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Old 25.06.2009, 11:25
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Re: buying Vs renting

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Oh! that calculator is nice. My Swiss friends recently bought a 4 room flat for 600k in a village close to Zurich, newly built. Yes most 3-4 room flats are more than 600k but if I move slightly outside Zurich then that would be possible?

This one in would be perfect for me. Middle of nowhere maybe?


EDIT- Playing with that calculator is quiet depressing. I better save more or earn more.
Nice place. Probably a quiet area and good for kids. I'm sure you've done your research. Personally, my question when it comes to buying in outside areas, how quickly can you get rid of it if you need to? Can you rent or sell it easily? From my point of view, seeing as the secondary market in Switzerland is not exactly strong, this question is quite important. Of course, if you are planning to stay there for a very long time, then it is a different story.
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  #42  
Old 25.06.2009, 13:14
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Re: buying Vs renting

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I looked into buying a couple of years ago, in the Zürich neighborhood, and found it a pretty depressing experience. It was more or less at the top of the market, and the amounts people were asking for absolute cr*p were incredible.
A factor that puts off a lot of Swiss is the absurd prices charged by any labourer / handyman / plumber, electrician etc., if anything goes wrong. A mate who bought a new-build flat in Langnau bores me to tears with his complaining about how such and such workman ripped him off.

Cheers

Jim
I'd agree with that but surely, for a new-build, all that's included in the price and if anything goes wrong in the first couple of years, the guarantee should cover any work.

Having said that, I had to explain to our electrician several times why things didn't work and what he needed to do to fix them as he couldn't quite work out what he had done wrong in the first place.

We had a washer and tumbler installed and were quoted 300CHF for fitting and getting rid of the cardboard.
'I'll do that', I said. 'You can't', it's a new build and it's before the hand-over.
The washing machine door opened one way, the drier the other way.
They refused to fix this saying it couldn't be done so I changed the mounting of the wrongly fitted door myself.
So, I paid 300CHF for......plugging the machines into the electricity and dumping a couple of pipes in a drain hole.
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  #43  
Old 25.06.2009, 13:33
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Re: buying Vs renting

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Exactly - a friend of mine bought a house for ~1M three years ago and now got several (unsolicited) offers for up to 1.5M, so he has increased his equity by 500K. His current monthly interest payment is only around CHF 800.

I know these are extreme cases and might involve a lot of luck on my friend's side - still, I feel there can be significant value in buying instead of renting over the longer term. I've started looking into purchasing an apartment or house now.
Your figure does tie up with real life examples - if you don't mind me asking, what town is your friend's house in?

I've seen people make 300K on a 1M house in bought and then sold after four years.
I suppose the big question is whether these sorts of figures will go down with the recession.
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  #44  
Old 25.06.2009, 13:41
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Re: buying Vs renting

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I'd agree with that but surely, for a new-build, all that's included in the price and if anything goes wrong in the first couple of years, the guarantee should cover any work.
The problems were twofold:
1. The builder / architect had to be taken to court to force him to respect the terms of the guarantee. The finish used on the kitchen units turned out to be stuck on with a glue that would dissolve in oil / steam. The plastic fronts started peeling off, requiring the installation of a whole new kitchen.
2. The workmen he hired were taken on to do improvements required by his wife, above and beyond the basic requirements of the house. Although his German is pretty good, they gave him a real run-around.

Cheers

Jim
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  #45  
Old 25.06.2009, 14:04
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Re: buying Vs renting

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The problems were twofold:
1. The builder / architect had to be taken to court to force him to respect the terms of the guarantee. The finish used on the kitchen units turned out to be stuck on with a glue that would dissolve in oil / steam. The plastic fronts started peeling off, requiring the installation of a whole new kitchen.


Cheers

Jim
The mistake he made was to pay the whole amount for the house. The general way people seem to do things here is keep back some - 20,000CHF normally covers it, to cover any problem such as this.
There's always some reason you can give to hold it back. Normally you can hand it over within one year.

We had the backing of the bank to do this!

We held some back for one reason which was sorted and then another one cropped up so we're getting that sorted out and using some of the money to pay for it. We'll send the builder the remainder (we have his agreement on this now).
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  #46  
Old 25.06.2009, 14:17
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Re: buying Vs renting

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Your figure does tie up with real life examples - if you don't mind me asking, what town is your friend's house in?

