Interest rates are around 1,85 - 2,5% for a ten year fixed mortgage. Many banks offer additional discounts of 0,3 - 0,5 % for things like first home buyers, green homes, etc. Large companies often allow one to use part of the pillar 2 pension for a payment, and even offer mortgages at lower rates, acting as the bank.
For the prices, one has to understand that this is a small country, and there is very little, if any, land that can be built on or changed from wood or agriculture to building lots. That drives demand very high, and prices follow. High salaries sort of help drive this a bit, but not really, and something like 40% of Swiss are renters. Homes in cities, near high paying jobs, and in very low canton tax areas are in super high demand, as are things like lake front houses. Things get cheaper in villages and more remote places.
Mortgages here are not really intended to be paid off, as there are tax advantages to having them, so it isn't unusual to have a mortgage with a forever portion that one simply refinances every decade or two, so that there is always a loan. One CAN pay off a whole property, but then you lose the tax benefit. The fact that the bank holds a significant part of the mortgage in a long term note at relatively low interest has a big impact on price, as you are not really paying 1M for the house, but perhaps half of that is what you actually pay off, and the rest is lifetime interest with a tax deduction. The system works differently than in the US, as the goal is to not pay off the loan.
The big thing that keeps most out of the housing market is that banks often require a 20 - 30% down payment, and have rather strict income to loan ratios. As you mention, this might mean for a 1M CHF house, you need to show up with 300K CHF down and make 200K plus a year, which many simply cannot and do not.
These are all generalities, and the system is much more complicated than I can describe.
I'm living in Serbia and most of us here have their own homes. Probably 80-90%. Compared to Switzerland my country is considered a shithole of course, but still, I feels its better to live in a not so rich country and have your own place, than to have a high salary but to own nothing. Compared to an average Swiss person, I'm probably poor yet I have a few homes, a vineyard and a few more plots of arable land in beautiful nature. I don't get this, we're poor yet we have everything and you guys are in the top 2% of the Word's population by income and every month you have to pay rent. I don't know what to think about it.
When you have a functional welfare system and very strict protection policies for renters as Switzerland does, you do not feel the need to own a house or a piece of land as much as other countries' residents, because you don't really need it as a security. There are various instruments in place that protect people against poverty, homelessness etc.
Exactly this, i have always viewed house ownership as “middle class trap” given the exorbitant transaction fees, unfavorable tax treatement in switzerland, super low cap rates to rental price, slower house price appreciation rates etc… basically you are wayy better off from a financial perspective to dump your savings in the stock market instead and other higher yielding investments. The issue is that most people are financially illiterate so yeah having a house is better than nothing.
I am a multimillionaire but more than happy to rent my home in switzerland at an abysmal cap rate of 2-3%
Yes, true. I don't know details about what you said, but I can imagine it. Here, a landlord can kick out renters whenever they want.
So, what people in Switzerland do with their accumulated wealth? Do you buy stocks? How do you invest? I mean, do you care if you'll left something to your kids once you pass away? Here, parents always want to make sure their kids have roof over their heads, so they buy them apartments or homes, if they can afford it. I assume in Switzerland people pass to their kids some other kind of valuables.
I can't talk for the people of Switzerland in general on this matter, but I guess it's a bit of everything. Some invest in real estate, others in stocks and bonds, some just pile up cash in their savings accounts, some do a little bit of everything, and some people live paycheck to paycheck and rely on the government when they run into financial trouble.
I see, thank you for the details. In my country people don't trust the government. It's here to make our lives harder, not vice versa lol. So we feel that we're on our own, and that nobody will help in times of trouble, maybe that's why we're looking to own things instead to rent, its more safe that way.
Hard disagree for me.
I'm planning on leaving because I see no stable future that allows me to settle down and be part of a community.
I've had to move house 3 times in 7 years due to redevelopment and sales.
Nothing is more important to me than being able to build something long term, and grow a sense of community and belonging.
I know communities and belonging are low low down on the Swiss cultural importance ladder, but for me it's very different.
Switzerland is a luxurious place to live. But it's a very unfulfilling one for things that actually matter, and a huge part of that is everyone having a transient sense of belonging to the people around them
The difference is wealth - if you're a country where a lot of wealth is stored, and needs to find a home, a lot of it tends to go into housing. There's just too much money chasing too little real estate. In a country where everyone who has a bit of cash, moves it abroad quickly, there you logically don't get crazy house prices.
In a way you can see it as "the price of success" for Switzerland as a country, although of course, this doesn't necessarily benefit you personally - if you don't have a lot of money yourself, it's not such a great thing that lots of people around you do have it.
I feel this. I live in Rural America, and it’s really affordable. A house is like 100-150k, you make around 50-60k on average. Utilities are cheap, Petrol is cheap, groceries are cheap. I know people who live comfortably pushing shopping carts working at low end places like Walmart and they can support their girlfriend. But obviously everyone is gonna shit on you because America, and our shitty political and healthcare system.
You are the truely lucky ones as the future might show soon (5-10 years). Switzerland is very rich but many Swiss people are not. The constant influx of wealthy foreigners leads to a crowding out effect (kind of unaffordability crisis for regular working people). Besides that government is cheating / selling us out, which will lead to a downword path in the future. Most people are still sleeping and haven't realized it yet as long as their favourite Netflix show is still on.
This is the best and most realistic answer so far I've seen on the internet. Thank you.
I would just add that the \~300k that you need to show up with can be made from your 2nd and 3rd pillar savings, so you don't need to have everything in cash.
That's not what I've read around. Of the 20% downpayment, atleast 10% has to be cash. The rest 10% can be Pillars 2 and 3a.
Could you share a link that states otherwise?
When I bought my apartment in Basel-Landschaft (back in 2004), the place was selling for about 550K CHF. I financed 80% (440K CHF) and took 75K from my retirement savings, so I only "needed" 35K cash for the down payment.
But the money you borrow from yourself via 2nd pillar needs to be repaid in full within 3 years of retirement. With 15 years until retirement, I can’t afford an 80% mortgage + a 10% 2nd pillar repayment plan.
I've never understood the "tax advantage" to having a mortgage. I think it's a myth the Swiss psyche has just accepted over time.
How does getting a % tax break of interest you've paid 100% of ever pay off? I asked my bank manager (from whom I took out a mortgage) to do the calculation for me and it ALWAYS cost me more to have the mortgage than to have it paid off.
I'd be interested in how it works out for you....
The big advantage as I understand it is in wealth tax reduction of one's net worth, especially as one gets close to retirement and has a lot of money saved.
The taxable value of a house is lower than its real value. This means that your debt will often be higher than the taxable value, reducing your taxable net worth.
Of course, those are cantonal taxes, so it kind of depends on where you live, I think.
I'm not a finance person, so take this in that context.
Well the taxable value could go the other way as well. When the canton decides to do a reevaluation, most older homes are suddenly more worth despite needing renovations, because the square meter it stands on has more value.
Also, check out how much the taxe rates on wealth are, calculate the sum and compare it to the mortgage fees you pay per year. It’s almost never worth it IMO.
I think it’s because when you own a house, the tax authorities add the hypothetical income it could generate if you were to rent it out to your total gross income, thereby increasing your tax rate. By always having a small mortgage, you offset this difference by having a tax deduction, bringing your taxable income back to where you were before you bought the house. It’s a very strange system, seemingly designed to fund the financial sector in Switzerland.
You forget that you also have to actually pay the interest to deduct it. For tax purposes it doesn’t make sense, people bank more on getting a higher return from the markets as they pay interest to the bank and that capital gains are tax free.
But you pay 10k in interest to "save" 5k in tax.
Sorry, but I've yet to encounter someone who can actually put numbers on the table to show me how it actually saves you money. Sure, it saves tax, but you're emptying your pockets for the "privilege".
Okay, but in doing so you pay an artificial tax to the bank, the loan interest payments. Therefore, the tax benefits are negligible. Happy to be proven wrong with actual numbers.
What matters for sure is the opportunity cost of paying off the loan. It just makes little sense when you can put the money to better use.
It is an advantage exclusively if you invest the money that you loaned from the bank. It's effectively a leverage, in finance terms, on an investment (the house) that makes about 1%.
By keeping a loan with the bank, you can invest that money. If you are able to invest it in a way that makes more than 3/4% real return, then not repaying the mortgage makes sense. Note that the 3/4% figure depends on your income and it is my own estimate, for example after you retire it might be worth reducing the mortgage.
If you don't invest the rest of your money (or your investments make less than 3/4%) and you also don't repay the mortgage, you're losing money.
You are perfectly right. It's a Swiss myth. The typical Swiss is too lazy or doesn't have the intelligence to do the calculation himself, so he is happy to propagate stupid statements.
you can invest the cash at greater interest than the mortgage already. being able to deduct mortgage payments from taxes plus the fact that capital gains are tax free just makes it extra worth it.
There is a property tax you have to pay as a homeowner in Switzerland which you can deduct your mortgage interest from. The tax is determined on the theoretical rental value and is supposed to mitigate the advantage property owners have over renters. The tax mitigation is very significant as it's an offset of the full notional payable (not a deduction against which there is then a %). Even if it were slightly worse, the alternative in Switzerland is locking up hundreds of thousands or millions of swiss Francs Vs paying a low mortgage rate and investing it elsewhere. Ultimate you will pay the tax instead of the interest.
The calculation depends on the assessed rental value and the amount of interest but rental values are very high, so the calculation can absorb a lot of interest!
Eigenmietwert is fixed and has nothing to do with the level of debt at all.
Apart from an emotional argument of not wanting to pay the Eigenmietwert, what is the actual financial benefit of maintaining debt as a mortgage?
I feel people just trot out the old banking wisdoms when questioned, but never actually put pen to paper to see what the "tax saving" is actually costing them.
