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  #1  
Old 21.06.2009, 17:57
Avi B'Nell
 
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buying Vs renting

I moved to Switzerland,(Baden Area) few months ago and having read through various information on the web, I gathered that about 70% of swiss population lives in rented accommodation rather than owning one. Any known reasons if this is true ?

What are the pros and cons for an EU citizens with almost stable/foreseeable employment assurance for 5 years...?

All inputs appreciated
Thanks in advance
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  #2  
Old 21.06.2009, 18:03
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Re: buying Vs renting

Have a good look around the forum -

- housing is extremely expensive
- you need a 20% deposit
- mortgage rates are low
- the value of real estate doesn't go up very much
- the extra costs - renovations, legal, inspections, moving are high
- there isn't a lot available

Renting gives some flexibility that buying does not - my husband is unlikely to get a similar job to the one he has now within 30km, so if he had to change jobs, we would very likely move house...
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Old 21.06.2009, 18:12
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Re: buying Vs renting

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What are the pros and cons for an EU citizens with almost stable/foreseeable employment assurance for 5 years...?
Hello - I agree with what Swisspea said. Except that we found there were more options with buying than renting. Mid last year we had to move as our apartment that we were renting had been sold. So we looked around for something to rent and really could not find anything that we wanted to live in in our price range. So reluctantly we looked at places to buy, but found that we had far more to chose from and we liked what we saw a lot more. Our monthly cost of financing is now FAR less than the rent we were paying, we like where we live a lot more and we could not be happier!

The transaction costs are also a lot lower here than in Australia so we don't feel like we have to stay here forever just because we bought.

Hope that helps
Jo
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Old 21.06.2009, 18:23
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Re: buying Vs renting

I see you're running two threads:
house purchase montreux
Shouldn't they be merged
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Old 21.06.2009, 18:33
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Re: buying Vs renting

No, Nev, please keep the threads separate as they're different topics & it's good to read people's various reasons for going down one route rather than the other. Gives people like me food for thought when considering the same dilemmas!
Thanks
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  #6  
Old 21.06.2009, 18:55
Avi B'Nell
 
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Re: buying Vs renting

Nev and Gillian, Spot On.

I agree, I started the second thread, however that was not the intention. Only after I posted my Q on the first one, I realised that the post icon was "closed".
With two different opinions I leave it to the moderators to merge the two.

Swisspea commented that its extremely expensive - Even though the monthly outgoings are supposedly lesser on a Mortgage ? I understand the 20% deposit, but for local with protected minimum wage is this difficult to save 20% over say 5 years?

Secondly, there isn't lot available - does that mean, (if you buy now and have to move out due to job change or whatever) it will get sold off very quickly?

interestingly, Joanne's experience is different. I wish some more members will also contribute...

Thanks Swisspea and Joanne
Avi
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Old 21.06.2009, 19:07
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Re: buying Vs renting

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Swisspea commented that its extremely expensive - Even though the monthly outgoings are supposedly lesser on a Mortgage ? I understand the 20% deposit, but for local with protected minimum wage is this difficult to save 20% over say 5 years?
It's difficult to save that amount while you're paying Swiss rents!

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...So we looked around for something to rent and really could not find anything that we wanted to live in in our price range. So reluctantly we looked at places to buy, but found that we had far more to chose from and we liked what we saw a lot more. Our monthly cost of financing is now FAR less than the rent we were paying...
Similar sort of thing happened to us. When we moved here, there wasn't all that much choice of housing to buy, but even less to rent. So we decided to buy.
Having things (renovation and repairs) done to ones own place does cost though. There is also a bit of hassle with it. No ringing the caretaker when something goes wrong...

The fact that there are few places on the market seems not to make it all that much easier or quicker to sell but it's perhaps just the paperwork that takes so long.

Happy hunting anyway.
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  #8  
Old 21.06.2009, 19:08
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Re: buying Vs renting

Hello!
Hubby is the financial mind so I will try to explain why we chose not to buy and if somehting is wrong/unclear get him on board to clarify.

The way mortgages are built here is that you never really reimburse the full price, meaning you are paying interestes mainly. You get a tax rebate on those BUT get a tax increase on "valeur locative" (they add an amount to your taxable income as it is considered a benefit that you do not pay rent).

We made all sort of calculations and scenarios and realized that we would pay more or less the same for the same type of flat in the same place in terms of monthly costs.

BUT with buying our flexibility was gone and maintenance costs could be high. Nowadays is anything breaks we clal the landlord, they fix it...

For us it came down to choose wether to pay rent or to pay interested and decided rent was better as our capital can return more on the market than by blocking it.

Also, the 20% to buy the kind of place we live in would have meant using us pension fund etc which we did not want to do.

I am sure others will have different opinion

Cheers,
K
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Old 21.06.2009, 20:00
Avi B'Nell
 
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Re: buying Vs renting

Thanks Kri
Being financial minded helps no doubt. I am not one, but your explanation does help understanding the strategy. Making use of your own funds to payback the principle amount on a property that does not appreciate much, makes no sense.

The initial thought was a very simple one,,, pay mortgage instead of rent, at the end of certain period if you sell, you get your rent back. The money spent on rent is kind of recovered back in some proportion.

Avi
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Old 21.06.2009, 20:23
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Re: buying Vs renting

We bought our house knowing it would not be a forever - or even perhaps long term - thing. My dream property - a small farm - is something very difficult to find, but I didn't want to spend years renting while we searched. So, we bought a small house in a decent area, intending to sell it when (if? ) I finally find that isolated farmhouse.

From a financial standpoint we are far better off buying than renting - this however is a very individual thing.