I've seen people make 300K on a 1M house in bought and then sold after four years.
I suppose the big question is whether these sorts of figures will go down with the recession.
2 issues here:
1. Selling within 4 years = massive taxes
2. And then where do you go? I am sure I can still make a profit of Fr.400k if I sell our place now... but then unless I want the same quality, I need to pump it all back in AND MORE to get a decent upgrade.

We also had problems with the builders during the building stage. We needed to keep an eye on them as they do make mistakes. Eg., light switches on the wrong side of the door, putting up a wall where there shouldn't have been one, etc. Sure it was a hassle, but we also really enjoyed watching our place taking shape. Once we got the keys, as I mentioned before, it helps that we are part of a larger complex, so all repair works are organized professionaly.

Also, in case of problems, I remember getting a sort of guarantee from the builder's bankers (a letter of UBS). Furthermore, there is always some additional charges that you need to pay because they always give you the most basic kitchen, insufficient electrical sockets, and you tend to add in things. This sum you only need to pay at the end and if something is not right, you simply refuse to pay until it is fixed.
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  #47  
Old 25.06.2009, 14:44
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Re: buying Vs renting

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Your figure does tie up with real life examples - if you don't mind me asking, what town is your friend's house in?

I've seen people make 300K on a 1M house in bought and then sold after four years.
I suppose the big question is whether these sorts of figures will go down with the recession.
his house is in Ticino - its a different market, easier to find something nice here than in Zurich (at the same time, prices don't appreciate that much, normally).
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  #48  
Old 25.06.2009, 14:47
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Re: buying Vs renting

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2. And then where do you go? I am sure I can still make a profit of Fr.400k if I sell our place now... but then unless I want the same quality, I need to pump it all back in AND MORE to get a decent upgrade.
That's a valid point - but it also applies when you're renting. At some point you might have to move to a new place and pay much higher rent than before.

Even if real estate prices appreciate only by 2-3% a year, this adds up to some serious money over a few years
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  #49  
Old 25.06.2009, 15:51
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Re: buying Vs renting

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- housing is extremely expensive - yes, can be
- you need a 20% deposit - no you don't
- mortgage rates are low - interest rates are very low and lovely!
- the value of real estate doesn't go up very much - this might be true in some areas but not all
- the extra costs - renovations, legal, inspections, moving are high - they are not, certainly not where I live
- there isn't a lot available - that's true...ergo the prices
I'm just selling a place after 5 years of having it in Kanton SZ. Actually, more to the point, I'm currently trying to avoid the six-figure sum of capital gains tax that arrived in the post! It's somewhere around 25% where I live - I understand it would be north of 40% in ZH.

Costs of selling have been around 50k. Wow, you say! But I had an agent show people around and handle everything for this about 40k - believe me, it was not my phone ringing off-hook for many days...! Factor in the notary fees and moving costs/cleaning and you hit almost 50k.

I never put down 20%. I put down 5% - interest rates were and are low. You can help the banks manage their risk by pledging pension funds (pillar 2) for example.

I'm going back to renting, short-term. That's just as much of a nightmare!!

What did I notice in buying (and in renting) actually? If you seek the "perfect" place, you'll never find it (meloncollie says it too) - so reeeeelaxx and do what suits you best.

Boxman - because I'ma living in a box, in cardboard box.
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  #50  
Old 13.07.2009, 22:25
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Re: buying Vs renting

My sincere thanks to everyone here for contributing so generously to the thread.


Avi
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  #51  
Old 14.07.2009, 11:49
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Re: buying Vs renting

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Exactly - a friend of mine bought a house for ~1M three years ago and now got several (unsolicited) offers for up to 1.5M, so he has increased his equity by 500K... I know these are extreme cases and might involve a lot of luck on my friend's side - still, I feel there can be significant value in buying instead of renting over the longer term. I've started looking into purchasing an apartment or house now.
Yes, this is quite a common example also in and around Geneva, where prices have been rising in recent years so quickly that many people increased their equity significantly (at least in theory).

But this does not mean that buying always brings value over renting -- it does if you buy at the right time in the cycle. Otherwise, you can also end up with negative equity.

I doubt that those offering 1.5 m for that house now would be able to sell it for 2.2 m in another three years because of various factors: there is economic crisis at the moment and even without it the income of most people who can now pay 1.5 m will probably not rise fast enough so that 2 m will be realistically in their budget. This rapid growth simply can not be sustained.
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  #52  
Old 12.10.2009, 18:43
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Re: buying Vs renting

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- our mortgage is slightly lower than Fr2000. We know we can rent our place out for Fr.3500.
Are you sure you can rent it out?