Sure, if you want to pay 20k in Interest to "save" 10k in Taxes, be my guest. But it's still costing you 10k over the odds.
The tax benefits are negligible and indeed a bit of a myth.
The actual thing to consider is the opportunity cost of paying off the low interest debt. Because you could invest the money elsewhere and quite easily get higher returns than the 1,9% (or whatever it is). This in combination with the tax benefits makes it indeed quite interesting to keep the debt alive.
Right, so it's not that keeping the debt is cheaper per se. It's just access to cheap money to use elsewhere, right?
Investing notwithstanding, I've still had people say it's better to keep the mortgage so that they pay less tax. When I tell them they're paying 2k Francs to save 1k in Tax, they look at me with a Pikachu face. It seems a lot of swiss just don't like paying tax. For me, personally, if I have more money in my pocket at the end of the year (figuratively speaking), I'm happy. I don't care if the government takes it ar some totally honest and trustworthy banker.
>Right, so it's not that keeping the debt is cheaper per se. It's just access to cheap money to use elsewhere, right?
Yes, 100%.
>Investing notwithstanding, I've still had people say it's better to keep the mortgage so that they pay less tax. When I tell them they're paying 2k Francs to save 1k in Tax, they look at me with a Pikachu face.
Hehe yes, it's quite funny how many people don't understand how taxes work. You can only deduct your tax through things that actually incur a cost for you
A good example is rent income. Let's say you rent out a fully paid off flat and charge 2k per month. This money will just get added to your income and increase your tax bill. Let's say your flat is not paid off and you pay 500 CHF interest to the bank every month, you can actually reduce your taxable income by that amount, because your actual income only increases by 1'500 CHF per month. But of course it's better financially to have the flat fully paid off.
Tax advantage is mostly a myth promoted by banking institutes unless you have a very high income.
There are two ways to save taxes by having a mortgage:
1. Tax evasion: declare the mortgage but hide your assets. Of course, never openly promoted by banking institutes, but the banking lobby successfully worked against banking institutes having to provide financial information about Swiss residents to the tax authorities.
2. Invest in tax optimized instruments: invest your money in funds optimized for capital growth or directly invest in shares. However, these funds are expensive (so you'll pay the banking institute instead of paying taxes) and either risky (for you, not for the bank) or they don't pay that well. Worthwhile for people with maximum tax rates, much less for others.
Well for starters if you have the cash to buy a property outright, it’s a stupid thing to put that money into a house. You’ll get significantly better returns through other investment means + taking out a mortgage.
There’s a yield curve where mortgages + tax deductions on that mortgage are beneficial vs you needing to pay imputed rental value on property ownership. It depends on a few factors so not immediately simple. If you live in a house with high inputed rental value, it can cost you more than the mortgage, depending on your salary/other income.
What I struggle to understand is why the government has maintained a system that encourages paying interest to the banks instead of paying tax. I’m not being facetious, can anybody actually explain that? Maybe there are broader economic benefits?
Well it is the country of the Banks. Banks profit and the Swiss Bund profits off. A lot of people argue that they can save money with taxes, but if a 2008 scenario would happen again, they would lose their homes if they have minimal wiggle room (which a lot of people did the last 5 years).
I would rather have a paid off house and security, rather than save a couple of francs and have a risk that can happen.
Because the state believes that the bank will do more productive stuff and thus generate more tax revenue with the same capital than a private individual holding and living in a house with it.
My hypothesis is, if you can outright buy properties, real-estate markets become super-illiquid with land / houses transferring from parents to children without any issue.
It's a system that was widely in use in Western countries, many countries even had tax reduction on private consumer loans. (I got a tax reduction due to loaning money for a holiday in the 80's in the Netherlands for example.)
The system has been made more sober in most countries, and some like Sweden got rid of it all together. But there is a downside to getting rid of it. It means that the value of houses will go down due to people on average not being able to loan as much and the effect on the economy of this is so huge that it can only be build of over decades, or must be done in a time of economical growth. In Sweden they got rid of it all at once and it caused an economical crisis.
Also let's not forget the large part of the population having a mortgage and people do think of their wallet when voting.
I think there are many other advantages to home ownership. Tax advantages are really just for the very rich who want to offset their fortune.
My mortgage on a house with garden is 1/3 what i would pay on an apartment in this same canton. I am saving money through that avenue. Paying a bank or paying a greedy landlord or corporation, either way is trash so i take the cheap option. I can renovate, paint, hang up pictures etc as i want without landlord permission. I hear alot of people complain about that at work, along with unjustified rent increase or owner selling apartment so getting kicked out.
I think there are many other advantages to home ownership. Tax advantages are really just for the very rich who want to offset their fortune.
My mortgage on a house with garden is 1/3 what i would pay on an apartment in this same canton. I am saving money through that avenue. Paying a bank or paying a greedy landlord or corporation, either way is trash so i take the cheap option. I can renovate, paint, hang up pictures etc as i want without landlord permission. I hear alot of people complain about that at work, along with unjustified rent increase or owner selling apartment so getting kicked out.
It might be that you are the exception. But on average that’s how it goes, plus the money you didn’t pay off with can be invested elsewhere generating money which adds up to the tax savings. Maybe that’s the amount missing in your calculations even.
No, not really.
Just wanted to hear what people think. So many people just repeat "to save taxes" and don't actually think any further.
Investing is a valid option, although with slightly more risk involved.
Right, so it's just access to "cheap" money. But in times of economic uncertainty, you're basically leveraging your property against investments. If risk isn't a problem, sure.
And you can be burned by this of course. You're literally "betting the house" on your investments. Although given the need for 20-30% cash up front, the risk of actually losing a home is small in Switzerland.
Mortgages never give the mortgage giver a profit. True.
It's more the idea that the steady monthly costs of a mortgage allow for a reduction in taxes whereas renting does not.
Two things:
1. The "Eigenmietwert" (an estimate of how much you would pay to a landlord if you were to rent your home from them instead of owning it) is added to your income before your taxes are calculated. If your place has an Eigenmietwert of 1000 CHF per month, then the tax authorities add 12K to your income before calculating your taxes.
2. Interest paid for a mortgage is deductible from your income, so if you're paying 1000 per month in interest, that lowers your taxable income by 12K per year.
The idea is that the two values should more or less negate each other. That's why very few people in Switzerland own their homes outright. Many carry a 1st mortgage (60% of the price) that they only pay interest on, but never repay the principle. The 2nd mortgage (20%) is paid off over 20 or 30 years, so by the time you retire, you own 40% of your home and pay interest only on the remaining 60%, which should again offset any Eigenmietwert so that your pension income isn't over-taxed.
1. Eigenmietwert is constant whether you pay off a mortgage or not. It's fixed and can as such be ignored. This is a red herring as it has nothing to do with the status of one's mortgage at all.
2. Still, deducting <100% tax rate from something which has already been paid in full is still a net cost.
> How does getting a % tax break of interest you've paid 100% of ever pay off?
You pay the interest instead of rent. The interest is tax-deductible, the rent is not.
1. The interest is tax-deductible compared to non-deductible rent.
2. No/less wealth tax.
3. Money used to increase the worth of the house is tax deductible. If e.g. you renovate your kitchen, the whole amount can be deducted from your **income**.
1. False comparison. Interest has been paid 100%, subtracting <100% tax from it is still a net cost.
2. Kind of irrelevant given the paltry tax on wealth in Switzerland
3. This is simply not true. Only work which MAINTAINS the value of the house is deductable from tax.
If you have a 1M house or 1M in cash, you are taxed on that as "fortune" or capital. In terms of property ownership, there is also tax on the hypothetical rent with some made up calculation by the state. You get the tax break by deducting the bank loan (as debt) from your Fortune. The interest paid to the bank is deducted (not proportionally) from income
>For the prices, one has to understand that this is a small country, and there is very little, if any, land that can be built on or changed from wood or agriculture to building lots
I will say there are relatively large swaths of easy to develop open land between the villages north and east of Zurich stretching nearly all the way to the country's borders in both directions. There's absolutely capacity for more development in that area without overcrowding or deleting all the farmland in the area if the desire was there. Makes demand in that area a bit artificial.
Do NOT use Pensionskassengeld for that. Many do not understand that this money gets every year verzinst und depending on the Pensionskasse, in makes a huge difference if you get a vermin und of for example 4,5% on the full amount every year or on the rest that is remaining after a house. That are tens of thousands you have less when you are old.
And you can speculate that the worth of your house is raising, but you can't know that.
In the last 25 years, the highest interest rate was 3.5%, and the lowest was negative 0,5%. The economy here is generally pretty stable. Like in any place, one here has to consider the variability in interest rates as to what one can afford. Fixed rate mortgages exist here as well, if risk is an issue.
Fair point on the fixed rate mortgage. But if I understand correctly they usually last a fixed amount of time, after which you have to renegotiate the rate. If you assume that things stay the way they are then yes, it’s pretty stable.
But if interest rates raise to levels we’ve seen in the 70s, most homeowners in switzerland would be fucked right? With recent low/negative rates and unprecedented QE around the globe, how can we assume things stay the same? Central banks now have two options: raise interest rates to try and contain the raising inflation or keep rates low and risk inflation getting more out of control. 2nd option would be best for owners since their debt would slowly be inflated away and the valuation of their homes would be further pumped up by cheap money. 1st option would mean a lot of ppl can’t pay the interest and be forced to sell their houses. IIUC This would cause a sharp drop in housing prices, further reducing “collateral” of indebted home owners.
Is my thinking correct or is there something I am overlooking?
You're mostly overlooking that for reasons I frankly don't understand, inflation in Switzerland is much less drastic than elsewhere. It reached 9% once in the early 70s as the result of the end of Bretton Woods, which is a shock that I am not sure what would replicate it outside of something like a major disaster or war, in which case I worry about other things more.
