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Old 08.09.2006, 10:43
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[Ins and Outs] Buying Property in Switzerland

Hey everyone is talking about renting but why? Why not buy?

The primary reason is that most people including Swiss do not know how to go about it so I will answer any questions about it including finance, hurdles to overcome, where you can seriously c**k up etc.

As these are very varied just post...
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Old 08.09.2006, 10:48
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Re: What to look for when buying a house in Switzerland

Quote:
Hey everyone is talking about renting but why? Why not buy?

The primary reason is that most people including Swiss do not know how to go about it so I will answer any questions about it including finance, hurdles to overcome, where you can seriously c**k up etc.

As these are very varied just post...
I would think the main reason not to buy is the 20% deposit? I know we'd love to buy here but not sure we'd ever have enough deposit.
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Old 08.09.2006, 10:54
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Re: What to look for when buying a house in Switzerland

Havent we been through all this before ? Or was that on the expats website...I can think of a number of reasons not to buy:

"So its a "once-in-a-lifetime-deal-can't-go-wrong-deal ?" I think not.
You really have to look at why you want to buy a property at all. On
the plus side, interest rates are very low, and tax benefits are
good. Liquidity is not, which may make it difficult to sell if you
suddenly have to leave the country or need your equity for something
else.

Capital gains as Paul pointed out are low for Swiss property, so you
are unlikely to make a killing on your property speculation unless
you are lucky enough to get the timing right and the swiss economy
suddenly gets excited.

If you are going to live in it you will obviously save on renting and
I can see the attraction of your own home. If you are going to rent
it out you will make a profit of sorts. But remember tenancy is very
regulated and there is a lot of new-build occurring so the market
could be a lot less buoyant in a few years time.

Some people consider buying a property is a one-way street. Anyone
who has seen property crashes, or the closure of major local
employers descimating the local housing market will realise that
caution should be exercised on what is most peoples biggest purchase.
Where is the diversity ?

If you can lucky enough to be able to afford a house rather than an
apartment then you can no doubt knock down walls and modify with gay
abandon. Those living in apartments though may find themselves, not
just limited-to , but committed-to certain conditions including
sharing major renovations if the rest of the house agree and you
don't..

Ask yourself : If you could get a bank to lend you 1m chf no-strings
at 2.5% would you still invest it in a swiss apartment ?

dave


Quote:
Hey everyone is talking about renting but why? Why not buy?

The primary reason is that most people including Swiss do not know how to go about it so I will answer any questions about it including finance, hurdles to overcome, where you can seriously c**k up etc.

As these are very varied just post...
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Old 08.09.2006, 12:21
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Re: What to look for when buying a house in Switzerland

I would love to have my own house but I a not sure if will be able to afford it. Read somewhere that 85% of people in (Zurich or CH) live in rented property.
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Old 08.09.2006, 12:22
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Re: What to look for when buying a house in Switzerland

Houses with atleast 3 bedrooms start from 1 million CHF right?
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Old 08.09.2006, 12:40
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Re: What to look for when buying a house in Switzerland

Quote:
Hey everyone is talking about renting but why? Why not buy?

The primary reason is that most people including Swiss do not know how to go about it so I will answer any questions about it including finance, hurdles to overcome, where you can seriously c**k up etc.

As these are very varied just post...
I think you'll find the most common reason is money. At the prices for houses and the deposits required...

Or, for those with cash but an undetermined amount of time they'll live here, the rules governing selling on.
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Old 08.09.2006, 12:40
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Re: What to look for when buying a house in Switzerland

We realised when we arrived here that it would have been to much of a squeeze to fit everything into a 5.5 room appartment so went down the house buying route.
We have 7.5 room house with small garden, 10 mins cycle into centre of Fribourg, 30mins into Bern, got change out of 600k, With interst rates as they are it costs us in the region of CHF1100 per month.
Obviously can't compare Fribourg to Zurich ,Lausanne or Geneva, but it does go to show that it doesn't have to cost an arm and a leg to buy something in CH
At the moment we feel it was the right decision however when we move on we will see how difficult/easy it is to sell/rent out.
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Old 08.09.2006, 13:00
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Re: What to look for when buying a house in Switzerland

Deposit normally 20% of house value although investments are pledge-able (eg pensions)

You can usually borrow such that no more than 33% of your gross salary is spent in the mortgage repayments.

