Homeownership in Switzerland
In Switzerland, the homeownership rate is low when compared to other countries. This likely has something to do with the small population of Switzerland. Additionally, older Swiss residents are more likely to own their homes than younger ones.
The majority of homeowners in Switzerland live in rural communities. However, there has been a significant rise in house prices throughout the years. This led to government regulations in an attempt to cool down the market. Unfortunately, this had the opposite effect, and prices continued to increase until they reached a plateau. The total value of mortgages also decreased during this period.
Despite these changes, property ownership remains common in Switzerland. Foreigners can buy a property just as quickly as Swiss nationals can. So if you're looking for a place to call home or invest in, Switzerland may be a great option!
Read the entire article to find out what you need to take into account when buying property in Switzerland as a foreigner. Or you could also have a look at the video below and get answers to key questions like: Can expats buy property in Switzerland? How do mortgages work? How is affordability calculated?
Rent or own your home in Switzerland? Which to choose?
It depends on your personal circumstances. Switzerland is an expensive country, and rents are constantly increasing. If you're not sure whether you want to stay in Switzerland for the long term, it might be better to rent. However, if you're planning on staying for a while, buying a house is the better option – especially since buying a property here is notoriously slow.
There are pros and cons to renting or owning a home. On the one hand, when you rent, you don't have to worry about repairs – the landlord is responsible for that. And if you like to move around a lot, it's easy enough to pick up and leave when your lease is up. But on the other hand, renting can be more expensive in the long run, and you may not have as much control over your living environment (e.g., who your neighbors are).
Owning a home has its perks: you can customize it however you want, make money by renting out extra rooms, and know that you'll always have a place to call your own. However, it also comes with many responsibilities (e.g., property taxes and repairs). Plus, it can be tough to save up for a down payment while also paying off student loans or credit card bills.
So what's the best option? It depends on your lifestyle and budget! If you're someone who doesn't mind doing some occasional repairs and wants more control over your living situation, then buying might be right for you. But if you'd rather not deal with any headaches and would instead rent than own, there are plenty of options for you.
House prices in Switzerland
The average price of an inner-city apartment in Switzerland was 12,938 Swiss francs per square meter in December 2020. This followed a 1% increase in September 2020 and a more than 15-year decline between 2017-2018, when purchase prices fell for the first time since 2000.
Zurich has the highest purchase prices, with Geneva and Lausanne in second and third place.
Can foreigners buy property in Switzerland?
The answer to this question is a little complicated. Generally, foreigners are not allowed to purchase property in Switzerland without a residence permit. There are some exceptions, however. For example, foreigners can buy holiday homes in designated areas and purchase property for business purposes if they prove a need. Buying property is different for foreigners than for individuals living or working in Switzerland, so it's essential to be aware of the restrictions. Generally speaking, foreigners are restricted to buying property in certain places and for short periods.
Costs of buying a property in Switzerland
When you buy a property in Switzerland, you will be responsible for two types of costs: the purchase price of the house and the percentage of this cost that the seller pays.
The Swiss government has made it a point to keep real estate prices low, so buyers have to pay relatively low fees. In addition, few other costs are associated with buying a home in Switzerland.
This makes Switzerland one of the cheapest places to buy a house in Europe. It is more cost-effective to register and transfer your home than rent it unless you expect to reside in Switzerland for more than five years or sell your property within two years.
How to find a place to buy in Switzerland
Main online property portals
There are several main online property portals in Switzerland, which include:
To get the best overview of the Swiss real estate market, it's advisable to search on all these portals. You can save your search and get notified by email when new properties matching your criteria are offered.
How to buy real estate in Switzerland
Choosing a property in Switzerland
When looking for a property in Switzerland, it is essential to know the different factors that will affect the cost. For example:
A professional survey provides warning of issues with older properties.
Asking for a survey is not common in Switzerland, but if you request one, be aware that it may give you a warning of serious problems.
Minergie is a Swiss company that has built sustainable and energy-efficient homes. If you are looking for an eco-friendly option, look for properties with the Minergie label.
In Switzerland, there are annual charges for maintaining common areas such as car parks or private roads. This can range from CHF 100-200 per year, depending on the size and location of the property.
Property taxes vary from commune to commune, as well as between cantons. Ask about the level of taxation in the town you are looking to buy a property - this can range from 0.3% to 2% of the value of your home!
Getting a Swiss mortgage
A 20% minimum deposit is typically necessary to buy real estate in Switzerland. However, first-time buyers are the only ones who get help to purchase a Swiss home with a mortgage.
You will need to be prepared to put up the 20% minimum contribution yourself.
Mortgage brokers can negotiate between seller, lender, and client on your behalf and try to get the best deal possible.