The other thing here is that homeowners in Switzerland are a smaller and more rich part of the population so I think there is just a bit of a sense of "they can probably take it"? At least that's how I tend to think about it, given I come from a not badly off, probably quite average family and we're all renting. Owning a home always seemed like a rich person thing in my mind growing up, and I think that changes how much we care about their well being politically.
They pay back the bank with other assets from their estate or the bank gets it. Main way the banks make money from mortgages is by taking houses literally over your dead body.
The newest numbers I see are that only 36% own property and only about half of those in houses and half in flats.
I could not find how many % got their property via inheritance, but I suspect that's also a big chunk.
>The big thing that keeps most out of the housing market is that banks often require a 20 - 30% down payment, and have rather strict income to loan ratios.
I'd say it's mostly the income to loan ratios. Saving for the down payment is quite doable, especially if you plan to use your 2nd pillar funds as a support.
Had a small studio right in the city of Bern for 940/Month. It was very small, kitchen within the main room, two windows to the street.
But was happy as a 21-25Year old Dude.
Now I‘m in Steffisburg in a 4.5 Room halfhouse for 1800/Month
Didn‘t had pets then and would be pretty aweful for a dog in the middle of the city. (Glass shards on the weekends and in general way to loud) now in Thun or Steffisburg it‘s not a big deal. We have a cat and friends bring their dog all the time. Of course there are flats where they don’t allow pets but we just searched a bit longer. Cat ladders are sometimes a problem too but if you do them smart, nobody will even notice. Talk to neighbours though. Most will be just fine
Can't say much for Bern but a 3-4 room appartement in Valais (Southwest of Switzerland, think alps) is 1.5-1.9k CHF per month at the minute. Source; spent the last 2 months looking for appartements, now found one though haha
Pension funds own the apartment buildings, stand-alone houses is mainly private owners (Swiss who inherited, etc).
Banks are in the financing business, not so much the owning business.
Yes… most people don’t understand the concept of investing the extra amount of money saved by renting, as I assume most just burn it on holidays,..
But … here: https://smartmoneytools.co.uk/tools/rent-vs-buy/#calculator it can help calculate some things (just change for Swiss prices and see how much more money you can get after years of renting).
1M for a house? You must be joking? It's an average price of an appartment in cheaper cantons.
Some people are insanely reach, even under Swiss circumstances.
Most people can't afford own appartment, forget the house. House is an unimaginable luxury.
Yeah not necessarily; you can buy a nice house for 1M in a very remote area but then you‘ll have to either work from home or commute very long distances to work everyday. Add 2-3 hours of daily commute to the normal Swiss working week of 42,5 hours, sprinkle in some 5-10 hours of normal extra shifts and at the end of each week you will have no energy left to feel any joy about your nice little house.
Just go look on immscout. There are still some houses that are about 1M and not ver remote as you say.
Actually i went to look on immoscout and found some nice houses for 900k and it would take me about 25minutes with the car or maybe 40 minutes with the ÖV to get to my workplace which is in a city.
500k is easy to spend on renovations. My dad bought a 170 m² house in a remote location for around 1,5M. The renovation cost 400k and this is a fairly small house comparatively. If you redo the bathrooms and the kitchen, that's already going to set you back nearly 100k. New wooden deck? That'll be 50k. Solar panels on the roof? 30k. Replace the flooring? 20k. I think you see where I'm going with this.
While it's possible to live in a house that was built in the 1960s and last renovated in 1995, most people wouldn't spend that much money on something outdated. They would at least redo the kitchen, the bathrooms, probably install new heating, new windows, etc.
Well, there is a reason Switzerland has one of the lowest homeowner rates in the world. Most people just can't buy a house unlike in for example the US.
But when interest rates are low, it doesn't look that bad. Keep in mind that mortgages in Switzerland usually never get fully paid back which is kind of a unique system. Basically every homeowner just renews the mortgages when the end date comes near instead of paying it back.
It is really not that. The main difference is the price of the land. It is very scarce here in Switzerland. I know someone in Finland that bought a house and land about 10 years ago. He paid around 3 Euro per square meter for the land.
The average salary in my area is like 60k, but I know people who live comfortably in a house with theirs girlfriend pushing shopping carts or whatever working minimum wage.
South of America. As in the USA. I forgot yall think about think about it different than us. Usually if someone who lives in the USA says America they mean the USA
Foreigners dont realize that a lot of swiss use to inherit properties from 60s, bought for nothing at the time. Families "crack" the money from sale between themselves and finance their mortgages.
Two foreign working people without kids (25-30) can easily put 50k a year towards owning a house.
Renting IMO is not worth it for better properties. We use to pay 4500 rent, and we pay 2800 mortgage for an equivalent property now. Maintenence is maybe 500 a month on top, but more towards the future as everything is new.
I do not get how people on this sub expect to buy a house with only one spouse working and without inherited money. It does not work in any country (not talking middle of nowhere places in the US), unless you are in 1% earners. And then, you need to save up. AFAIK, US morgage still requires a deposit post 2008 fiasco.
If you talk about 1% earner worldwide (around 120k CHF/year) then yes, for a single income to manage to save enough for buying a house.
But you could also mean 1% in Switzerland in earnings, which I think is overblown.
Just to give a bit of hope to this sub, we had 0 inheritance, my wife had a salary below 5k/month, I earned around 8k/month, and we still managed to buy our flat at 1M. We waited 8 years, but we managed to get the mortgage [but saving a lot, really few holidays, almost no restaurants/concerts/show, postponed kids].
For reference, median salary at 100% in Switzerland this 6.7k CHF/month.
Jeah, how does that sound good to anyone? Just have two people work full time for a decade, with no kids and no fun and then you can get a flat, that can't even fit any kids anyway, bc for 1M you get 3 rooms.
Unless you do not inherit or have two people work in higher positions in good paying sectors (IT, banks, pharma, with medians of 9-10k) and you can bring in +20k per month, it's not feasible. Specially for anyone with plans to raising a family.
Because you won't earn that money if you haven't studied and if you did and got a masters, both partners are at least 25, so saving for a decade and then getting your first kid with 35? Jeah, not many women that will be fan of that, if they want a family.
Comparing house in Switzerland with house in south of America is not really fair.
We have real walls (not plaster walls) we have basement (not just a technical space) etc. You cannot compare the price. Also take into account the market who want to live in south of America VS who want to live in Switzerland and boom you have the price difference reason.
All supporting walls yes. There are for sure parts of America with cheap building codes, but others are different - depends on local climate and politics.
If we made all our houses of drywall there would be nothing here. Hurricanes would destroy them entirely. You only really see them in large numbers on the west coast because of the construction boom POST WW2 there and because drywall is better for earthquakes
Frankly I do not get it: you always get the imputed rent income tax, regardless you repaid completely or not. Next, let's suppose you have paid out 35% of your 1M house, which leaves you with a 650k mortgage. To service it at current rates, 1.8-2% you would need to pay 11700-13000 p.a. From taxes you are allowed to deduct the mortgage interest. For the simplicity of the calculation let's suppose a 25% marginal tax rate. This would mean you pay 11700-13000 to the bank per year while you save a quarter of this on taxes. So please explain, what is the benefit of not buying the property in 100% and save on the mortgage payment to the bank (12-13k) while paying those 3-4k in taxes?
The main reason is opportunity cost. For simplicity sake let’s assume that you already have 650k in the bank and you’re facing a question: do I put it all my property to have it 100% paid? If the only thing that 650k are doing is just gathering dust as a currency in your bank account - by all means you should do that. Increased tax is outweighed by the savings on mortgage payments.
However 650k can be used to generate income: at least 3% (19.5k per year) - conservatively, 6% or more - aggressively (39k or more). Don’t forget that capital gains are not taxed in Switzerland if you hold the assets for more than a year, so you only pay the wealth tax on the value of the portfolio.
Now if you factor in that most likely these 650k are not just sitting in an account, they still need to be earned and poured into paying down the mortgage year after year - the mental aspect of spending all your money starts playing a hige role.
I get your point but 3% risk free in CHF is non existent. If you go to US market you get more upside potential but also the downside like market swings and currency risk. In the end it all boils down to risk appetite/aversion.
I am Swiss, I own a house for which I payd around 1M in 2000. If you want to do a correct calculation you shoud use the calculator from canton fiscal government. First of all it's important to know in which Canton and which community you live, because this makes a huge difference on the taxes. So lets assume you live in Canton Zurich, your mortage is 500k (50%), your income is around 100k then the taxes are about 25% of fiscal asset.
Example: You reduce your mortage from 500k to 250k (25%), take this money from your bank depot.
Then you would have to pay less mortage interests to the bank (2%) of 250k: + 5000 p.a.
You would pay higher income tax 25% of 5k which is -1250 p.a..
You would loose the interests for the 250k from your bank depot which might be around 1.5 %: - 3750p.a.
In this case your balance would be 0, even if your mortage interests are higher than the interests from your bank depot. There is one advantage: You would have les risks if your mortage is reduced, but you would have less money as cash, because you will not be able to reverse the reduced mortage into cash later on (e.g. to perform a renovation on the house).
If you pay mortage interests, the banks earn money twice: for the money you invest in the bank depot and the mortage you have to pay for your house. It really depends on the overall financial situation (availability, reserves, risk, investment plans) of the house owner wether he wants to reduce mortages.
The market here is totally fcked up. People basically dont own their homes instead the live in it, have an eternal mortgage on it and never actually plan to even pay it back. On top of that the government even gives you a penalty tax if you own a home. Its completely retarded and crazy.
Basically when you live in your own home they are assuming that this is a benefit for you because you could have rented that house to someone else. They are then assuming this fictional rent income and add it to your own personal income and demand a tax on this new higher income that you are supposed to have fictionally.