The overriding reason for buying was the need for breathing room. I simply could not stand living under a microscope, as we did when renting. But again, I suspect that this is a very individual thing.
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Old 21.06.2009, 21:00
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Re: buying Vs renting

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The initial thought was a very simple one,,, pay mortgage instead of rent, at the end of certain period if you sell, you get your rent back. The money spent on rent is kind of recovered back in some proportion.

Avi
yeah, that works in some other countries but not here

The mortgages here are actually built so that when you retire (i.e. 65) you still own 35-40%... rest of your life from buying you have paid 45-40% and lots of interests...

Ciao
K
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Old 21.06.2009, 21:51
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Re: buying Vs renting

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yeah, that works in some other countries but not here

The mortgages here are actually built so that when you retire (i.e. 65) you still own 35-40%... rest of your life from buying you have paid 45-40% and lots of interests...

Ciao
K
You're missing out the fact that the value of the house can increase over this time. Although, on average, in Switzerland, house price inflation is very low, in the right areas it makes buying perhaps a better bet the renting.
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Old 21.06.2009, 22:46
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Re: buying Vs renting

Adding the "valeur locative" to the income of a property owner makes the investment worthless in my opinion (basically what Kri was saying). You end up at retirement owning only a fraction of your property. You have paid interests to the bank or taxes to the state all your life depending on your choice.

On top of that, if you are lucky enough to make some profit when you sell your property, there is a another tax ("impôt sur les gains immobiliers") waiting for you..... It varies from canton to canton (cantonal tax).
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Old 21.06.2009, 23:00
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Re: buying Vs renting

For us where we rent is fantastic and as we are still relatively new in Switzerland it works well for us. We have a fantastic Swiss neighbour who has helped us enourmously. Having three young children the help we get is worth more than the rent.

I feel that property prices are going to be reasonably stable for a long while. When we buy then we will pay cash and not borrow!

Loads of people are going to tell me this that and the other tax, investment and other reasons. However it is as simple as this, if you have no borrowing you own it, you cannot default and no one can take it away.
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Old 21.06.2009, 23:14
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Re: buying Vs renting

Excellent Contributions. Thank you everyone. !
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Old 21.06.2009, 23:17
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Re: buying Vs renting

- our mortgage is slightly lower than Fr2000. We know we can rent our place out for Fr.3500. Of course, better choices in apartments.
- capital gains - at last valuation by the bank, 42% increase in value between 2003 and 2008. Ok.. this has decreased slightly now. But still, no way we can make this kind of gain on our 20% downpayment elsewhere.
- flexibility1 - from our perspective, if we face a problem, we can easily rent out our place for Fr.3000, pay the mortgage of Fr.2000 and still have some money left over to rent another cheaper place. Then again, we won't find anything much below Fr.2000 anyway, so why move out?
- flexibility2 - we had noisy neighbours for a while, and we did not move out simply because we felt rooted to the place. But they moved out and the new ones are very quiet.
- repairs&upkeep - our place is part of a bigger complex, so it is all well organized, plus we get to vote on the bigger expenditures.
- tax - a disadvantage as the assumed rental income is higher than our interest payments. But our place is in a lower income tax area.

but the timing of our purchase was very good, we were lucky. We had a look around this year to cash in our capital gains and upgrade, but find the prices ridiculous...

I think the locals are just not into the buying thing. We got some weird looks from our friends when we bought. One even said, "oh, if you lose your jobs you will be in deep trouble". Eh? I think if that were to happen and I was renting, I would lose the roof over my head far quicker!
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Old 22.06.2009, 08:10
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Re: buying Vs renting

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- One even said, "oh, if you lose your jobs you will be in deep trouble". Eh? I think if that were to happen and I was renting, I would lose the roof over my head far quicker!
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
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Old 22.06.2009, 08:12
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Re: buying Vs renting

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Loads of people are going to tell me this that and the other tax, investment and other reasons. However it is as simple as this, if you have no borrowing you own it, you cannot default and no one can take it away.
I totally agree, only issue I see is that you are going to pay LOADS income tax on it and therefore the "cost" of owning may then be something you are not willing to pay and decide to put your money elsewhere where someone actually pays you for it

This unless you foresee your property value going up massively but in these days I am not sure that is something we can count on for the next future...

Ciao
K
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Old 22.06.2009, 08:15
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Re: buying Vs renting

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You're missing out the fact that the value of the house can increase over this time. Although, on average, in Switzerland, house price inflation is very low, in the right areas it makes buying perhaps a better bet the renting.
I agree to that but it is not something you can count on and definitely not in these times... and even if the prices do increase massively, between intereste payments, taxes on capital gains, notary fees etc etc one has to see what the net gain in your pocket really is...

I do not have the figure anymore so pls don't hold me to it, but I seem to remember that capital gain tax is 50% if you sell your good before 10yrs, so a quick turnaround is not really possible (this was done on purspose to avoid speculation on the housing market)

Cheers,
C
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Old 22.06.2009, 09:51
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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
Perhaps. From our point of view, cost of staying at our place is right now Fr.2000. Worst case scenario, we move out within 3 months, earn Fr.3000 from rental and pay the bank, say Fr.2500, we have Fr.500 more to spend on renting another place. So if we downgrade and rent a place for Fr.1500, our net expenditure is only Fr.1,000.

One reason we chose out place is the ability to rent it out in case we needed to. The location - 4 minute walk to the train station and about 10 trains to Zurich per hour, journey time is 10 minutes. Demand is proven by the fact that one of our neighbours recently had more than 20 applications when he wanted to rent out his place. Previously, during the good times, he had more than 50 applicants!

Capital gains tax -depends on the Kanton. Usually if you put the gains into your next property, the tax is deferred. If you keep the property for more than 5 years, the tax reduces anyway to something insignificant.

But of course now, I also find property prices very high. Having to spend more than Fr.1m for a decent property means that your mortgage cost is the same as rent.
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