Buying house in Switzerland


#1

Just looking to see what the general mood is - bullish or bearish on current housing market. We’ve been in Geneva for 8 years and are close to taking the plunge on a house in Vaud.

Despite the “free” money in terms of current rates I have a nagging doubt about ending up with an illiquid asset in negative equity if rates rise significantly.

The house is ideal, the owners are the usual unrealistic sellers you find in Switzerland but have come down 15% to an asking price that I think is fair value. Mortgage costs would be half the rent we currently pay. We could probably rent it for 2.5x the mortgage costs if we had to go abroad.

On that basis in terms of current cash flow, getting our own place to make a home etc it looks good - but I just have this nagging doubt that what if interest rates etc etc.

Would appreciate any mustachian opinions over a Saturday morning coffee.

Thanks all


#2

It’s easier for me to imagine and calculate when I see some real numbers, like: house costs 1’000’000, mortgage would be 1’000, we could rent it out for 2’500 kaltmiete.

now what would be your monthly maintenance fee for reparations, to keep the house fresh and in the same standard?

how much do you need to put as collateral, sth like 350’000? If this money got invested in an ETF with an annual return rate of 7%, that’s 2000 monthly alternative cost.


#3

If you read in German I can recommend a very good book with lots of details, data and calculations about it:

Kaufen oder mieten?: Wie Sie für sich die richtige Entscheidung treffen by Gerd Kommer

Although the book is talking mainly about the situation in Germany, the author also mentions that the real growth of prices (considering the taxes and costs of ownership) on houses in Switzerland is very low. So you should consider owning a house as a lifestyle decision, not as an investment asset. He writes that you will basically freeze a lot of money in the house (+ the interest you’ll pay to the bank), while this money could be working for you as an investment. You should buy a house only if you really need it, low interests at the moment should not be the argument for this decision.


#4

one fact that people tend to forget when they think about “I could rent my house to someone else and go rent something else” is that your earnings are taxed as income. you would probably want to sell once you leave Switzerland.

here are some more hints about the subject:

in general the question whether renting or buying is cheaper can be answered by village:


in general in a rural area buying is cheaper than renting while in urban communities it’s the other way round


#5

Well you have some taxable income from the house, Eigenmietwert = about 50-75% of market rent, even if you live in the house by yourself. Of course, once you emigrate both the income and the tax rate go up, so you have some point, but it’s not like you don’t owe any taxes before


#6

What do you guys thing about this: to buy a flat in Switzerland, get registered in that flat, after some time rent this flat to somebody, retaining the “Anmeldung”, and travel around the world, living off that rent and dividend from ETFs?

For the typical Swiss rent of 2000 CHF/month you could live a good life in many places around the world, e.g. Poland. And retaining the Swiss residence would be beneficial for tax reasons. I have this draft plan of “slow travel”, i.e. renting a flat for a short time (a few months) in some interesting place around the World and exploring the surroundings, then going to another place. In order not to get too homesick, I would jump back to Poland or Switzerland from time to time.

A flat in Switzerland would provide some stability and a bigger comfort than only a digitally stored ETF. What do you think?


#7

I am not someone who likes to own a house. I do however invest in REIT’s for diversification. Although tiny amounts.


#8

This type of abuse is easily identifiable and unlikely to fly. Your renter will have to register as well, give them a copy of the contract, each flat has a unique number these days, they’ll put two and two together and…

Even if you don’t rent out the flat, they still tend to find out eventually, unpicked up mail, noisy neighbors, etc. I hear Wollerau is especially good at weeding out their paper residents as it happens all the time there


#9

Hmm, I just wonder, why do they care? For them it’s free money. If they don’t like me as a virtual resident, then I go pay taxes somewhere else. What if I kept the flat as a rental property and was registered by friends or family?

And why does it have to be classified as abuse? If I change my place of residence every few months, perhaps still spending 2-3 months in Switzerland, what’s so essentially wrong about it? Would it really make sense to seek legal domicile in each holiday country and drown in paperwork, instead of just retaining my Swiss domicile, as it would be the place I call home and come back to after my voyages?


#10

Well, the swiss are notorious sticklers to rules and the rules say you lose residence after being 6 months out

For a non resident owner, the tax on rental income is also quite a lot higher than for a resident AFAIK


#11

What if you lose your residence and don’t have any other? Where do you pay your taxes?


#12

Nowhere, it’s perfectly legal in the developed world to not be attached to any particular country as a tax resident. But in most cases employment income, real estate income and dividends would still get partially taxed by the source country with no refunds for you

As a non resident, your US dividend withholding would increase to 30% from 15%, so this is one nice advantage of CH residence that you’d lose