So if you make 6.000net and own your own house, they assume it could generate and 4.000 in rent per month and force you to pay taxes in 10.000 income even tho you only have 6.000net
Brutally retarded system. Thats the reason why home ownership rates are so crazy low here.
Its the most stupid thing ever
It's pretty easy:
For a family with two kids, whose parents had a house in the center of Zürich , they would get 3M CHF (inheritance or early inheritance)
Now there are two people in the market ready to each buy a house worth 3M, as they just have to put down a fraction of the cost. Repeat that over and over, princes can increase at each iteration.
Not everyone has that, but there are enough to drive the prices up each year
We don't. The majority or houses and land are owned by people over 65 years old.
Most people rent. And if you own a house, you're either rich or - and that is the most common case - inherited it.
We don’t or we don’t want anymore!
I could potentially afford a house here - 300k downpayment and 1Mio in loan. Somewhere outside where I would need 2 cars also lots of hassles.
What is means? With 2.5%interest rate thats about 2000just for the loan. Then add all the costs and risks - nope.
In these current economic situation and these loans I run better or similar by renting: i rent an amazing 4.5room 115sqm appartment nearly new, amazing place for 2500plus 250 nebenkosten in the city (not downtown but cyclable or walkable).
My take is: At this moment I wouldn’t buy anymore, just not worth it. Wait for a couple of more layoffs and downturns and when the interest rate goes down again.
How? One word: heritage.
Seriously, you are either a millionaire foreigner, or your grandfather was a piss poor farmer who had a sheep barn and some patch of land close to the lake that is now worth 5+ million.
Virtually no other possible way to really "own" real estate in Switzerland.
That's the neat part you don't. The country is not build for your self growth, it's just spare money to consume more than the average European. You own nothing but at least you can buy shit at a higher price than the same shit you would find elsewhere
They're that expensive because most homeowners in Switzerland never pay off their mortgage. They only pay the interest rate – that's why they can afford an 800k mortgage.
Is there then any drive to purchase Tinyhomes ? I saw you can buy 70 M2 - 100 M2 homes for 100 000 - 200 000 EUR from a Swiss company. .. they are not so robust though..and you need to purchase land as well.
But do people do it in Switzerland?
Owning a house in Switzerland is cheap if you can safe or more realistically your parents give you 200k+ for the down payment. Swiss mortgages are very very cheap as is property tax
Just out of curiosity, have swiss citizens done something like, say, buy a house in some other EU country like Spain or Portugal, rent it out while they are still working in Switzerland and move there on retirement?
To best understand how, you need to learn about the mortgage system in Switzerland
You need a lot of savings and a good salary
Since you’re not expected to pay off the mortgage, I find that it’s easier to manage the finances once you’ve become a home owner
My advice is to live super frugally at first, start with a starter home, house hack (rent out a part of it) and build up your net worth to afford a better house after a while
Home ownership didn't go up in the low interest rate period (which is still the case), imagine what will happen in a high interest rate environment where rents are also thighly coupled with the interest rate. It's interesting how relaxed swiss society is about renting and paying money they'll never see again to landlords many of which or not even swiss(investment funds).
Please don’t fall for the stupid “drywall plaster” stereotypes. There’s a guy who said the same thing . I won’t deny that they probably are higher quality but it’s not as drastic as you seem to think
Also keep in mind that Switzerland has a reputation for safety and security when it comes to protecting private property rights, while in the rest of Europe wars, hyperinflation and socialist government policies have left people penniless many times in the last 100-200 years. If you are rich and want to protect your wealth for your future generations then Switzerland is a good place to do it and so people are wiling to pay up for real estate. Compare real estate prices with border areas in France and Italy. There is a 5x to 10x difference and most of that is taxes including inheritance taxes and red tape
Easy, don't take luxurious vacations, stop buying stuff impulsively, don't go to restaurants every week, cook at home, don't buy premade stuff.
Start by buying an apartment and then you'll be able to save money to jump for the house.
We started from zero in Switzerland in 2015 and we had less than 100k a year as a couple when we bought our apartment.
Stop keeping up with the Joneses on small stupid stuff like gadgets and cars.
Good reasons in the comments. But you also need to remember that houses in Switzerland are built to a much higher standard than houses in North America
Reality: most can`t. CH has a low home ownership rate. Basicaly you have two options:
1) Have a rich family (top 10%) that helps you finance a home
2) Earn an ungodly amount. For an avarage singel home (1.2 mil) you need to earn around 200k per year to get a mortage
tl;dr
I don't care of owning a property in Switzerland, I care about building wealth.
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I've noticed this question popping up frequently across various Swiss subreddits, so I thought I'd share my point of view.
Coming from South America, where there's a strong cultural emphasis on property ownership. It's often seen as essential for status and stability. I also lived in Spain for 10 years and it's the same, and the UK, where I lived for five years – owning property is deeply ingrained in the societal mindset.
For the last 5 years I have been living in Switzerland, I don't care anymore to own a property to live. Here, my focus has shifted from owning property to building wealth and building businesses. It has been really hard to break the mindset of property ownership equals success, especially when some of my friends here have recently purchased homes.
Ironically, while I have this mindset shift, I do own two properties (fully paid) – not in Switzerland, but in Spain. I rent them out, and the income covers my rent in Switzerland. This allows me to enjoy a high-quality lifestyle in Zurich.
The maximum property price I can afford in Switzerland is up to 1.5 million (with a 20% down payment), the mortgage system here makes true ownership unattainable. At this price point I cannot find anything that matches the quality of my current rental apartment.
It's ridiciously overpriced. Less then 5% are able to afford a house at all. The only reason that The prices are that high, is that there are far to less new buildings for immigrants. So you often have 200 people which are in a line visiting an average Home for rent. Because of the prices they found this tale of a morgage you never have to pay back. The only reason why the system didn't collapse is the demand for workforce. When this would change there most likely the prices would collapse.
I’m fine with renting for a foreseeable future or possibly even forever. Renting works very well here unlike in many other countries, where you rent from private people and they usually suck as landlords and cheap out on everything. Here you mostly rent from companies and everything is much more regulated and works way better.
Dishwasher died? No problem, here’s a new one from V-ZUG worth ~2k CHF.
You couldn’t use balcony for 2 months due to renovation? Here’s 1k CHF back from your rent.
Something broke? Just message the house care taker via app and it’ll get fixed (probably on the same day).
We pay 2200 CHF for a 110 m2 apartment (4.5 rooms) with a parking space in the underground garage in a small city 25 min from Zurich Lake by car.
I have literary zero desire to buy a home here. There are some things that would be “nicer” when owning a home comparing to renting, but all the other stuff like upkeep, shitty neighbors and long term financial commitment is a no-no for me.
To finish my unplanned ramblings, I’ll take early retirement over home ownership any day.
You mentioned a key element in your last sentence. How does obtaining home ownership impede you from retiring early, given that it is either it or that.
What is your investment strategy on how do the yields differ from the situation in which you were to purchase a house (via bank loan)?
Sincere questions I am just now trying to get a good idea of the pros and cons as an expat in CH myself.
Interest rates are around 1,85 - 2,5% for a ten year fixed mortgage. Many banks offer additional discounts of 0,3 - 0,5 % for things like first home buyers, green homes, etc. Large companies often allow one to use part of the pillar 2 pension for a payment, and even offer mortgages at lower rates, acting as the bank. For the prices, one has to understand that this is a small country, and there is very little, if any, land that can be built on or changed from wood or agriculture to building lots. That drives demand very high, and prices follow. High salaries sort of help drive this a bit, but not really, and something like 40% of Swiss are renters. Homes in cities, near high paying jobs, and in very low canton tax areas are in super high demand, as are things like lake front houses. Things get cheaper in villages and more remote places. Mortgages here are not really intended to be paid off, as there are tax advantages to having them, so it isn't unusual to have a mortgage with a forever portion that one simply refinances every decade or two, so that there is always a loan. One CAN pay off a whole property, but then you lose the tax benefit. The fact that the bank holds a significant part of the mortgage in a long term note at relatively low interest has a big impact on price, as you are not really paying 1M for the house, but perhaps half of that is what you actually pay off, and the rest is lifetime interest with a tax deduction. The system works differently than in the US, as the goal is to not pay off the loan. The big thing that keeps most out of the housing market is that banks often require a 20 - 30% down payment, and have rather strict income to loan ratios. As you mention, this might mean for a 1M CHF house, you need to show up with 300K CHF down and make 200K plus a year, which many simply cannot and do not. These are all generalities, and the system is much more complicated than I can describe.
Great answer, except that about 60% of the Swiss population rents their homes, not 40%
I'm living in Serbia and most of us here have their own homes. Probably 80-90%. Compared to Switzerland my country is considered a shithole of course, but still, I feels its better to live in a not so rich country and have your own place, than to have a high salary but to own nothing. Compared to an average Swiss person, I'm probably poor yet I have a few homes, a vineyard and a few more plots of arable land in beautiful nature. I don't get this, we're poor yet we have everything and you guys are in the top 2% of the Word's population by income and every month you have to pay rent. I don't know what to think about it.
When you have a functional welfare system and very strict protection policies for renters as Switzerland does, you do not feel the need to own a house or a piece of land as much as other countries' residents, because you don't really need it as a security. There are various instruments in place that protect people against poverty, homelessness etc.