After reading the "Not for buy-to-let investment" section here (http://www.globalpropertyguide.com/E.../Price-History), it seems that renting out property owned as a foreigner is not permitted (unless permit holding residents are not considered foreigners).

Last edited by brjoha; 12.10.2009 at 21:04.
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  #53  
Old 12.10.2009, 22:05
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Re: buying Vs renting

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Are you sure you can rent it out?

After reading the "Not for buy-to-let investment" section here (http://www.globalpropertyguide.com/E.../Price-History), it seems that renting out property owned as a foreigner is not permitted (unless permit holding residents are not considered foreigners).
A lot of people on EF are married to Swiss nationals so that's not a hurdle
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  #54  
Old 12.10.2009, 23:05
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Re: buying Vs renting

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Are you sure you can rent it out?

After reading the "Not for buy-to-let investment" section here (http://www.globalpropertyguide.com/E.../Price-History), it seems that renting out property owned as a foreigner is not permitted (unless permit holding residents are not considered foreigners).
Well it varies canton by canton, but I believe this is referring to non-resident foreigners. My understanding is that as long as you live in it for 3 years you can then rent it out when you leave.

I don't have any sources on that, just what I have been told along the way.
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Old 28.10.2009, 02:17
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Re: buying Vs renting

Very interesting read - I am wondering if you buy a property (and you are not Swiss) can you rent it out without restrictions (should you decide to move, loose your job etc)?
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  #56  
Old 20.11.2009, 21:46
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Re: buying Vs renting

Very informative thread.

One question. Does rental value of a house/apartment owned outside Switzerland also get added to the taxable income ?
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  #57  
Old 20.11.2009, 23:57
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Re: buying Vs renting

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Well I guess it depends on the persepctive you see this from: for us we think that if we lose our jobs we can up and downscale our living expenditures within 2 months latest, not as easy if you have bought a place. Unless you rent it out as you said and go live somewhere cheaper but you could still have other issues (tenants not paying you etc etc)

But I think it is part of personal choices and how you feel about it.

Cheers,
K
"Not an expert" BUT I think you will find it difficult to rent a place if you have no job - landlords like to see proof of income - OK you've got the unemployment insurance coming in (for a while) but you might find yourself severely limited for choice.

We rented then bought another house in the same village (slightly smaller, better location) and we are quids in financially. The tax you pay on the rentable income of your house is only on the 20% you OWN - all mortgage interest payments plus the endowment policy you have (both tax deductible) more than offsets this. Including the interest and endowment we pay less now than when we rented - I reckon this saving on rent is about 6% return (tax-free) on the amount we put down as an deposit. Not bad with current interest rates on saving at the moment...

Plus, you talk to your mortgage provider (ours is Raifeissen) if you get into difficulty - they don't want to force you out and sell the place because they'll probably take a loss - a friend of mine who no had income at all for a while (self-employed, no unemployment insurance) with the same bank as us found them sympathetic and they let it ride for a while (nearly a year I think) and added it on to the end. This is no guarantee they'll do this for everyone....
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Old 21.11.2009, 00:02
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Re: buying Vs renting

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Very informative thread.

One question. Does rental value of a house/apartment owned outside Switzerland also get added to the taxable income ?
Yes, if you declare it - it's part of your "worldwide" income
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Old 21.11.2009, 15:17
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Re: buying Vs renting

Well I have been claiming deduction for the interest I pay for this apartment since 2 years and I guess it will be risky if I do not declare once I get the apartment. Any ideas how this rental value will be calculated ? As I have heard diff Kantons have a diff way to calculate for houses in Switzerland.
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Old 21.11.2009, 21:37
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Re: buying Vs renting

I'm not sure I understand your question - if you're claiming interest then you mst have declared that you HAVE the apartment. AFAIK ("not an expert") you state the market value of your property, the amount that is mortgaged and the difference is your equity, wealth, Vermögen - this you pay tax on, don't know what rate.

But you deduct the interest payments so you probably end up paying less tax (your interest payments are higher than the wealth you receive). This is why Swiss houses are perpetually mortgaged - you claim the interest but actually own a small percentage of your house (gets bigger every generation) - if you owned 100% of your property and didn't pay any interest you would be caned for tax.

As a mortgage adviser explained to me (I couldn't understand why my mortgage didn't at the end leave me owning the property outright) - only the rich and the old own their own property outright - your grandchildren eventually have 100% of it.
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