Thank you, I know but I would like to estimate our real monthly costs after buying in order to compare it to our current monthly rent costs. For example to assess how much we would be able to dedicate for our pension fund repayments if we use those for buying. E.g. if your monthly rent was 2000 CHF and monthly mortgage costs are 1500 CHF, then adding 500 CHF per month for reimbursing pension should keep your monthly spending at the same level.
The whole rent vs. buy thing is more complex. How much would I earn with VT in 20-30 years with the capital I invested in my house? And how will it compare to the value of the house in 20-30 years? Thatâs basically the most important question to me.
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40+ posts in the thread and nobody tried to do a simulation?
Ok so i have setup a google sheet to figure out in which cases it is better to rent vs buy.
I tried to be as precise as possible, but as is often the case some assumptions have to be made:
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if real estate price is growing over time, I assume that rents are growing as well with the same rate
EDIT: @REandSTOCK rightly mentioned below that this is not the case. This is now corrected. There is a different growth rate for rent and prices. -
I assume that buying is done âSwiss-styleâ, i.e with the intention to never repay 66% of the mortgage. We donât do a full amortizement of the mortgage (which is so alien to all immigrants coming in Switzerland - âwhat do you mean, you donât repay the mortgage?â).
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When comparing buying vs renting, there are years when buying has more expense than renting and vice versa. I assume that on a given year, whoever has the least expense invest the leftover in VT or similar. Those quantities are computed in columns P and S.
And here it is:
Feedbacks are welcome. In my case, with a monthly rent of 1â500 CHF in ZĂŒrich, similar apartments selling for 800â000 CHF and an expected Real estate growth of 2% per year, it looks like renting is more advantageous. The opportunity cost of not investing your downpayment in the stock market is too big here.
I played a bit with the parameters and i also found out that:
- If you donât expect Real estate prices to grow but merely stagnate, donât ever buy, the opportunity cost is too big
- The Eigenmietwert is really a b*tch. It is not totally offset by the interest cost, and depending on your marginal tax rate, this can result easily in 5kCHF more in taxes each year, which has a big opportunity cost.
- Maintenance cost is hard to evaluate. Iâve put it at 0.5% per year, but if it gets bigger than this the opportunity can kick in quickly
- If you plan to amortize your mortgage totally, donât ever buy. The opportunity cost is huge.
But of course, those are only the financial aspects of it. The issue with real estate is that we can quickly become sentimental about it.
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They are not. The price of real estate was growing faster due to the interest rate going down.
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Thank you very much for doing this!
Itâs quite amazing how even a small change in rent can significantly change the optimal strategy.
What explains the optimal strategy switching twice?
E.g. from Rent to Buy to Rent
[I understand the first one is due to fixed/transaction costs with buying, but I couldnât really figure out the second switch.]
1% interest? Maybe now, but the historical average is closer to 3.5%. Maintenance cost 0.5%? This is not realistic. The âNebenkostenâ are already close to that, probably around 0.4%. Gerd Kommer wrote in an article that 1.5% is a realistic value, banks are working with 1.0%. Did you account for the selling tax of 25%? So if you sell it after 30 years for 1.5 million, youâll end up paying 175k in taxes.
I think you made buying way better than it is in reality. And still itâs less attractive from a financial standpoint.
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In Vaud, if you sell after more than 25 years (if you live inside, every year counts for 2 years), you only pay 7% instead of 30% if you sell in the first year.
Very cool spreadsheet @Julianek!
However:
- what do you rent for 1500CHF/month in ZĂŒrich?
- what do you buy for 800kCHF in ZĂŒrich?
I think those values are too biased on the lower end (or please send me your contacts 
)
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@Julianek really appreciate your calculations⊠just as a comparison. The house we bought was also for rent for CHF 3`000.- on the market. We bought it for 750k 10y ago.
We bought the house literaly with no cash 10y ago. All money from the PK and enjoying the 6.5 room house with the family for around CHF 400.- monthly mortage cost (plus money you put aside).
Would I buy a today house again for e.g. 800k? I guess yes, if you use it for yourself and your family. Putting 80k cash and 80k PK money in. Why PK money, because it seems to be kinda dead money for the forseeing future. Currently the banks even donât ask for amortisation. So you can put that money aside into VT or some other fund.
Like most things it is a personal decision. And the enjoyment being in a house with enough space for the kids (and a dog) and having nice garden is difficult to put in numbers. Is it bias? Definetly yes, because we all love the house!
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What do you mean by âyou sell in the first yearâ? The first year after this 25 years period?
No, I meant if you sell less than a year after you buy it, you pay 30%. Then every year / couple of years, it goes down progressively to 7%.
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This seems insane to me. A property bought for 750â000 is rented out for 3000 monthly. This was now or then?
Thanks for the thread and information. Itâs a topic that comes up in our circle quite often.
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Hi
Something similar in Geneva too.
Within two 2 years after purchase, the capital gain tax is 50%, drop to 10% after 10 years and 0% after 25 years (https://www.ge.ch/impot-benefices-gains-immobiliers/calculer-montant-impot)
There is the âreemploiâ as well when selling your main residency, capital gain tax is postponed if the proceeds is used to buy another property (conditions apply).
Each canton has its own tax law in the topic.
Perfectly clear now, thank you!
I donât think that the bank will give a mortgage without a job. When we asked for ours one didnât 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 âTragbarkeitsregelâ calculated with 5% interest rates.
This type of policy disincentivising âhouse flippingâ 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 outâŠ
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 âthe Big Shortâ but school teachers, and Australian)⊠introducing huge systematic risks to the economy as a whole. Or you get situations like thisâŠhttps://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 canât 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 
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, âTotal Cash Outflowsâ shouldnât it be picking the amount of âTotal interestsâ instead of only âInterest on non Amortization partâ?
This calculator is very good used with the right parameters
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