Which means you can borrow a LOT, if you are confident enough and you are really really want to.

dave


Quote:
I think you'll find the most common reason is money. At the prices for houses and the deposits required...

Or, for those with cash but an undetermined amount of time they'll live here, the rules governing selling on.
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Old 08.09.2006, 13:02
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Re: What to look for when buying a house in Switzerland

Quote:
Deposit normally 20% of house value although investments are pledge-able (eg pensions)

You can usually borrow such that no more than 33% of your gross salary is spent in the mortgage repayments.

Which means you can borrow a LOT, if you are confident enough and you are really really want to.

dave
Interesting. So if I can barely make enough to pay the bills, if want to really really bad, I can buy a house? No, it doesn't work that way.
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Old 08.09.2006, 13:07
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Re: What to look for when buying a house in Switzerland

If you can come up with 20%, then they'll lend and repossess. Like the taxman, the banks don't like to lose.

I know a number of people that have mortgaged up the to hilt both here and UK, and come unstuck.

There was a woman in London who wrote a column for the Evening Standard who claimed she was broke and in financial hardship, even though she owned a large townhouse and apartment in North London. There was a major outcry from the readers at her arrogance, and she has since sold the house...

dave


Quote:
Interesting. So if I can barely make enough to pay the bills, if want to really really bad, I can buy a house? No, it doesn't work that way.
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Old 08.09.2006, 13:15
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Re: What to look for when buying a house in Switzerland

Quote:
If you can come up with 20%, then they'll lend and repossess. Like the taxman, the banks don't like to lose.
I don't doubt they'd repossess. That's not the point.

The point is that home ownership isn't open to everyone (particularly here), because for many, many people, getting that 20% to put down is impossible.

Average price of a house? 1 million, or so I hear. 20% of that in cash? Not in my lifetime.
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Old 08.09.2006, 13:26
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Re: What to look for when buying a house in Switzerland

Approx 32% of Swiss householders are owners.

The market is small and as the Swiss generally don't move if they buy, the available property is very limited and much of what you see advertised have some sort of problem otherwise property sells by word of mouth.

That said Swiss property is IMO a bargain - compared to the south of England anyway. Prices are starting to move up gently, but the market has not shown much more than 10% increase over 10 years. Though establishing the facts is difficult due to the small turnover.

Mortgages are tax deductable (without limit), but this is changing as the 'Eigenmietwert' (the money you save not paying rent) is removed from the tax system. Your property is valued and this figure is derived from teh valuation and added to your income.

Those working for banks/insurance companies will be able to get 1/2 to 1% off the already low martgage rates. We just went up from 1.5% for 3 years to 2.7% for 5 years - borrowing money at these rates is near to stealing - I once paid 15.5% in the UK.

Profit on the sale of a property is subject to a capital gains tax to reduce speculation (Grundstuckgewinsteuer). This reduces with the number of years you live in the property and varies from canton to canton. If you sell and rebuy at the same price or higher and put the money back into a property anywhere in Switzerland within 2 years, then you are not subject to this tax.

Why don't the Swiss buy? The 20% legally required deposit is a very big hurdle. The lack of avaibalbe property and then when no-one you know is buying, why would you?

Finally: what to look for? I have bought/sold 5 proprties in the UK and 1 in CH. I always ask the question when buying "could I sell this again?". If there are things that would put off a buyer, like a busy road, view of the back of a factory, no off-street parting, view that could be blocked by future building etc. Then don't buy...

Last edited by AbFab; 13.10.2006 at 20:20.
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Old 08.09.2006, 13:58
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Re: What to look for when buying a house in Switzerland

Deposit normally 20% of house value although investments are pledge-able (eg pensions)

This is becoming more popular, borrowing against your pension, depending on how long you have been contributing you can take out a sizable chunk of this ,and with the perceived sceptisism over the ability of pensions to pay out in the future some seem quite happy to do this.
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Old 08.09.2006, 14:53
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Re: What to look for when buying a house in Switzerland

I would certainly be interested in advice Richard. We are moving at the end of the month and will begin the house hunting process straight away. We pretty much know where we are regarding the financial side of things, but advice on possible hurdles and things to look out for would be gratefully received, as this will be our first purchase in Switzerland.

