Finding a property to live in

I need some sanity check from the forum while looking for a property to buy and live in.

Currently we rent and the yearly ~35k expense is too high to bear psychologically on the long run. It’s OK to finance until both of us work, but I’d like to find our own place to live in and own for the long term (~20+ yrs).

We are lucky to live in a flat in Zürich that has a small garden and all amenities in a circle of 600m around us (childcare, kindergarten, hort and schools car free, coop, Aldi, train station, several restaurants). We can live our lives 85% car-free and just walking in the neighborhood, it’s super convenient and stress-free. Nothing tells me I need to move (other than my intrinsic urge to own something). Here, everything belongs to some pension fund so no supply whatsoever.

So my criteria for looking for a flat are as follows:

Against the gemeinde/commune/location:

  • has to have a school nearby (our child is only 2 yo, so next 10 yrs should be covered) in "kid walking distance)
  • I’d like to have good schools, and while everyone tells me that all schools are excellent, I somehow am skeptical about this.
  • has to have some basic grocery option nearby
  • the place needs to have a train station in reasonable (~10-12mins’ walk) distance.
  • ideally the gemeinde should be in the bottom half of the tax rate table (or at least less than city Zürich 100/119%)
  • I’d like to manage our everyday life without the need for 2 cars as daily drivers.

against the object:

  • the object needs to have a modern heating system (earth sonde/heatpump/solar) with floor heating
  • ground floor with some garden/patio access
  • I need an open kitchen layout
  • ideally with large windows all around

This kind leaves us only with newly built apartments as these are kind of de facto standards now.

To fulfill the list above seems to be prohibitively expensive (2M+), or not existing, or only in the middle-of-nowhere parts of Aargau.

What am I doing wrong?

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Nothing, your requirements simply command those prices in this market. :slight_smile:

As an idea - is Adliswil a bit better tax wise?
I believe it’s 100/100.
They are building a lot of new stuff these days it seems.

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CS and Wüest published some data where in Switzerland it’s cheaper to rent, and where it’s cheaper to own. In the past, rural areas were cheaper to own and urban communities were cheaper to rent. I don’t know how this looks nowadays but the research you did suggests that it may still hold true.

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If you are comparing like with like don’t you consider your rent kind of a good deal? 1.75% vs 2M sale price before costs - that is a pretty meagre return for the owner, and also sensitive to interest rate increases

Per your post in the the other thread it is just not a good market to buy in. We are also renting

The positive aspect of this, if I invest the money I would use for a deposit it would reach 2M NW much more quickly than buying

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So at least 50-60 times your annual rent?

Don’t buy anything that costs you more than 30x the annual rent.

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I think you got everything right. It’s just very expensive (too much demand / too little supply)

I am in a very similar situation and now looking around Horgen but prices are around 2m+. As other suggested look at Adliswil or wadenswill. Not sure if you are expat or not, wasenswill may be less international. But I believe it will become. More and more people on the silver coast will be pushed to look after thalwill / horgen as prices go Up and supply is non existing, lot of new buildings going up on wadenswill.

As cortana said, above 30x does not make financial sense. One consideration from my side

  • supply in CH and around zurich is very low
  • stocks are at ATH. If you made a nice absolute gain is a way to derisk
  • inflation going up means that new builds will cost even more as raw materials and labour will cost more. Even if people say inflation is temporary. Still prices for a couple of years will go up and usually they don’t go down - so you have a new higher base

Another consideration. I ran the numbers. Most likely you will be richer if you invest in stocks than putting into a house. But do you have the persistence and courage to do this with all your money for next 20 years? The reason is that easy to preach to put all your money in equity, a different story is to feel confident / continue to do so when your portfolio would have swollen to 2-3mil.

At the end, my view to purchase in CH is an emotional decision. Not financial. Financially make little sense!

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that 30x annual rent I guess is net rent, right? without energy&nebenkosten

@user137 is the 35k net or with nebenkosten?

I consider it an awesome deal. Ideal location, OK size, OK layout. But 18yrs old kitchen, subpar heating system etc… I’d happily buy this flat if I could, hence moving into something less good in terms of location is a mental challenge…

But rent apart, our fix costs run to 6 figures every year and I’m trying to derisk that.

With NK and garage. So it’s a great deal.

If you buy something for 1.5-2.0 million, you would be better off (financially) if you rent something for 60-80k/year and keep this capital invested in stocks.

So 35k/year sounds great.

Statistically speaking, yes. But the next crash is inevitably around the corner, so the “average 8% over the long term” will not make you happy if the next 5-7 years it’s gonna be -2%, for instance.

And while I can reason that the “average return on my stocks portfolio will make up for much more than the rent here”, I’d want to have an own place. It’s a mindset thing. Maybe not worth it, but it’s intangible.

Also a correction: a property worth 1.5m only needs 300k own capital, so that’s around 24k pa on average.

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also base rates will hike, so inevitably property prices will… probably not drop, but at least stagnate for a decade or so afterwards?

Yes. Rates may go up a little. I don’t think massively in Switzerland though.

Property prices may stagnate, I think this or small increase over next decade. However, even if they drop for 10-15 years, it does not matter if you buy to live in.

But if this happens, you would have been better off to invest in stocks. Therefore if it’s a financial decision, keep in stocks. if it’s an emotional one then, you could consider buying

That is also why so many people move from a rented flat in Zurich to a house in the suburbs of Zofingen, far away from any school or grocery option, buy two cars and leverage their biggest asset by 4.

Some even do this for Stockwerkeigentum. Remember: dumm, dümmer, Stockwerkeigentümer

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Might it be possible to get your tenant to renovate it?
The rent would surely increase but maybe it would still be a good deal and you could keep the other great attributes of the apartment (except ownership). But I have no idea if that’s realistic. :slight_smile:

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Sounded like my apartment up to this point, I think your requirements are a bit too high. How many sqm would it need to be?

It surely comes from people who didn’t go to school in Switzerland. Swiss public school are of high level of education and unless your child has “special needs”, he will be more than good there. I always thought private schools were a weird investing option because to me the ROI of sending children to private school is more of a parental psychological relief than something else. Sorry I digress.

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Sorry for continuing a sidetopic, but this question had come quite often recently.

If you want to have a good school for children, avoid school districts with many old high buildings. There seems to have been a fashion to build such 10+ store buildings in 60th and 70th. Like Bümpliz and other areas in the west of Bern. That what counts as slums in Switzerland, although there is no comparison with France and Germany.

It is totally fine to live there as an adult, but avoid settling there with a family if you can afford it. In these areas I think teachers are objectively having less resources to deal with children individually, because there are many of them and they need more support in studies that family cannot provide. So the cycle of low education - low income may continue.

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Yes, on opportunity costs. Then there is interest, maintenance costs etc. Most studies came to the conclusion that you should only buy it, if the rent is higher than 5% of the buying price:

Lets adjust this number more in favor of owning, so let’s say it’s 4% instead of 5%. Buying something for 1.5 million means that anything up to 60k/year in rent would be financially more wise.

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One thing I dont get from the video, didnt Felix mix up two things (most probably not😃)?

Lets forget about property tax and say 1% maintenance costs . That 1% is refering to the total house value (lets say 1M). Now he is refering with the 3% opportunity cost as well to the total house value, but your down payment may only be 300k. So eventually you have the opportunity costs only on the 300k, which you could put in stocks, but the house owner profits (on margin) of 1% appreciation of the house value.

Now in his equation, does he compare an investor who buys the house with x cash and y credit to an investor who invests in stocks with x cash and y credit (which you never would get, when backed up with not enough cash)?

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