Keep in mind that few properties are available in Switzerland, but plenty of people are looking to sell their properties. So if you're lucky enough to find something you like, be ready to act fast!
The country has strict regulations on foreign investors, so investing is best through an agent or other overseas experts who can help navigate these rules and restrictions.
Completing a real estate purchase in Switzerland
When purchasing real estate in Switzerland, the buyer must go through several steps:
The notary is a public officer who facilitates the process of transferring property. The notary includes properties in the transfer, ensures everything is legal, and handles other formalities.
The foreign real estate law limits the purchase of residential property in Switzerland to citizens from countries that are members of the UE. Real estate cannot be purchased outside designated secondary areas.
A citizen from a country that is not a member of the UE can only purchase one property without restrictions. They can buy residential property without restrictions if they hold a B or C residence permit.
A non-member citizen from any country who holds an EE visa cannot purchase commercial real estate in Switzerland (not sure if this includes temporary residence permits).
If you're looking for a new place to live in Switzerland, there are plenty of housing listings to choose from. Many moving services can help you find the best house for your needs, and a short stay is an option for visitors who want to stay in Switzerland for less than 90 days but not more than 6 months.
Switzerland is a great place to buy property - the country has been affected by the global housing crisis.
Still, it's not as bad as other countries. 4 million people in Switzerland have access to some of the low-cost property prices in Europe. The buyer pays between 0.25% - 3.55% for the entire purchase price of a home in Switzerland.
How do mortgages work in Switzerland?
The mortgage lender usually finances up to 80% of the value of your home. You must contribute at least 20% of the purchase price yourself. At least half of this amount must come from your funds, not from social security.
People use different ways to finance a house. The most common ways are savings, securities, annuities, life insurance, gifts, or inheritances. Another way to finance a home is to take out a first and second mortgage.
The first mortgage can cover up to 66% of the purchase price. You can take out a second mortgage if you need more money to buy the house.
The second mortgage must be paid in regular installments over a maximum period of 15 years or until you reach the age of 65.
What is affordability, and how is it calculated?
Affordability is how much money you make compared to how much a house costs. You should keep your living expenses (the money you spend on your mortgage, principal, and other costs) to one-third of your total income.
That way, you can still afford to pay your mortgage if interest rates go up. Most financial institutions use a 5% interest rate when calculating how much you can borrow so you can still afford the mortgage if interest rates rise.
You'll need to maintain your home every year. This includes things like utilities, insurance, and minor repairs. You should spend about 1% of your home's market value on these costs each year.
Promotion of home ownership. Invest pension assets in a home of your own.
You can withdraw the 2nd pillar capital early if the residential property belongs to you alone or jointly with your spouse or registered partner. You can withdraw the 2nd pillar capital early if you use it to purchase share certificates in a housing cooperative or invest in your existing residential property to increase its value.
However, you cannot withdraw capital from the 2nd pillar before investing it in vacation or second homes.
Our tips for early withdrawal from the 2nd pillar
The minimum amount for early withdrawals from the 2nd pillar is CHF 20,000.
Timing advance withdrawals can be requested every five years and only up to three years before retirement age.
Voluntary purchases may be advanced for financing home ownership no earlier than three years after they're made.
Consent of your partner
If you're married or living in a registered partnership, you need the written consent of your spouse or partner to make an advance withdrawal.
Payment is made by your pension fund directly to the seller or lender. It's prohibited by law to have your pension assets paid out.
Owner-occupied home: Are mortgages viable on a pension?
Retirement can result in significant financial losses. On the other hand, homeowners often want to stay in their own homes. That requires careful planning.
OASI and pension fund pensions generally don't exceed 60% of the income insured under the LOB insurance program. However, experience shows that retirees need about 80% of their previous income to maintain their prior standard of living.
A 3rd pillar plan can help close this gap. Retirees, on the other hand, can tie up the money they'll need later for daily living expenses by buying a house.
Advance withdrawal of pension fund assets
When considering whether to withdraw money from your retirement fund to buy a home, consider the associated reductions in your future pension and, if applicable, insurance benefits in the event of disability or death. If you choose this type of funding, you'll need to close the resulting pension gap as quickly as possible by paying into the plan and closing any associated gaps in risk benefits.
Your insurance company or bank must understand that your mortgage will be economically viable after you retire. Mortgage interest and maintenance costs shouldn't exceed one-third of your retirement income. And if mortgage rates rise to five percent, that's true. If you can't meet the sustainability criteria when you retire, your mortgage could be canceled, and you could lose your home.
Ready for the next step?
If you want to know more about mortgages in Switzerland and how you can use your insurance policies to finance or secure a mortgage, Hello Switzerland's insurance partner, Helvetia, is happy to answer any questions you might have.
Schedule a free consultation with one of Helvetia's advisers who specialize in insurance needs for international professionals in Switzerland.
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