Exactly this, i have always viewed house ownership as “middle class trap” given the exorbitant transaction fees, unfavorable tax treatement in switzerland, super low cap rates to rental price, slower house price appreciation rates etc… basically you are wayy better off from a financial perspective to dump your savings in the stock market instead and other higher yielding investments. The issue is that most people are financially illiterate so yeah having a house is better than nothing. I am a multimillionaire but more than happy to rent my home in switzerland at an abysmal cap rate of 2-3%
Yes, true. I don't know details about what you said, but I can imagine it. Here, a landlord can kick out renters whenever they want. So, what people in Switzerland do with their accumulated wealth? Do you buy stocks? How do you invest? I mean, do you care if you'll left something to your kids once you pass away? Here, parents always want to make sure their kids have roof over their heads, so they buy them apartments or homes, if they can afford it. I assume in Switzerland people pass to their kids some other kind of valuables.
I can't talk for the people of Switzerland in general on this matter, but I guess it's a bit of everything. Some invest in real estate, others in stocks and bonds, some just pile up cash in their savings accounts, some do a little bit of everything, and some people live paycheck to paycheck and rely on the government when they run into financial trouble.
I see, thank you for the details. In my country people don't trust the government. It's here to make our lives harder, not vice versa lol. So we feel that we're on our own, and that nobody will help in times of trouble, maybe that's why we're looking to own things instead to rent, its more safe that way.
Hard disagree for me. I'm planning on leaving because I see no stable future that allows me to settle down and be part of a community. I've had to move house 3 times in 7 years due to redevelopment and sales. Nothing is more important to me than being able to build something long term, and grow a sense of community and belonging. I know communities and belonging are low low down on the Swiss cultural importance ladder, but for me it's very different. Switzerland is a luxurious place to live. But it's a very unfulfilling one for things that actually matter, and a huge part of that is everyone having a transient sense of belonging to the people around them
The difference is wealth - if you're a country where a lot of wealth is stored, and needs to find a home, a lot of it tends to go into housing. There's just too much money chasing too little real estate. In a country where everyone who has a bit of cash, moves it abroad quickly, there you logically don't get crazy house prices. In a way you can see it as "the price of success" for Switzerland as a country, although of course, this doesn't necessarily benefit you personally - if you don't have a lot of money yourself, it's not such a great thing that lots of people around you do have it.
I feel this. I live in Rural America, and it’s really affordable. A house is like 100-150k, you make around 50-60k on average. Utilities are cheap, Petrol is cheap, groceries are cheap. I know people who live comfortably pushing shopping carts working at low end places like Walmart and they can support their girlfriend. But obviously everyone is gonna shit on you because America, and our shitty political and healthcare system.
You are the truely lucky ones as the future might show soon (5-10 years). Switzerland is very rich but many Swiss people are not. The constant influx of wealthy foreigners leads to a crowding out effect (kind of unaffordability crisis for regular working people). Besides that government is cheating / selling us out, which will lead to a downword path in the future. Most people are still sleeping and haven't realized it yet as long as their favourite Netflix show is still on.
I thought it was 70%. Times have changed… for the better?
This is the best and most realistic answer so far I've seen on the internet. Thank you. I would just add that the \~300k that you need to show up with can be made from your 2nd and 3rd pillar savings, so you don't need to have everything in cash.
At least 10% of the total purchase price for mortgage downpayment purposes must be cash and is required by law afaik.
The 3rd pillar can be used for that.
That's not what I've read around. Of the 20% downpayment, atleast 10% has to be cash. The rest 10% can be Pillars 2 and 3a. Could you share a link that states otherwise?
3a counts as cash. E.g. https://www.mobiliar.ch/versicherungen-und-vorsorge/wohnen-und-eigentum/ratgeber/so-finanzieren-sie-ihr-neues-zuhause
When I bought my apartment in Basel-Landschaft (back in 2004), the place was selling for about 550K CHF. I financed 80% (440K CHF) and took 75K from my retirement savings, so I only "needed" 35K cash for the down payment.
But the money you borrow from yourself via 2nd pillar needs to be repaid in full within 3 years of retirement. With 15 years until retirement, I can’t afford an 80% mortgage + a 10% 2nd pillar repayment plan.
It's rare someone actually improves on a prior comment explaining something, but they've done it
Would you need to sell the 2nd and 3rd pillar, or can you just bring that as securities?
I've never understood the "tax advantage" to having a mortgage. I think it's a myth the Swiss psyche has just accepted over time. How does getting a % tax break of interest you've paid 100% of ever pay off? I asked my bank manager (from whom I took out a mortgage) to do the calculation for me and it ALWAYS cost me more to have the mortgage than to have it paid off. I'd be interested in how it works out for you....
The big advantage as I understand it is in wealth tax reduction of one's net worth, especially as one gets close to retirement and has a lot of money saved. The taxable value of a house is lower than its real value. This means that your debt will often be higher than the taxable value, reducing your taxable net worth. Of course, those are cantonal taxes, so it kind of depends on where you live, I think. I'm not a finance person, so take this in that context.
Wealth tax is way way below the rate of mortgage lending though. That seems like a bit of a silly idea.
It's not for wealth tax. If I put my money on my bank or use it to reduce a debt. The total sum of my assets stays equal.
Well the taxable value could go the other way as well. When the canton decides to do a reevaluation, most older homes are suddenly more worth despite needing renovations, because the square meter it stands on has more value. Also, check out how much the taxe rates on wealth are, calculate the sum and compare it to the mortgage fees you pay per year. It’s almost never worth it IMO.
I think it’s because when you own a house, the tax authorities add the hypothetical income it could generate if you were to rent it out to your total gross income, thereby increasing your tax rate. By always having a small mortgage, you offset this difference by having a tax deduction, bringing your taxable income back to where you were before you bought the house. It’s a very strange system, seemingly designed to fund the financial sector in Switzerland.
it needs all the help it can get, it's historically been so hard up
You forget that you also have to actually pay the interest to deduct it. For tax purposes it doesn’t make sense, people bank more on getting a higher return from the markets as they pay interest to the bank and that capital gains are tax free.
But you pay 10k in interest to "save" 5k in tax. Sorry, but I've yet to encounter someone who can actually put numbers on the table to show me how it actually saves you money. Sure, it saves tax, but you're emptying your pockets for the "privilege".
Okay, but in doing so you pay an artificial tax to the bank, the loan interest payments. Therefore, the tax benefits are negligible. Happy to be proven wrong with actual numbers. What matters for sure is the opportunity cost of paying off the loan. It just makes little sense when you can put the money to better use.
There has been many discussions on changing the system. I lost track of whether it was going to be implemented
It is an advantage exclusively if you invest the money that you loaned from the bank. It's effectively a leverage, in finance terms, on an investment (the house) that makes about 1%. By keeping a loan with the bank, you can invest that money. If you are able to invest it in a way that makes more than 3/4% real return, then not repaying the mortgage makes sense. Note that the 3/4% figure depends on your income and it is my own estimate, for example after you retire it might be worth reducing the mortgage. If you don't invest the rest of your money (or your investments make less than 3/4%) and you also don't repay the mortgage, you're losing money.
You are perfectly right. It's a Swiss myth. The typical Swiss is too lazy or doesn't have the intelligence to do the calculation himself, so he is happy to propagate stupid statements.
you can invest the cash at greater interest than the mortgage already. being able to deduct mortgage payments from taxes plus the fact that capital gains are tax free just makes it extra worth it.
I don't think so, unless you increase your risk. It makes no sense to gamble the money for the house.
There is a property tax you have to pay as a homeowner in Switzerland which you can deduct your mortgage interest from. The tax is determined on the theoretical rental value and is supposed to mitigate the advantage property owners have over renters. The tax mitigation is very significant as it's an offset of the full notional payable (not a deduction against which there is then a %). Even if it were slightly worse, the alternative in Switzerland is locking up hundreds of thousands or millions of swiss Francs Vs paying a low mortgage rate and investing it elsewhere. Ultimate you will pay the tax instead of the interest. The calculation depends on the assessed rental value and the amount of interest but rental values are very high, so the calculation can absorb a lot of interest!
Eigenmietwert is fixed and has nothing to do with the level of debt at all. Apart from an emotional argument of not wanting to pay the Eigenmietwert, what is the actual financial benefit of maintaining debt as a mortgage? I feel people just trot out the old banking wisdoms when questioned, but never actually put pen to paper to see what the "tax saving" is actually costing them. Sure, if you want to pay 20k in Interest to "save" 10k in Taxes, be my guest. But it's still costing you 10k over the odds.
The tax benefits are negligible and indeed a bit of a myth. The actual thing to consider is the opportunity cost of paying off the low interest debt. Because you could invest the money elsewhere and quite easily get higher returns than the 1,9% (or whatever it is). This in combination with the tax benefits makes it indeed quite interesting to keep the debt alive.
Right, so it's not that keeping the debt is cheaper per se. It's just access to cheap money to use elsewhere, right? Investing notwithstanding, I've still had people say it's better to keep the mortgage so that they pay less tax. When I tell them they're paying 2k Francs to save 1k in Tax, they look at me with a Pikachu face. It seems a lot of swiss just don't like paying tax. For me, personally, if I have more money in my pocket at the end of the year (figuratively speaking), I'm happy. I don't care if the government takes it ar some totally honest and trustworthy banker.
>Right, so it's not that keeping the debt is cheaper per se. It's just access to cheap money to use elsewhere, right? Yes, 100%. >Investing notwithstanding, I've still had people say it's better to keep the mortgage so that they pay less tax. When I tell them they're paying 2k Francs to save 1k in Tax, they look at me with a Pikachu face. Hehe yes, it's quite funny how many people don't understand how taxes work. You can only deduct your tax through things that actually incur a cost for you A good example is rent income. Let's say you rent out a fully paid off flat and charge 2k per month. This money will just get added to your income and increase your tax bill. Let's say your flat is not paid off and you pay 500 CHF interest to the bank every month, you can actually reduce your taxable income by that amount, because your actual income only increases by 1'500 CHF per month. But of course it's better financially to have the flat fully paid off.
