When it comes to costs and financing, your personal goals come into play. Whether you want to invest a certain amount seeking the best ROI or you want to save rental fees and just own a home at the place you work will have a great impact on your buying decision. Therefore, we split the information on costs and make it more relevant to your goals.
Multi-family house or commercial property investors may take the following cost factors into consideration:
Financially, it is by far more attractive to own a home than to rent a home. When buying a home we suggest to consider the following factors:
Market value of a property
Generally speaking, the closer to urban infrastructure and the lower the taxes, the higher the price. And vice versa. A home in Zurich city may cost double than a comparable home in the Zurich suburbs or in the countryside. You can check sales prices by comparing it to similar homes offered in the listings on the internet. Another very helpful possibility is asking a Swiss bank for a financing offer. They will tell you if the price is right. Or ask your buyers' agent to conduct market value estimation.
It is important to also assess the appreciation potential of a property. A real estate monitor offered by property estimators and banks can help forecasting future market value in different areas.
Buying Price and Return on Investment
Is it better to invest in urban areas or rural areas? Like in most markets, the property's location and its proximity to urban centres are crucial factors.
We are not attempting to offer advice on this website on the many factors, which determine an investment property's market price and its Return on Investment, but take into consideration that the ROI should reflect the risk of vacancy and expected renovation/maintenance costs. There are a number of real estate market reports available that offer some guidance on market prices, reselling values and vacancy risks per area.
Your personal budget
How big an investment can you afford? There are two main rules of thumb for private home aquisition:
1. You must be able to afford approximately 25% of the sales price in equity.
2. Your income must be high enough to pay the mortgage interest, even if it significantly goes up.
Most Swiss banks offer online mortgage calculators to help find out your personal property budget.
Various types of mortgage loans are offered by commercial banks and insurance companies, with variable and fixed rates or a combination thereof. Banks typically finance up to 60-70% of the property's value for multifamily houses, up to 75-80% of the property's value for private homes, taking into account a number of factors including also your personal standing. Interest rates have been very low for quite some time now and can de facto only go up from current levels.
Unlike in other countries, Swiss banks do not require full amortization of the mortgages. The only requirement is to pay back the second mortgage within 15 years the latest.
Switzerland has a three tiered taxation system including federal, cantonal and municipal taxes. As a result, tax rates vary from canton to canton, from town to town. The cantosn of Central Switzerland have some of the most facourable tax laws in the country. Before taking a decision on buying a property it is highly recommended you check the tax rates at the respective municipality.
Properties are usually taxed at their location. A wealth tax is levied on the the approximate value of the property, income tax is payable on a (notional) rental income which depends on the value of the property. Mortgages can be deducted from the value, mortagage interests and maintenance cost from the (notional) rental income.
When buying a property, some cantons levy a real estate transfer tax to the buyer. This tax is owed only once.
At the time of selling the property, a property gains tax comes into play. The tax amount to be paid depends on the difference between the buying and selling price and on the time of ownership.
Costs for utilities and property management in multi-family dwellings are higher if you are an apartment owner than if you rent the apartment. The reason for this is that some of the utility costs are paid by the landlord if you are a tenant.
For a single family house there is usually no difference in utility costs since either tenant or residing owner are responsible for the whole property and there is no professional property management in place.
Professional Real Estate Management services are available. Costs may vary depending on the property size. Therfore, we advise to request an specific offer.
You may also want to take into consideration costs for communting. As rule of thumb, calculate CHF 0.70 per kilometre by car. An all-in annual public transport card costs between CHF 3000 and 4000 per year. Priceless is the time you save when you live close to your workplace.
Our SWISS PROPERTY REPORT 2019 provides more in-depth information on all topics related to property acquisition in Switzerland.