I'll post again once we have begun the process........

cheers
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Old 08.09.2006, 15:06
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Re: What to look for when buying a house in Switzerland

Okay so there are two questions/points generally that have been raised:

1. Its MAD to buy
2. Can't raise the money.

1. No it definitely is sensible to buy IF you are going to stay for a while or have plenty of liquid capital.
Reasons:
It is cheaper than renting - much cheaper.
You do not have any of the hassle when moving out spoken of here.
It ensures more or less that you have a reduced tax bill as you can deduct the interest and you massively increase your debt which has the nice side effect of making your capital negative thereby removing that tax burden.

2. The can't raise the money is a great myth. This is used frequently by insurance companies to sell policies to people that will allow them to own their own home in 20 years - ie you will then have the capital. The important point is the net income you have. The bank will go through this with you to ensure that you are not going to overstretch yourself and they are far far more conservative than in the UK. This will provide you with an amount that can be used to pay interest. Generally in Switzerland property is not amortized until you are 65 and then only 35% of the total.

So how do you raise the 20%. There are three things you can do all involving investments for the future (Vorsorge).
1. Liquidate your pension money. This is becoming a quite attractive option for the EU citizens as you are likely to receive less in the way of interest contributions than you pay and you can then "cash in" that pension money before June 1st 07. What then happens to this is not yet clear but anyway the money from the sale will be under current legislation transferred back into your account which you can liquidate on leaving Switzerland.

2. Pledge your pension money. The money stays in your account and the bank has some form of security. Theoretically the bank can take it if you default. However they are not able to do this quite as easily as you might think as the money is tied until you retire or leave and they have no access till that date...

3. Pledge your third pillar. This is very tax efficient as you are relieved the tax burden on this money and this can be used to keep the bank happy. However you will need to have a life insurance policy to cover the difference between the 20% and the amount in the pot - but this is quite cheap.
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Old 08.09.2006, 15:09
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Re: What to look for when buying a house in Switzerland

Quote:
...and with the perceived sceptisism over the ability of pensions to pay out in the future some seem quite happy to do this.
The only thing you can actually borrow about is the BVG part ie your company pension and this is individually your pot so it must pay out. In Switzerland there is now strict legislation to prevent companies using or abusing this in any way.
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Old 08.09.2006, 15:21
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Re: What to look for when buying a house in Switzerland

Quote:
I would certainly be interested in advice Richard. We are moving at the end of the month and will begin the house hunting process straight away. We pretty much know where we are regarding the financial side of things, but advice on possible hurdles and things to look out for would be gratefully received, as this will be our first purchase in Switzerland.

I'll post again once we have begun the process........

cheers
Will be more than happy to help but the first hurdle and the biggest one is the mental barrier which I guess you have jumped over. And wrt to the financial are you sure?! I do not mean with this the amounts you have at your disposal but actually the ways available to go about it and how it works.

I think and here I am talking from experience that you need to plan the process not just dive in. I know that is not what I did and it required a rethink and change of strategy to align with, more or less, the rental mentality. The key point here is to find the right balance between tax, qualify of life, stress and space and that is not always easy.

1. Naturally you want the lowest tax but this has one of the highest impacts on the cost of the living space and it is not a straight calculation you need to assess the deductables from where you are.
2. If you are young you might want to live in the city, if you are not so young you might want to be out a bit. If you have a family you might want a garden and so it goes on.
3. Stress - never thought of this before but the stress factor is a hidden part to consider - how far to a bus stop or railway station, how far to a shop (not Volg!), how far to work(time not distance), how far away from negative factors such as motorways, railways, airports(!).
4. Space is determined by what you can afford which is often but not always determined by other factors such as current popularity and tax levels. You need to determine three things with respect to space, what you would like, what you can do with out(ie ground floor flat or roof flat, garden, two indoor car spaces etc) and what is the minimum ie must have. This helps with search engines as you can give in these criteria.
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Old 08.09.2006, 15:35
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Re: What to look for when buying a house in Switzerland