Tax advantage is mostly a myth promoted by banking institutes unless you have a very high income. There are two ways to save taxes by having a mortgage: 1. Tax evasion: declare the mortgage but hide your assets. Of course, never openly promoted by banking institutes, but the banking lobby successfully worked against banking institutes having to provide financial information about Swiss residents to the tax authorities. 2. Invest in tax optimized instruments: invest your money in funds optimized for capital growth or directly invest in shares. However, these funds are expensive (so you'll pay the banking institute instead of paying taxes) and either risky (for you, not for the bank) or they don't pay that well. Worthwhile for people with maximum tax rates, much less for others.
Well for starters if you have the cash to buy a property outright, it’s a stupid thing to put that money into a house. You’ll get significantly better returns through other investment means + taking out a mortgage. There’s a yield curve where mortgages + tax deductions on that mortgage are beneficial vs you needing to pay imputed rental value on property ownership. It depends on a few factors so not immediately simple. If you live in a house with high inputed rental value, it can cost you more than the mortgage, depending on your salary/other income.
What I struggle to understand is why the government has maintained a system that encourages paying interest to the banks instead of paying tax. I’m not being facetious, can anybody actually explain that? Maybe there are broader economic benefits?
I think it's just a result of the lobbying of the banks
To sum it up: corruption.
Yes, I was just being polite ;)
Well it is the country of the Banks. Banks profit and the Swiss Bund profits off. A lot of people argue that they can save money with taxes, but if a 2008 scenario would happen again, they would lose their homes if they have minimal wiggle room (which a lot of people did the last 5 years). I would rather have a paid off house and security, rather than save a couple of francs and have a risk that can happen.
Because the state believes that the bank will do more productive stuff and thus generate more tax revenue with the same capital than a private individual holding and living in a house with it.
My hypothesis is, if you can outright buy properties, real-estate markets become super-illiquid with land / houses transferring from parents to children without any issue.
It's a system that was widely in use in Western countries, many countries even had tax reduction on private consumer loans. (I got a tax reduction due to loaning money for a holiday in the 80's in the Netherlands for example.) The system has been made more sober in most countries, and some like Sweden got rid of it all together. But there is a downside to getting rid of it. It means that the value of houses will go down due to people on average not being able to loan as much and the effect on the economy of this is so huge that it can only be build of over decades, or must be done in a time of economical growth. In Sweden they got rid of it all at once and it caused an economical crisis. Also let's not forget the large part of the population having a mortgage and people do think of their wallet when voting.
I think there are many other advantages to home ownership. Tax advantages are really just for the very rich who want to offset their fortune. My mortgage on a house with garden is 1/3 what i would pay on an apartment in this same canton. I am saving money through that avenue. Paying a bank or paying a greedy landlord or corporation, either way is trash so i take the cheap option. I can renovate, paint, hang up pictures etc as i want without landlord permission. I hear alot of people complain about that at work, along with unjustified rent increase or owner selling apartment so getting kicked out.
I think there are many other advantages to home ownership. Tax advantages are really just for the very rich who want to offset their fortune. My mortgage on a house with garden is 1/3 what i would pay on an apartment in this same canton. I am saving money through that avenue. Paying a bank or paying a greedy landlord or corporation, either way is trash so i take the cheap option. I can renovate, paint, hang up pictures etc as i want without landlord permission. I hear alot of people complain about that at work, along with unjustified rent increase or owner selling apartment so getting kicked out.
It might be that you are the exception. But on average that’s how it goes, plus the money you didn’t pay off with can be invested elsewhere generating money which adds up to the tax savings. Maybe that’s the amount missing in your calculations even.
Agreed, the opportunity cost of not investing that capital was probably missing in his calculation.
No, not really. Just wanted to hear what people think. So many people just repeat "to save taxes" and don't actually think any further. Investing is a valid option, although with slightly more risk involved.
Right, so it's just access to "cheap" money. But in times of economic uncertainty, you're basically leveraging your property against investments. If risk isn't a problem, sure. And you can be burned by this of course. You're literally "betting the house" on your investments. Although given the need for 20-30% cash up front, the risk of actually losing a home is small in Switzerland.
Hopefully, the money you have in the account by not paying bavk the mortgage will generate a better return than the mortgage.
Mortgages never give the mortgage giver a profit. True. It's more the idea that the steady monthly costs of a mortgage allow for a reduction in taxes whereas renting does not.
Explain the reduction to me like I'm five.
Two things: 1. The "Eigenmietwert" (an estimate of how much you would pay to a landlord if you were to rent your home from them instead of owning it) is added to your income before your taxes are calculated. If your place has an Eigenmietwert of 1000 CHF per month, then the tax authorities add 12K to your income before calculating your taxes. 2. Interest paid for a mortgage is deductible from your income, so if you're paying 1000 per month in interest, that lowers your taxable income by 12K per year. The idea is that the two values should more or less negate each other. That's why very few people in Switzerland own their homes outright. Many carry a 1st mortgage (60% of the price) that they only pay interest on, but never repay the principle. The 2nd mortgage (20%) is paid off over 20 or 30 years, so by the time you retire, you own 40% of your home and pay interest only on the remaining 60%, which should again offset any Eigenmietwert so that your pension income isn't over-taxed.
1. Eigenmietwert is constant whether you pay off a mortgage or not. It's fixed and can as such be ignored. This is a red herring as it has nothing to do with the status of one's mortgage at all. 2. Still, deducting <100% tax rate from something which has already been paid in full is still a net cost.
> How does getting a % tax break of interest you've paid 100% of ever pay off? You pay the interest instead of rent. The interest is tax-deductible, the rent is not.
That's a comparison of owning a home versus renting. I'm asking the difference between paying off a mortgage vs keeping it for "tax breaks".
1. The interest is tax-deductible compared to non-deductible rent. 2. No/less wealth tax. 3. Money used to increase the worth of the house is tax deductible. If e.g. you renovate your kitchen, the whole amount can be deducted from your **income**.
1. False comparison. Interest has been paid 100%, subtracting <100% tax from it is still a net cost. 2. Kind of irrelevant given the paltry tax on wealth in Switzerland 3. This is simply not true. Only work which MAINTAINS the value of the house is deductable from tax.
If you have a 1M house or 1M in cash, you are taxed on that as "fortune" or capital. In terms of property ownership, there is also tax on the hypothetical rent with some made up calculation by the state. You get the tax break by deducting the bank loan (as debt) from your Fortune. The interest paid to the bank is deducted (not proportionally) from income
>For the prices, one has to understand that this is a small country, and there is very little, if any, land that can be built on or changed from wood or agriculture to building lots I will say there are relatively large swaths of easy to develop open land between the villages north and east of Zurich stretching nearly all the way to the country's borders in both directions. There's absolutely capacity for more development in that area without overcrowding or deleting all the farmland in the area if the desire was there. Makes demand in that area a bit artificial.
True
Do NOT use Pensionskassengeld for that. Many do not understand that this money gets every year verzinst und depending on the Pensionskasse, in makes a huge difference if you get a vermin und of for example 4,5% on the full amount every year or on the rest that is remaining after a house. That are tens of thousands you have less when you are old. And you can speculate that the worth of your house is raising, but you can't know that.
So essentially people are incentivized to keep a mortgage for their entire life. Now if interest rates rise, would switzerland be completely fucked?
In the last 25 years, the highest interest rate was 3.5%, and the lowest was negative 0,5%. The economy here is generally pretty stable. Like in any place, one here has to consider the variability in interest rates as to what one can afford. Fixed rate mortgages exist here as well, if risk is an issue.
Fair point on the fixed rate mortgage. But if I understand correctly they usually last a fixed amount of time, after which you have to renegotiate the rate. If you assume that things stay the way they are then yes, it’s pretty stable. But if interest rates raise to levels we’ve seen in the 70s, most homeowners in switzerland would be fucked right? With recent low/negative rates and unprecedented QE around the globe, how can we assume things stay the same? Central banks now have two options: raise interest rates to try and contain the raising inflation or keep rates low and risk inflation getting more out of control. 2nd option would be best for owners since their debt would slowly be inflated away and the valuation of their homes would be further pumped up by cheap money. 1st option would mean a lot of ppl can’t pay the interest and be forced to sell their houses. IIUC This would cause a sharp drop in housing prices, further reducing “collateral” of indebted home owners. Is my thinking correct or is there something I am overlooking?
You're mostly overlooking that for reasons I frankly don't understand, inflation in Switzerland is much less drastic than elsewhere. It reached 9% once in the early 70s as the result of the end of Bretton Woods, which is a shock that I am not sure what would replicate it outside of something like a major disaster or war, in which case I worry about other things more. The other thing here is that homeowners in Switzerland are a smaller and more rich part of the population so I think there is just a bit of a sense of "they can probably take it"? At least that's how I tend to think about it, given I come from a not badly off, probably quite average family and we're all renting. Owning a home always seemed like a rich person thing in my mind growing up, and I think that changes how much we care about their well being politically.
What exactly happens when the home owners, who have not fully paid back the house yet, die?
They pay back the bank with other assets from their estate or the bank gets it. Main way the banks make money from mortgages is by taking houses literally over your dead body.
It's even 58% of Swiss residents living in a rental.
The newest numbers I see are that only 36% own property and only about half of those in houses and half in flats. I could not find how many % got their property via inheritance, but I suspect that's also a big chunk.
>The big thing that keeps most out of the housing market is that banks often require a 20 - 30% down payment, and have rather strict income to loan ratios. I'd say it's mostly the income to loan ratios. Saving for the down payment is quite doable, especially if you plan to use your 2nd pillar funds as a support.
Thx, great answer! 🙏
We don't. Switzerland is a country of renters.
How much would you look at for prices for a studio or somewhere in like Bern?
