Buying property in Switzerland

Taking the Plunge – Buying property in Switzerland
Switzerland offers a very high standard of living and
quality of life with excellent education and health
facilities. It is also one of the world’s most stable
countries both economically and politically. In addition,
it is home to the rich and famous and is one of the
world’s foremost winter and summer playgrounds and
provides the diversity of summer lake fun to deep
winter white wonderlands and all of this in the heart of
central Europe. Investing your money in property
here, would seem to be a sure bet.
Homeownership
Despite the economic slowdown and rising
unemployment rates, real estate prices in
Switzerland’s key areas like Lake Geneva and Zürich
remain high. For evidence, look no further than Zürich,
where finding a modest three bedroom apartment for
less than one million francs is like searching for a
needle in a haystack.
Lifestyle Decision
Most expats rent property, but there are many
advantages to buying a place of your own which can
affect your overall well-being and have positive
repercussions to your assignment abroad. Certainly,
buying an apartment or a family home means creating
living space and possibly fulfilling a life-long dream. It
can also give you a feeling of stability and belonging
that is not achieved through renting alone. This said,
the key question on everyone’s lips this year – is it a
good time to buy now?
Who can buy in Switzerland?
If you are domiciled in Switzerland and are in
possession of a permit B for EU/EFTA origin countries
or permit C for non EU/EFTA countries, you are able to
buy property in Switzerland.
In general in Switzerland, homeownership is on the
increase. In a country where only 33% of the
population are homeowners, compared to 46% in
Germany, 52% in Austria and 65% in the rest of Europe,
many Swiss and also many foreigners are now deciding
to buy versus renting as a means of investing money
into something that might ultimately yield a good
return. According to some sources, homeownership has
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increased from 33% to 38% over the last ten years and
investing in property in Switzerland is regarded as a
good long-term investment with sustainable growth
prospects. After all, the property market is very
secure and stable and the standard of property built
is unparalleled in build quality and fixtures and fittings
to anywhere else in the world. In addition, it is
reassuring to know that purchasing in Switzerland is a
safe option, with the honesty and reliability of real
estate agents and notaries ensured.
On the whole, Swiss nationals buy and hold their
properties and do not move house or apartment
frequently, but “buy for life”. This means that the
current vacancy rate of properties to buy is just 0.2%
in Switzerland on a whole. And buying property, should
be viewed as a long-term commitment in true Swiss
fashion and not as a quick way to turn a profit.
Every corner of Switzerland is currently experiencing
high property prices. In fact prices have been rising
steadily since 1988. Prices for apartments have more
than doubled in the last ten years and family homes
prices have increased, an average of 37 percent. Of
course, regional and local influences do affect the
price significantly, so prices do fluctuate greatly from
area to area. The lake Geneva and Greater Zürich area
remain the most expensive places to live in
Switzerland. After years of steady growth, prices may
stagnate slightly this year, but so far, no stagnation
is in sight.
Time to Buy ?
The current real estate market situation is a seller’s
market. In all regions of Switzerland, demand for
property is higher than the supply; again leading to
high prices. Now is undoubtedly an ideal time to sell a
property, but is it a good time to buy?
With the change in the bilateral agreements, it is now
easier for expats with a permit B or C to purchase
property and the record low interest rates offer
attractive packages with a low repayment option.
Some people argue low interest rates are pushing
house prices higher and that the current house market
bubble is sure to blow soon, but other optimists are
certain that interest rates will remain low for at least
another year, if not longer. It is still a good time to
buy, but one should be aware not to take out too high
a mortgage in case interest rates rise dramatically in
the next few years. Only buy what you can actually
afford, allowing for a worse case scenario in case
interest rates are to rise dramatically.
If you do decide to buy, please be aware that the
selling market here is much slower than in other
countries; an average house in Switzerland is on the
market for anything between 5 months and one year.
But if you have a good property in a good location,
you are sure to do well.
Expats
Buying property in Switzerland is not too popular with
expats. Most expats prefer to pay costly rents for
many months or years before deciding to invest their
money into Swiss bricks and mortar. Expats are usually
only willing to buy once they know that they feel at
home and will be staying in the country for longer. Of
course, many high net worth individuals turn to
Switzerland to find a dream home in one of
Switzerland’s attractive and luring locations and they
do tend to buy from the outset, seeing the
acquisition as a long-term investment for the future.
In general, expats on assignments take much longer to
decide.
Mortgages
Swiss banks generally grant mortgages of up to 80
percent of the current market value of a property
which means that you pay a minimum deposit of 20
percent from your own resources and the rest is
loaned to you by the bank. The larger the deposit, the
lower your monthly mortgage payments, although
repayments cannot usually be more than one third of
your gross salary. Many people do not know that it is
also possible to give a part of your pension as
security to the bank to secure your loan.
Mortgage Rates
Switzerland has been offering consistent low interest
rates with one of the world’s most stable currencies
for the past few years. Over the last ten years,
interest rates have fluctuated only slightly between
2.5 percent (lowest) and 4.5 percent (highest). There
is relatively little difference between fixed and
variable rate mortgage rates with variable rates
starting at around 2.5 percent and fixed rates varying
from 1.25 percent (one year fix) to between 3 and 3.7
percent for a ten-year fixed rate mortgage (2011).
The country’s unique mortgage system features the
highest per capita mortgage indebtedness in the
world. This is due to high level of foreign deposits, the
high rate of domestic savings and the small population.
Shop around and see which bank offers you the best
mortgage deal. Unknown to many, it is possible to
negotiate with the bank over their mortgage offer.
Currently with the low interest rates, it is advisable
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to fix a large portion of mortgage loan for as many
years as possible – the bank will offer different
options ranging from 3, 5 and 10 years and in some
cases, up to 15 years is possible.
Property is treated as an asset which is subject to
both wealth and income tax and must be declared as
taxable income. And if you sell your home, you will be
liable to pay tax.
Conclusions
Now is certainly a good a time to buy. Location is
crucial, but choose a new and modern property that is
“fit for the future” and you could also be making a
sound investment for your own and your family’s
future.
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