I don’t think that the bank will give a mortgage without a job. When we asked for ours one didn’t even take my salary into account because I could have children (I have now one, but I still work the same amount). I wonder what to do in case one retires early, will the bank accept income from investments. Also you still need to be able to fulfill the “Tragbarkeitsregel” calculated with 5% interest rates.
This type of policy disincentivising “house flipping” is a great moderator of the housing market which, in my opinion should be treated differently from other investible assets like stocks and bonds. Look at North America and Aus/NZ to see how alternative scenarios (in some cases, policies that are essentially the opposite to those here in CH) play out…
In Australia a few years ago it was not uncommon to find people earning a median salary to have interest-only mortgages on multiple properties (think of the Florida stripper with 5 houses in “the Big Short” but school teachers, and Australian)… introducing huge systematic risks to the economy as a whole. Or you get situations like this…https://betterdwelling.com/more-than-half-of-canadas-gdp-gain-was-from-realtor-commissions/
Quite a complex subject, but we will see over the next 12-24 months how this current macroeconomic hit plays out in countries where highly leveraged real-estate and rapid buying/selling is the norm. Unfortunately, the governments in these countries have created a monster (or bubble, if you prefer) they can’t let die and are forced to come to the rescue in a very expensive way to keep the system going when shit hits the fan.
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You forgot her condo 
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It was then 12y ago. And just last year the family who rent got the letter to buy those houses for CHF 1m.
Thanks for this. I actually worked a while back on something similar but not comprehensive.
Question: Collumn N, “Total Cash Outflows” shouldn’t it be picking the amount of “Total interests” instead of only “Interest on non Amortization part”?
This calculator is very good used with the right parameters
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Total Cash outflows takes into account column C (“Amortization paid”) which is the trickiest one. This column is constant and equal to cell B14, which computes how much you need to pay every year to both repay the capital borrowed (say the 15% amortization), AND the interest on this capital, this over a fixed period of N years (here 15 years). I can provide further calculation if needed.
So actually the total cash outflows do take into account the interest of both parts of the mortgage!
Well for sure if the rent was 3’000 CHF per month, then it is easier to find opportunities where you may be better off buying, even with 3% interest rate on your mortgage. Especially so if, as you say, you are not required to pay any amortization…
Those are all very valid points, especially the maintenance one. Regarding interest rates, I have no idea when they will be in 20 years, but indeed 3.5% is not farfetched. They might go into negative territory as well (as Denmark currently does… the guys are paid to borrow money for their house, crazy). And the capital gain tax makes things even worse indeed.
All i wanted to do is to provide the tools so than people can do their own simulation, so the thread does not goes in circle.
I agree with you though, buying in Zürich in the current market conditions is very unattractive.
It depends on your parameters. Usually in the very long term (25+ years), the stocks compounded returns takes over the leverage of the house if real estate does grow too much (<=2%).
In the short term, it all depends of your cash flows. The leverage on the house plays a big effect as well since you are leveraged x5 and it magnifies the real estate growth (a 2% becomes a 10% minus borrowing costs). But this effect will be less strong in the long term: as the value of the house grows, the proportion of liabilities compared to the house value becomes less and less, and your leverage diminishes.
These prices are for sure on the lower end of Zürich City. I live in a 65 sqm apartment in Leimbach, on the 16th floor of a Baugenossenschaft. While it is still technically Zürich City, 50 meters further and you are in Adliswil. But the connections to Hauptbahnof are very good, and this is the view on the Glarner Alps I had from my balcony early this morning… So the price is cheap-ish, but i really like it.
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It wasn’t an attack or something. Thank you for the calculation. It made buying even less attractive for me than it was before.
I mean it’s just ridiculous…buying real estate for 1-2 million.
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Many in our circle of friends are looking though, mainly fueled by low interests. But it is just an insane amount of money to spend 1 million on a 100 square meter apartment. We will rent here and consider buying real estate abroad.
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I saw 2 projects from Werner Sutter in Muttenz and Lausen (both in Baselland). The exact same house with the same land size. 1.2 million in Muttenz and 0.8 million in Lausen. You are basically paying 400k to be 13km closer to Basel.
I would srsly consider that when buying property. Moving farther out from the city might save you a couple of 100k.
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Unless, that is, you intend to sell the house/apartment within 6-7 years, in which case, it should be in a prime location to avoid sitting on the market for a long time.
Usually, within 10 kms of Basel should be ok, but beyond that, it becomes a bit doubtful. Of curse, as usual, ymmv.
Btw @Cortana, I am also in the process of buying an apartment (shortlisted a few) in Basel-land. My primary banking relationship is with u b s. Any tips from your side on how I should proceed to negotiate the mortgage with them for a better rate?
If you are cool, I would even want to meet up with you in Basel to get some guidance/advice on this aspect and the process.
I have a couple of friends that work as private client advisors in UBS, Raiffeisen, Valiant, BLKB, BKB and MoneyPark. I work in this field too.
Just hook me up with a private message if you need help or tips for negotiating or chosing banks.
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Thanks! will send you a private pm.
Interesting discussion, covers mostly the financial aspects. I looked at properties a while back (7-8 years, again 4-5 years ago) and now, reality - there is no land to buy and no adequate properties around Zurich +40km for 800K, which is my break-even. We (+ gf) currently pay 2500CHFx12months = 30k/y for a 120sqm flat close to the airport. Things that motivate me get out of the rented flat (which has a decent standard): stupid neighbor just below; eco friendliness/closer to the nature; enjoy the sunset (currently altersheim in front of my balcony hide the evening sun); gardening/house as a hobby. What frustrates me slightly is that there is a kind of mafia on the real-estate market in CH, you cannot buy „Bauland“ as it is already taken by building companies willing to force you into a contract. Alternatives like buying an older (1950-60) building still for 700k CHF and modernizing it seem to be a financial ruin. Wonder what your experience is. Thx.
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Thank you @Julianek for that spreadsheet. I had some fun changing the values. For the values I provided, rent almost always came out as the winner.
I decided to also give it a shot. In my spreadsheet I imagined that a realty is like capital that you can have at your disposal and I’m trying to calculate the annual cost of having access to that capital. To keep things simple, I made some assumptions:
- there is no inflation
- realty and rent do not change in value
- there is no amortisation
In the following example the annual cost of both RENT and BUY is 36’000 or 3.6% of the realty’s value.
A final thought: what these comparisons don’t address is the risk premium. Both scenarios have different volatilities and different risks involved. So it’s a bit like comparing the return of a time deposit with bond and with stock. Yes, the returns are different, but it doesn’t mean everybody automatically invests in assets with highest expected returns.
So I guess what I want to say is that if you want to know: should I rent or buy, then I can say: it depends on the kind of risk that you want to be exposed to. The market is probably roughly efficient anyway, so don’t look for any risk-free savings here.
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You won’t need 30% equity until retirement.
Till then, 10% cash and 10% 2nd pillar will be enough and substantially improve your numbers
Do you mean, you can use your 2nd and 3rd pillar as coverage of your loan? This sounds interesting, because it reduces opportunity cost by a lot.
For the downpayment you need 10% in cash.
The remaining 10% can come from the 2nd pillar, either from withdrawal or pledged.
and how about the amortisation of the remaining 14%? Can you simply pay into the 2nd pillar and use that?
No, the indirect amortization goes in a 3rd pillar, I don’t think there are alternatives.