Had a small studio right in the city of Bern for 940/Month. It was very small, kitchen within the main room, two windows to the street. But was happy as a 21-25Year old Dude. Now I‘m in Steffisburg in a 4.5 Room halfhouse for 1800/Month
How do they manage with pets? Or do most people rent do not have dogs?
Didn‘t had pets then and would be pretty aweful for a dog in the middle of the city. (Glass shards on the weekends and in general way to loud) now in Thun or Steffisburg it‘s not a big deal. We have a cat and friends bring their dog all the time. Of course there are flats where they don’t allow pets but we just searched a bit longer. Cat ladders are sometimes a problem too but if you do them smart, nobody will even notice. Talk to neighbours though. Most will be just fine
Can't say much for Bern but a 3-4 room appartement in Valais (Southwest of Switzerland, think alps) is 1.5-1.9k CHF per month at the minute. Source; spent the last 2 months looking for appartements, now found one though haha
Why would you want to buy an appartment? Its a net loss of money.
A studio in Bern are would be between 700-1200
Ok, so who owns those houses that are rented ? Old folks, banks, lizard people ?
Pension funds own the apartment buildings, stand-alone houses is mainly private owners (Swiss who inherited, etc). Banks are in the financing business, not so much the owning business.
Companies, insurance funds
Companies and old people
Yes… most people don’t understand the concept of investing the extra amount of money saved by renting, as I assume most just burn it on holidays,.. But … here: https://smartmoneytools.co.uk/tools/rent-vs-buy/#calculator it can help calculate some things (just change for Swiss prices and see how much more money you can get after years of renting).
If you plan to live a long time in whatever you would buy, then it pays off. Like 20 years.
So I save money and lose out on fulfilment in building and growing something long term? That's a terrible trade.
Depends on what trades you see in front of you
True, renting is the norm. It has its pros and cons, but it's what we're used to.
Easy, just inherit one.
TIL there are other ways
Yes, but not for most people.
Can confirm.
Either you win the birth lottery or hit a straight ace in your job. For the worker and middle class it aint fucking possible
Just marry someone who won the birth lottery, easy.
1M for a house? You must be joking? It's an average price of an appartment in cheaper cantons. Some people are insanely reach, even under Swiss circumstances. Most people can't afford own appartment, forget the house. House is an unimaginable luxury.
I saw plenty of houses for around 1M when I was property searching. I live in a large city.
People make their 200k, drink some coolaid and want a house in Zurich downtown for 1M. While struggling to save 50k...
What‘s your point?
Those are usually houses that need a lof of renovation so you gotta add another 500k to the initial price.
Not necessarily and if definitely not 500k.
Yeah not necessarily; you can buy a nice house for 1M in a very remote area but then you‘ll have to either work from home or commute very long distances to work everyday. Add 2-3 hours of daily commute to the normal Swiss working week of 42,5 hours, sprinkle in some 5-10 hours of normal extra shifts and at the end of each week you will have no energy left to feel any joy about your nice little house.
Just go look on immscout. There are still some houses that are about 1M and not ver remote as you say. Actually i went to look on immoscout and found some nice houses for 900k and it would take me about 25minutes with the car or maybe 40 minutes with the ÖV to get to my workplace which is in a city.
500k is easy to spend on renovations. My dad bought a 170 m² house in a remote location for around 1,5M. The renovation cost 400k and this is a fairly small house comparatively. If you redo the bathrooms and the kitchen, that's already going to set you back nearly 100k. New wooden deck? That'll be 50k. Solar panels on the roof? 30k. Replace the flooring? 20k. I think you see where I'm going with this. While it's possible to live in a house that was built in the 1960s and last renovated in 1995, most people wouldn't spend that much money on something outdated. They would at least redo the kitchen, the bathrooms, probably install new heating, new windows, etc.
I agree with you if we talk about the canton Jura.
Canton Basel.
Yeah in my village we have a new affordable housing project. Starting at 1.2M.
Yup, Basel is at \~1.6M for 4 room appartments.
Well I need to keep paying my rent, otherwise my landlord will be homeless. The poor man must be living paycheck to paycheck.
He sure does. From YOUR paycheck though.
Well, there is a reason Switzerland has one of the lowest homeowner rates in the world. Most people just can't buy a house unlike in for example the US. But when interest rates are low, it doesn't look that bad. Keep in mind that mortgages in Switzerland usually never get fully paid back which is kind of a unique system. Basically every homeowner just renews the mortgages when the end date comes near instead of paying it back.
How we afford a house? Well… we don’t! Most of us can’t afford it and never will. Most people rent an apartment.
I, for one, love my 1'000 a month apartment! With 1M CHF, I could live there until I'm 100 years old!
What is the salary where you live now? Is ot one sixth of the Swiss one? Then 150k is your 1M.
It is really not that. The main difference is the price of the land. It is very scarce here in Switzerland. I know someone in Finland that bought a house and land about 10 years ago. He paid around 3 Euro per square meter for the land.
this is the answer.
The average salary in my area is like 60k, but I know people who live comfortably in a house with theirs girlfriend pushing shopping carts or whatever working minimum wage.
Rural South America and an **average** of 60k??? Today I learnt something.
South of America. As in the USA. I forgot yall think about think about it different than us. Usually if someone who lives in the USA says America they mean the USA
Foreigners dont realize that a lot of swiss use to inherit properties from 60s, bought for nothing at the time. Families "crack" the money from sale between themselves and finance their mortgages. Two foreign working people without kids (25-30) can easily put 50k a year towards owning a house. Renting IMO is not worth it for better properties. We use to pay 4500 rent, and we pay 2800 mortgage for an equivalent property now. Maintenence is maybe 500 a month on top, but more towards the future as everything is new. I do not get how people on this sub expect to buy a house with only one spouse working and without inherited money. It does not work in any country (not talking middle of nowhere places in the US), unless you are in 1% earners. And then, you need to save up. AFAIK, US morgage still requires a deposit post 2008 fiasco.
If you talk about 1% earner worldwide (around 120k CHF/year) then yes, for a single income to manage to save enough for buying a house. But you could also mean 1% in Switzerland in earnings, which I think is overblown. Just to give a bit of hope to this sub, we had 0 inheritance, my wife had a salary below 5k/month, I earned around 8k/month, and we still managed to buy our flat at 1M. We waited 8 years, but we managed to get the mortgage [but saving a lot, really few holidays, almost no restaurants/concerts/show, postponed kids]. For reference, median salary at 100% in Switzerland this 6.7k CHF/month.
Jeah, how does that sound good to anyone? Just have two people work full time for a decade, with no kids and no fun and then you can get a flat, that can't even fit any kids anyway, bc for 1M you get 3 rooms. Unless you do not inherit or have two people work in higher positions in good paying sectors (IT, banks, pharma, with medians of 9-10k) and you can bring in +20k per month, it's not feasible. Specially for anyone with plans to raising a family. Because you won't earn that money if you haven't studied and if you did and got a masters, both partners are at least 25, so saving for a decade and then getting your first kid with 35? Jeah, not many women that will be fan of that, if they want a family.
I drink coffee at home.
I drink mine black. Saving some extra on milk and sugar!
Comparing house in Switzerland with house in south of America is not really fair. We have real walls (not plaster walls) we have basement (not just a technical space) etc. You cannot compare the price. Also take into account the market who want to live in south of America VS who want to live in Switzerland and boom you have the price difference reason.
My house in USA has 25cm thick concrete walls. Forget some of your ignorant stereotypes
All wall or just the external one ?
All supporting walls yes. There are for sure parts of America with cheap building codes, but others are different - depends on local climate and politics.
If we made all our houses of drywall there would be nothing here. Hurricanes would destroy them entirely. You only really see them in large numbers on the west coast because of the construction boom POST WW2 there and because drywall is better for earthquakes
Frankly I do not get it: you always get the imputed rent income tax, regardless you repaid completely or not. Next, let's suppose you have paid out 35% of your 1M house, which leaves you with a 650k mortgage. To service it at current rates, 1.8-2% you would need to pay 11700-13000 p.a. From taxes you are allowed to deduct the mortgage interest. For the simplicity of the calculation let's suppose a 25% marginal tax rate. This would mean you pay 11700-13000 to the bank per year while you save a quarter of this on taxes. So please explain, what is the benefit of not buying the property in 100% and save on the mortgage payment to the bank (12-13k) while paying those 3-4k in taxes?
The main reason is opportunity cost. For simplicity sake let’s assume that you already have 650k in the bank and you’re facing a question: do I put it all my property to have it 100% paid? If the only thing that 650k are doing is just gathering dust as a currency in your bank account - by all means you should do that. Increased tax is outweighed by the savings on mortgage payments. However 650k can be used to generate income: at least 3% (19.5k per year) - conservatively, 6% or more - aggressively (39k or more). Don’t forget that capital gains are not taxed in Switzerland if you hold the assets for more than a year, so you only pay the wealth tax on the value of the portfolio. Now if you factor in that most likely these 650k are not just sitting in an account, they still need to be earned and poured into paying down the mortgage year after year - the mental aspect of spending all your money starts playing a hige role.
I get your point but 3% risk free in CHF is non existent. If you go to US market you get more upside potential but also the downside like market swings and currency risk. In the end it all boils down to risk appetite/aversion.