I don't think I've seen anyone in this thread saying its "MAD to buy", but at the same time there are many reasons which do not make buying an obvious decision or even desirable. It's simplistic to say: "it definitely is sensible to buy IF you are going to stay for a while or have plenty of liquid capital. "

Just because you can, doesn't mean you should.

dave


Quote:
Okay so there are two questions/points generally that have been raised:

1. Its MAD to buy
2. Can't raise the money.

1. No it definitely is sensible to buy IF you are going to stay for a while or have plenty of liquid capital.
Reasons:
It is cheaper than renting - much cheaper.
You do not have any of the hassle when moving out spoken of here.
It ensures more or less that you have a reduced tax bill as you can deduct the interest and you massively increase your debt which has the nice side effect of making your capital negative thereby removing that tax burden.

2. The can't raise the money is a great myth. This is used frequently by insurance companies to sell policies to people that will allow them to own their own home in 20 years - ie you will then have the capital. The important point is the net income you have. The bank will go through this with you to ensure that you are not going to overstretch yourself and they are far far more conservative than in the UK. This will provide you with an amount that can be used to pay interest. Generally in Switzerland property is not amortized until you are 65 and then only 35% of the total.

So how do you raise the 20%. There are three things you can do all involving investments for the future (Vorsorge).
1. Liquidate your pension money. This is becoming a quite attractive option for the EU citizens as you are likely to receive less in the way of interest contributions than you pay and you can then "cash in" that pension money before June 1st 07. What then happens to this is not yet clear but anyway the money from the sale will be under current legislation transferred back into your account which you can liquidate on leaving Switzerland.

2. Pledge your pension money. The money stays in your account and the bank has some form of security. Theoretically the bank can take it if you default. However they are not able to do this quite as easily as you might think as the money is tied until you retire or leave and they have no access till that date...

3. Pledge your third pillar. This is very tax efficient as you are relieved the tax burden on this money and this can be used to keep the bank happy. However you will need to have a life insurance policy to cover the difference between the 20% and the amount in the pot - but this is quite cheap.
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Old 08.09.2006, 15:40
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Re: What to look for when buying a house in Switzerland

Quote:
I don't think I've seen anyone in this thread saying its "MAD to buy", but at the same time there are many reasons which do not make buying an obvious decision or even desirable. It's simplistic to say: "it definitely is sensible to buy IF you are going to stay for a while or have plenty of liquid capital. "

Just because you can, doesn't mean you should.

dave
Clearly it is simplistic but the general mentality of most Swiss is we want to but can never afford a myth kept alive for many a year... And probably the only reason for not buying if you are intent on staying for a while is the potential to be left with property on your hands at least for longer than you would like...
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Old 08.09.2006, 15:55
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Re: What to look for when buying a house in Switzerland

Errrr ...nope.

a) I have a business which is in its infancy. I will some cash over the next couple years when the big expansion comes, and may need premises far from here.

b) I fully intend staying here long term, but many people I know have just been made redundant (and spent 9 months looking for a job), so I am not confident that I will stay here if that happened.

c) my ex wife is a nutter, so the fewer visible assets I have, the better.

d) I have seen how many new apartments they are building in Opfikon, and wonder what the future holds for the value of my similar property.

e) capital gains here is low and I'd rather keep my house in London which is doing very nicely.

f) I have my own business which is doing very well but the "salary" I have chosen to pay myself is low therefore I can borrow only little.

g) I am on a yearly contract and would love to stay here long term, but the client renews year on year so I can't commit.

h) I want to remain in Langstrasse and spend all my money on fast women and booze.

i) the same as (h) but insert pet obsession (boats, aeroplanes)

j) ownership is more hassle than its worth (recent experience of haus-dispute here!)

k) you can't choose you neighbours. Bad neighbours here cost thousands.

l) I prefer to keep a balanced tax efficient liquid portfolio of diversified risk.

m) I want to punt all my cash on the Chicago Mercantile.

usw.

Dave

Quote:
And probably the only reason for not buying if you are intent on staying for a while is the potential to be left with property on your hands at least for longer than you would like...
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