Buying a 2-Room in Kanton ZH vs. Rent and ETF (VT)?

Real Estate
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Hi everyone,

I am considering buying a small apartment in Kanton ZH.
I’m looking for a sanity check regarding Swiss homeownership. I’ve run the numbers, but I want to make sure I’m not falling into a classic psychological homeownership trap. Please don’t hold back - challenge my assumptions.

Age: 36, Net Income: CHF 9,500 / month

Liquid Assets: ~CHF 400k (allocated across Cash, ETFs - mostly FTSE All-World/VT)

Purchase Price: CHF 920,000. Size: 2 rooms (meaning: not a forever home).

Life Plan (The 5-7 Year Horizon)

I hope to start a family (partner + 1 child) within 5–7 years. At that point, a 2-room in Küsnacht will be too small. The plan would be to either sell it to upgrade to a bigger family home or keep it as a rental and buy the family home.

Dilemma: Rent & Chill vs. Buy

I am trying to decide between these two strategies:

  • A: Rent a modest place, keep the CHF 400k compounding in a global ETF, buy a family home directly in 5-7 years if/when the family actually happens.

  • B: Buy, renovate before 2029, live there for as long as I need it, sell it, and use the equity to buy the bigger family home.

My gut says Strategy A (Rent & ETF) wins long-term because Swiss real estate transaction costs (notary, *Grundstückgewinnsteuer* if I sell in <5 years) and maintenance will eat all my property appreciation.

What are your thoughts? Am I overestimating the ETF and underestimating the security of Swiss brick and mortar? How would you navigate this?

Thanks a lot in advance for your brainpower!

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You state you have run the numbers. What are your assumptions and what is the result of your simulation(s)?

Have you already found the partner you want to do this with? If yes, what is their opinion on buying the 2 Rooms? If no, I would keep renting for that reason alone: renting gives freedom of movement, meaning you can make yourself available for someone you would really want to have a relationship with no matter their own circumstances (availability to live near where you currently do).

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Can you actually find a place around the lake, even a small one for 900k? How much for renovation? If you do, you would have the income and assets, but not with much buffer left.
What would be the corresponding rent?

Notary in ZH is negligible and I wouldn’t count on appreciation and hence tax for such a short time period.
For only a few years, I wouldn’t want to buy, though and rather value the flexibility of renting as well as having liquid assets. Unless you have an offer at hand, finding a reasonable priced place can take a lot of time. So could finding a partner and reach the move-together and start family phase. If that doesn’t happen, would you still sell the place, or happy to stay there long-time?

Anyway, not much to challenge. It does come down to your numbers, and what the point in owning is to you.

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I see this as the preferred strategy.

Some complications with strategy b:

As mentioned, hard to find availability for ownership.

Family plans often don’t follow a schedule :slight_smile: What if you meet the partner of your life in two months and the kid is ready in a year? You might have to sell your home with a loss after you have invested a lot of renovation money.

Will you stay in Zurich? If not, it becomes a hassle to manage an apartment far away. Of course, you could contract an agency. But for a small home, you’ll pay proportionately high fees to the agency for (relative) little rental income.

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You will likely benefit from “Steueraufschub”, i.e., pay tax only once you sell the next property (or the one after that).

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If „theoretical rent“ of same apartment is close to 5% of the value of apartment then maybe it makes sense. In Zurich city or lake side this is very tough to achieve and rental yields tend to be 2%

Otherwise it should be seen as emotional decision rather than financial one.

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How much do you spend on rent currently?

I would say keep renting and instead buy the first family home if you want to buy, it will be better than buying an interim home because fees will reduce any gain you have to nothing for such a short while.

Choose the right area and buy the home for the right reason, don’t think of it as an investment.

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Firstly, thank you to everyone who took the time to reply! :blush:

It seems that the majority of you recommend renting rather than buying at this point, which has definitely given me something to think about.

To answer some of the questions that came up:

  • I don’t have a long-term partner yet, unfortunately.

  • I have already found a suitable apartment at the price I mentioned.

  • It needs around CHF 50k in renovations, but I already have that cash available.

If I do find a partner and need a larger place in a few years, my plan would be to rent out the apartment temporarily and then sell it - it is in a highly desirable place. I negotiated the purchase price down quite a bit, so I don’t expect the eventual loss to be huge. I also already have experience renting out a flat in Germany. It’s definitely some work and costs a bit of money, but it’s manageable. I’m not expecting it to be a profitable rental investment anyway - in this case, even a 2% rental yield would be difficult to achieve. The main goal is simply having my own home.

Right now I’m paying CHF 2,100/month in rent, but I’ll have to move within a year, so I expect my next rent to be around CHF 2,500/month.

Using historical S&P 500 returns (roughly 2007–2017 as a simple example), if I invested CHF 300k upfront and then CHF 3k/month (realistic for now), I’d end up with roughly CHF 1.7 million after investing about CHF 700k in total.

If I buy the apartment instead, I’d lose around CHF 370k of liquidity, while I expect the apartment itself to appreciate by perhaps ~1% per year.

For the renting scenario, I assumed future rents average CHF 3,000/month, meaning around CHF 360k would be spent on rent over the next 10 years. Even after accounting for that, the ETF portfolio would still be worth around CHF 1.4 million in my simulation.

Of course, these are just assumptions based on pervious S&P performance… There is a lot of discussion about an upcoming bubble, and worsening geopolitics, so the next decade could be much more turbulent. On the other hand, I know it is about average growth.

My worry might be emotional: I’m worried that something could go badly wrong with index investing, and at the same time I’m also worried that if I don’t buy now, I might miss my opportunity to participate in the Swiss housing market altogether.

I’d be interested to hear what you guys/ladies think.

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Same could be (and has been) said about the housing market…

Why would you miss it? And if you did, so what?
That’s assuming your offer is at market price, and not some family discount or other once in a life-time opportunity.

Sounds like fear of missing out. But again, same could be applied to investing and isn’t the best basis for decisions. But you can twist that any way you like.

I do get the sentiment, I got my own place. Not the ownership itself, but for the possibility to customize and control, for a lack of better words that come with it. But that’s for decades of staying there for me, which isn’t the plan in your case.

Anyway, if your ultimate goal is owning, for whatever reason, you could put all the numbers to the side and go for it. If you remain skeptical, that tells something, as well.

Good luck with the decision, it should turn out fine either way.

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It’s not irrational worry. Asset class diversification is a real thing and you should consider it . Having all money tied up in equities is not for everyone