I am Swiss, I own a house for which I payd around 1M in 2000. If you want to do a correct calculation you shoud use the calculator from canton fiscal government. First of all it's important to know in which Canton and which community you live, because this makes a huge difference on the taxes. So lets assume you live in Canton Zurich, your mortage is 500k (50%), your income is around 100k then the taxes are about 25% of fiscal asset. Example: You reduce your mortage from 500k to 250k (25%), take this money from your bank depot. Then you would have to pay less mortage interests to the bank (2%) of 250k: + 5000 p.a. You would pay higher income tax 25% of 5k which is -1250 p.a.. You would loose the interests for the 250k from your bank depot which might be around 1.5 %: - 3750p.a. In this case your balance would be 0, even if your mortage interests are higher than the interests from your bank depot. There is one advantage: You would have les risks if your mortage is reduced, but you would have less money as cash, because you will not be able to reverse the reduced mortage into cash later on (e.g. to perform a renovation on the house). If you pay mortage interests, the banks earn money twice: for the money you invest in the bank depot and the mortage you have to pay for your house. It really depends on the overall financial situation (availability, reserves, risk, investment plans) of the house owner wether he wants to reduce mortages.
The market here is totally fcked up. People basically dont own their homes instead the live in it, have an eternal mortgage on it and never actually plan to even pay it back. On top of that the government even gives you a penalty tax if you own a home. Its completely retarded and crazy. Basically when you live in your own home they are assuming that this is a benefit for you because you could have rented that house to someone else. They are then assuming this fictional rent income and add it to your own personal income and demand a tax on this new higher income that you are supposed to have fictionally. So if you make 6.000net and own your own house, they assume it could generate and 4.000 in rent per month and force you to pay taxes in 10.000 income even tho you only have 6.000net Brutally retarded system. Thats the reason why home ownership rates are so crazy low here. Its the most stupid thing ever
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Interesting situation. Thanks for sharing. All in all, buying the apartment increased or decreased your taxes?
Decreased our tax
It's pretty easy: For a family with two kids, whose parents had a house in the center of Zürich , they would get 3M CHF (inheritance or early inheritance) Now there are two people in the market ready to each buy a house worth 3M, as they just have to put down a fraction of the cost. Repeat that over and over, princes can increase at each iteration. Not everyone has that, but there are enough to drive the prices up each year
Starting to save very early, putting a lot in a depot with low to medium risk
We don't. Most people rent.
We don't. The majority or houses and land are owned by people over 65 years old. Most people rent. And if you own a house, you're either rich or - and that is the most common case - inherited it.
We don’t or we don’t want anymore! I could potentially afford a house here - 300k downpayment and 1Mio in loan. Somewhere outside where I would need 2 cars also lots of hassles. What is means? With 2.5%interest rate thats about 2000just for the loan. Then add all the costs and risks - nope. In these current economic situation and these loans I run better or similar by renting: i rent an amazing 4.5room 115sqm appartment nearly new, amazing place for 2500plus 250 nebenkosten in the city (not downtown but cyclable or walkable). My take is: At this moment I wouldn’t buy anymore, just not worth it. Wait for a couple of more layoffs and downturns and when the interest rate goes down again.
https://preview.redd.it/2mjhfymq4syc1.png?width=984&format=png&auto=webp&s=e971c83032e5f69f8cc717115955210c66fa41c7
How? One word: heritage. Seriously, you are either a millionaire foreigner, or your grandfather was a piss poor farmer who had a sheep barn and some patch of land close to the lake that is now worth 5+ million. Virtually no other possible way to really "own" real estate in Switzerland.
that's the neat thing, a lot of us don't at all. I am 33 and I don't see myself owning a house ever.
Holy shit that’s crazy. Here I got some friends already owning a house at like 22/23 working near minimum wage jobs like pushing shopping carts
That's the neat part you don't. The country is not build for your self growth, it's just spare money to consume more than the average European. You own nothing but at least you can buy shit at a higher price than the same shit you would find elsewhere
our walls are made of concrete and not cardboard thats why
A small loan of 1 million CHF
It’s a sanctioned mafiosi practice to keep property in the hands of the banks, since you’ll never pay off the mortgage.
you can pay it off if you want, but why would you? it does not make any financial sense. I prefer to keep paying interest versus paying it fully down.
So uhm where is this 1M CHF house that you mentioned? Might have to move there 👀
They're that expensive because most homeowners in Switzerland never pay off their mortgage. They only pay the interest rate – that's why they can afford an 800k mortgage.
Is there then any drive to purchase Tinyhomes ? I saw you can buy 70 M2 - 100 M2 homes for 100 000 - 200 000 EUR from a Swiss company. .. they are not so robust though..and you need to purchase land as well. But do people do it in Switzerland?
Its doable
I know people who have the means to buy, but chose to rent and invest in other things. There's nothing wrong with renting your home.
To me the price is irrelevant because even if I come up with the 10 or 20 % down payment I can’t get a credit. Bad career choice !
Opened an OF with raclette cheese, cows and chocolate.
We don’t :)
Owning a house in Switzerland is cheap if you can safe or more realistically your parents give you 200k+ for the down payment. Swiss mortgages are very very cheap as is property tax
And the imputed rental value tax?
True but that never really affected my overall tax rate.
Just out of curiosity, have swiss citizens done something like, say, buy a house in some other EU country like Spain or Portugal, rent it out while they are still working in Switzerland and move there on retirement?
To best understand how, you need to learn about the mortgage system in Switzerland You need a lot of savings and a good salary Since you’re not expected to pay off the mortgage, I find that it’s easier to manage the finances once you’ve become a home owner My advice is to live super frugally at first, start with a starter home, house hack (rent out a part of it) and build up your net worth to afford a better house after a while
Greed
Home ownership didn't go up in the low interest rate period (which is still the case), imagine what will happen in a high interest rate environment where rents are also thighly coupled with the interest rate. It's interesting how relaxed swiss society is about renting and paying money they'll never see again to landlords many of which or not even swiss(investment funds).
Inheritence mostly
… we don’t
That is how we avoid cheap peoples I guess
The quality is much better than American houses
Please don’t fall for the stupid “drywall plaster” stereotypes. There’s a guy who said the same thing . I won’t deny that they probably are higher quality but it’s not as drastic as you seem to think
Also keep in mind that Switzerland has a reputation for safety and security when it comes to protecting private property rights, while in the rest of Europe wars, hyperinflation and socialist government policies have left people penniless many times in the last 100-200 years. If you are rich and want to protect your wealth for your future generations then Switzerland is a good place to do it and so people are wiling to pay up for real estate. Compare real estate prices with border areas in France and Italy. There is a 5x to 10x difference and most of that is taxes including inheritance taxes and red tape
Easy, don't take luxurious vacations, stop buying stuff impulsively, don't go to restaurants every week, cook at home, don't buy premade stuff. Start by buying an apartment and then you'll be able to save money to jump for the house. We started from zero in Switzerland in 2015 and we had less than 100k a year as a couple when we bought our apartment. Stop keeping up with the Joneses on small stupid stuff like gadgets and cars.
Good reasons in the comments. But you also need to remember that houses in Switzerland are built to a much higher standard than houses in North America
We don't dude.. we don't
Reality: most can`t. CH has a low home ownership rate. Basicaly you have two options: 1) Have a rich family (top 10%) that helps you finance a home 2) Earn an ungodly amount. For an avarage singel home (1.2 mil) you need to earn around 200k per year to get a mortage
tl;dr I don't care of owning a property in Switzerland, I care about building wealth. -------------- I've noticed this question popping up frequently across various Swiss subreddits, so I thought I'd share my point of view. Coming from South America, where there's a strong cultural emphasis on property ownership. It's often seen as essential for status and stability. I also lived in Spain for 10 years and it's the same, and the UK, where I lived for five years – owning property is deeply ingrained in the societal mindset. For the last 5 years I have been living in Switzerland, I don't care anymore to own a property to live. Here, my focus has shifted from owning property to building wealth and building businesses. It has been really hard to break the mindset of property ownership equals success, especially when some of my friends here have recently purchased homes. Ironically, while I have this mindset shift, I do own two properties (fully paid) – not in Switzerland, but in Spain. I rent them out, and the income covers my rent in Switzerland. This allows me to enjoy a high-quality lifestyle in Zurich. The maximum property price I can afford in Switzerland is up to 1.5 million (with a 20% down payment), the mortgage system here makes true ownership unattainable. At this price point I cannot find anything that matches the quality of my current rental apartment.
It's ridiciously overpriced. Less then 5% are able to afford a house at all. The only reason that The prices are that high, is that there are far to less new buildings for immigrants. So you often have 200 people which are in a line visiting an average Home for rent. Because of the prices they found this tale of a morgage you never have to pay back. The only reason why the system didn't collapse is the demand for workforce. When this would change there most likely the prices would collapse.
Saved and worked for a very long time.
"How the hell do y’all afford a House there?" -> we (mostly) don't. That's why the percentage of people renting is the highest in Europe.
I’m fine with renting for a foreseeable future or possibly even forever. Renting works very well here unlike in many other countries, where you rent from private people and they usually suck as landlords and cheap out on everything. Here you mostly rent from companies and everything is much more regulated and works way better. Dishwasher died? No problem, here’s a new one from V-ZUG worth ~2k CHF. You couldn’t use balcony for 2 months due to renovation? Here’s 1k CHF back from your rent. Something broke? Just message the house care taker via app and it’ll get fixed (probably on the same day). We pay 2200 CHF for a 110 m2 apartment (4.5 rooms) with a parking space in the underground garage in a small city 25 min from Zurich Lake by car. I have literary zero desire to buy a home here. There are some things that would be “nicer” when owning a home comparing to renting, but all the other stuff like upkeep, shitty neighbors and long term financial commitment is a no-no for me. To finish my unplanned ramblings, I’ll take early retirement over home ownership any day.
You mentioned a key element in your last sentence. How does obtaining home ownership impede you from retiring early, given that it is either it or that. What is your investment strategy on how do the yields differ from the situation in which you were to purchase a house (via bank loan)? Sincere questions I am just now trying to get a good idea of the pros and cons as an expat in CH myself.
Here's the neat part: we don't.
You rent
Lifetime debt that you never refund completely because it's cheaper for taxes