Buying a home in Switzerland? The pros and cons!

Are you thinking of buying a property in Switzerland? 

It is worth noting that buying property in Switzerland has its advantages. These include promising returns, a secure investment and favourable tax conditions. However, there are also some drawbacks in terms of additional costs, a limited supply of properties and the complexity of financing…

If you’re about to become a homeowner in Switzerland, find out all the pros and cons of this status before taking the plunge!

Buying a home in Switzerland: what are the pros and cons?

Buying a home in Switzerland offers many advantages, whether in terms of profitability, investment or quality of life.

Is it worth buying property in Switzerland?

The trend in the country is towards renting. However, investing in Swiss property in the country’s most promising regions offers numerous advantages. The factors that attract the most attention from investors, particularly those looking to maximise value for money, are reduced costs and optimised returns.

However, this is not always the case and depends on several factors:

• Rent levels. The sharp rise in rents in certain Swiss cantons means that buying a property is sometimes a more cost-effective option than renting a house or flat.
• Mortgage rates. These have risen significantly since the end of 2021. Nevertheless, the running costs and interest payments associated with owning a property remain more cost-effective than renting when financed through a short- or medium-term loan.

Investors with sufficient capital to opt for medium-term financing would therefore be well advised to consider buying a property, particularly in cantons where rents are rising sharply.

Buying a home in Switzerland is all the more attractive because it means you aren’t paying ‘for nothing’. Indeed, buying a home is an investment in property. Once the mortgage payments have been paid off, the property becomes part of the owner’s assets. By contrast, a tenant will pay rent for several years without seeing their assets increase as a result.

Buying a property in Switzerland: a sound investment

The investment aspect remains a major advantage when buying property in Switzerland.

However, interest rates are constantly changing, and a rise or fall is always a possibility. To counteract these market fluctuations, you can opt for a fixed-rate mortgage for a set period.

Investing in Swiss property is a reassuring prospect for prospective homeowners. With pensions on the decline, many are choosing to buy property to ensure financial security in their later years.

Buying a home before retirement allows you to pay off all or part of your mortgage, thereby reducing your housing costs when the time comes to leave the workforce.

Another option is to sell your home in order to realise a substantial capital gain, thereby building up a sizeable nest egg. Indeed, Swiss properties, provided they are well maintained, have historically tended to increase in value and generate a significant profit upon sale.

Buying a property in Switzerland: tax benefits

Becoming a homeowner in Switzerland can offer significant tax benefits, depending on the canton.

In fact, a homeowner will be able to claim various maintenance and investment costs relating to their property purchase against their taxes.

The following are tax-deductible in most cantons:

• The costs of maintaining and renovating the property (painting, external work, façade restoration, renovation work, etc.).
  
• Costs associated with thermal insulation and energy-saving measures.
  
• Interest payable on a mortgage for the purchase of a house or flat.
  
• Amortisation of the property. When you become a homeowner in Switzerland, you can amortise your mortgage by opting for annual repayments. The lending bank generally sets the amortisation at 1% of the borrowed capital. The amortisation of the property can be made via an account or an insurance policy set up to receive the repayments. This account or insurance policy is then deposited with the lending bank as collateral. This system allows the amount of debt to remain stable and enables the owner to claim higher mortgage interest deductions from their taxes than if the loan were repaid through progressive monthly instalments.

Enjoy a comfortable lifestyle by becoming a homeowner in Switzerland

Buying a property in Switzerland also offers numerous benefits in terms of quality of life and comfort:

• Doing whatever you like in your own home: knocking down a wall, giving the place a fresh coat of paint…
  
• Enjoying security of tenure: as a homeowner, you are not bound by a tenancy agreement in the same way as a tenant, so you cannot be evicted.
  
• The satisfaction of completing a wonderful project.

Buying a property in Switzerland: what are the downsides compared to the upsides?

However, if you are about to become a homeowner in Switzerland, there are certain aspects you need to be mindful of, particularly when it comes to financing and preparing for the purchase.

Be patient if you want to buy a property in Switzerland 

Whilst buying a property is proving to be more advantageous than renting, the fact remains that Switzerland is facing a real barrier to home ownership.

This phenomenon can be attributed in particular to the surge in property prices, which is a direct consequence of the state of the supply and demand market. Properties for sale are scarce, and demand is high given the still relatively low interest rates, which are encouraging people to buy. This imbalance between supply and demand effectively explains the surge in prices observed for properties on the market.

Consequently, buying a home in Switzerland takes time and requires patience to find your dream home at the right price…

What income do you need to buy a home in Switzerland?

Property prices in Switzerland are very high, which makes buying a home quite a complex process. It is essential to plan your property purchase carefully and have a strong application. Banks analyse all the relevant factors to assess the risk they are taking when granting a mortgage, even when your salary is paid in foreign currency. Based on this analysis, a mortgage rate will be offered.

Becoming a homeowner in Switzerland therefore requires (and this is no mean feat) an excellent credit history and a steady income. 

Two main criteria are analysed:

• Equity: to buy a property, you need to have a deposit of at least 20% of the purchase price.
• The debt-to-income ratio: the rules governing property financing in Switzerland are strict; prospective homeowners’ debt-to-income ratio must be 33% or less, and 30% of the property’s value must be repaid over a maximum of 30 years. Household income and total debt are carefully assessed to calculate the debt-to-income ratio. The higher the income, the lower the debt-to-income ratio.

Significant purchase costs should be expected when buying property in Switzerland

The sale price of a property listed in Swiss francs in the advert is not, in fact, the amount the future owner will have to pay.

There are other associated purchase costs to take into account; these should not be overlooked if you are to be aware of the actual final purchase price.

These costs include:

• Notary fees.
• The transfer fees payable on any property transaction.
• Mortgage costs.
• Land registry registration fees.

If your available funds are not in Swiss francs, you will also need to factor in currency conversion fees. Our online currency converter will allow you to see, in full transparency, the best rates offered by b-sharpe.

Buying a property in Switzerland has both advantages and disadvantages that need to be considered and assessed in light of your personal circumstances. You will therefore need to weigh up the benefits of a sound property investment against the scarcity of properties on the market.