I’ve read some very interesting threads on this forum about Swiss real-estate market value. But I must say I’m still even more confused than before. I’m reading and learning a lot but I’m sure your blunt feedback would surely help out.
Right now the only question I would like to solve is this:
- should I keep renting my house or should I purchase one to live into it.
I fully understand each situation may vary but I’d like to keep it simple. From my understanding the “Price to rent” ratio is a very accurate indicator when it comes to decide if you should buy or rent real-estate.
As a benchmark I look at UBS price to rent ratio of 29.5 for Switzerland. For most of the houses on my list I get a 32 ratio. Looking at different online opinions I’ve settled my mind on the fact that “price-to-rent ratio of 21 or more indicates it is much better to rent than buy” (I’m not sure if this is applicable for the Swiss market).
I fully understand how you compute the price to rent ratio however my head is spinning when it comes to understand its output based on the figures below.
Let me give you an example:
home purchase price = CHF475,000.00
acquisition costs 4.5% (notary) = CHF21,375.00
20% cash downpayment = CHF116,375.00
at 1.3% interest rate monthly payment is = CHF722
yearly operating costs at 1% of purchase value = CHF4,750.00
Monthly “total cost of ownership” (without impact on personal income tax) = CHF1,118
Without going too crazy on the rent I believe this is something which can be rented for CHF1800 (I’m just using this figure to compute the theoretical price to rent ratio).
Therefore in this case, despite having a high price to rent ratio it looks to me that I should definitely buy instead of renting as this would result if a monthly gross profit of CHF682.
I understand disadvantages of owning a property such as lack of flexibility however if I add up the monthly gross profit with tax deductions coming from mortgage interests and maintenance of the house buying a property looks like a no brainer to me.
I would really love if you could prove me wrong and be blunt with me because I would learn new things and wouldn’t commit to a mortgage for the many years to come.