go to a lawyer they'll advise you legally.
But the finances/legals aren't the full story.

In your own personal value system how does location, appearance, comfort, control, size,(insert your own list of benefits here) have on the whole package?

I bought almost a year ago and it was the location and transport links on top of the facilities of the apartment/garden compared to living in the city that did it for me.

Of course it's nice to make a profit and this is an anglo-saxon expectation (I'm from Ireland and also have property in the UK) but not a Swiss/Germanic one.


I actually postponed a car purchase to decorate and buy as this was more important to me. Now I feel more rested etc when home and enjoy entertaining etc again.

Get back to the basics of the general joys/benefits of having your own place assessed against the disadvantages then make a decision as you would any other.

Good luck with the decision and finding a place. At the end of the day it's just a home, but how homely?
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Old 14.08.2008, 17:27
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Re: Is it worth it to buy a house in Switzerland?

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yeah, we painted all our walls white and there was nothing anybody could do about it.


We had all the walls painted white toooooo

But now some have changed and there's more changes in the pipeline.

+ Actually being able to drill holes and not worry about the consequences
+ rent vs mortgage payments for what you can get (latter is lower generally)
+ It's yours and you can make changes to it if you like - for me I like the fact I can do any change I want without asking someone if I can have permission (with the exception of changes requiring a building permit).

etc.....

We built ours from scratch and I ensured I installed the cabling infrastructure to cope with my needs now and most of my future ones (damn HDMI, but can do this over cat5 instead).

Obviously when things break you can't call the owner to come and fix it, and can get stung by some large bills on this front.
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Old 14.08.2008, 17:50
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Re: Is it worth it to buy a house in Switzerland?

The woman who we bought our house from (4 years ago for 420K with no ajoining neighbours in Kanton Aargau) bought her house for less than 50K about 25 years before.
Maybe long term you can make some money - for retirement or your kids.
Perhaps you can pay some money each month into a balancing account which would pay off the mortgage when you sell the home -difference between rent and mortgage say.

But for me, the flexibility, no neigbours and no landlord outweighs all the other issues. As long as you have the right insurances and do not go over the top on making the place look like a museum, i think you will end up winning (lifewise)

My mum and dad have spent 30 years improving slowly their home - now it just about perfect. In my view it is better to save your money up for home improvements rather than mortgage up to the maximum. Most other people seem to disagree with me here. On my side, it just feels nice to have some collateral.
There are plenty of cheap detached places still available for less than 500K - if you are not so fussy where you live
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Old 15.08.2008, 09:54
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Re: Is it worth it to buy a house in Switzerland?

Normally you have to 'amortise' 1% of the value of the property each year. The suggested way to do this is to setup a Third-pillar account as this is Tax effective. We are also slowly reducing the main capital to a more reasonable level (interest rates aren't what they used to be and without my 1% discount from my old job the difference is substancial).

But it's not like the UK where you are expected to pay off the mortgage within 25 years. Here the 'debt' is passed down. Having a mortgage has tax advantages as well (usually more than offsets the 'rental' income tax).

Some people like living in rented accomadation. For me I was never that comfortable with it and wanted my own place. Also loosing connecting neighbours is a BIG bonus.

The value of our property has shot up due to the location etc... The downside of this is if we sell we would have to pay tax on the gain. BUT if this is re-invested in another property, then there is NO tax to pay (but has to be in Switzerland I guess).
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Old 15.08.2008, 10:47
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Re: Is it worth it to buy a house in Switzerland?

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<snip>this is re-invested in another property, then there is NO tax to pay (but has to be in Switzerland I guess).
Yes in Switzerland only. And you must buy a property of the same price or higher than the one you sell. And Grundstuckgeweinsteuer also reduces the longer you live in a property...
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Old 15.08.2008, 11:15
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Re: Is it worth it to buy a house in Switzerland?

We bought in 2005. We ended up with a house in a very quiet area close to town for CHF 1,000 a month less in repayments compared to renting an apartment.

Since then, libor interest rates have gone from 1.45% to 3.55% - making our repayments go up quite a bit, although it was still the best option for us since fixed rates would have meant we paid more.

Repairs are expensive. Factor in 1% of the value per year. Appliances breaking, window replacement and a leaking roof were what we needed to pay for last year. As a tenant you don't have to worry about these things.

The "Eigenmietwert" /deemed rental income calculation means a higher tax rate for us. We will need to pay the tax on this amount even after we retire.

Although our quality of life has increased substantially, I do regret buying here. This was the 5th property purchase I went through and the only one I wish I didn't buy.
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Old 15.08.2008, 11:45
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Re: Is it worth it to buy a house in Switzerland?

Some of the disadvantages are not immediately obvious. You may be less entitled to some of the social services. For example, we were refused a stipendium (grant) for our son because we own a house.

A friend's husband aged 57, became redundant after working 37 years for the same firm. Believe me, it is not easy to find a job aged 57. He is entitled to 2 years unemployment benefit after which, if he does not find a job, he will become a case for social security. The fact that he owns a house whilst claiming social security is a definite disadvantage as one is expected to pay back the social security that is claimed and for this the house is taken into consideration. If he sells the house social security can claim a large portion of any profit made. Under certain circumstances they can even force the sale of the house.

With hindsight, I would say buy a house in another country as an investment to rent out and live in a rented apartment in Switzerland.
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Old 15.08.2008, 11:49
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Re: Is it worth it to buy a house in Switzerland?

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...and to paint the walls any damn colour you choose!
Where we live you can paint the walls any colour you want just as long as you paint them back white again when you leave
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Old 15.08.2008, 11:53
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Re: Is it worth it to buy a house in Switzerland?

How can they force you to pay back the unemployment money when you pay your insurance for this every month in your salary deductions? Do you have a link to an official paper on this?

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A friend's husband aged 57, became redundant after working 37 years for the same firm. Believe me, it is not easy to find a job aged 57. He is entitled to 2 years unemployment benefit after which, if he does not find a job, he will become a case for social security. The fact that he owns a house whilst claiming social security is a definite disadvantage as one is expected to pay back the social security that is claimed and for this the house is taken into consideration. If he sells the house social security can claim a large portion of any profit made. Under certain circumstances they can even force the sale of the house.

With hindsight, I would say buy a house in another country as an investment to rent out and live in a rented apartment in Switzerland.
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Old 15.08.2008, 11:56
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Re: Is it worth it to buy a house in Switzerland?

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Repairs are expensive. Factor in 1% of the value per year. Appliances breaking, window replacement and a leaking roof were what we needed to pay for last year. As a tenant you don't have to worry about these things.
This is a very valid point.

Boiler breaks? Kiss 5k goodbye.
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Old 15.08.2008, 11:57
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Re: Is it worth it to buy a house in Switzerland?

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How can they force you to pay back the unemployment money when you pay your insurance for this every month in your salary deductions? Do you have a link to an official paper on this?
I didn't say UNEMPLOYMENT benefit, I wrote social security.
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Old 15.08.2008, 12:00
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Re: Is it worth it to buy a house in Switzerland?

Ok but do you have a link to this? It is the first time I have heard about such a situation & would be interested in learning more.

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I didn't say UNEMPLOYMENT benefit, I wrote social security.
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Old 15.08.2008, 12:24
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Re: Is it worth it to buy a house in Switzerland?

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Ok but do you have a link to this? It is the first time I have heard about such a situation & would be interested in learning more.
I have heard about this too here. I have heard of people being told to sell their home and use those funds first before social security will help them.

Social security is also means tested where I come from ie Australia. It includes subsidised/state care homes for the elderly we have just came to know with my grandparents needing one this month.
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