We are renting a 3 bedrooms 105m2 flat (2004 construction) for 4400 CHF with a double garage included.
Before someone assumes that this a crazy price I would like to mention that prices for 3 bedroom flats in Geneva are pretty much the same (see Champel, St Jean, Saconnex, etc). Especially when you sign first time in 2024.
Having said that we have now started thinking the option to buy something.
However we don’t have the liquid capital required now and we would have to sell a flat we own in Europe to use this as downpayement for the Swiss mortgage. In a best case scenario this would be around 400k euros
According to the UBS calculator our maximum purchase price is
Are you sure you can buy a 3 bedroom (105 m2) apartment in Geneva for 1.55 million? These are quite interesting rental yields (4400 CHF rent on 1.55 million apartment). I always thought Geneva city is like Zurich city where yields are very low
Or are you planning to move to a smaller apartment?
Opportunity costs. Your downpayment, say, 300k CHF, invested in a low cost portfolio that would grow by 4% p.a., would bring you 12k per year, conservatively estimated.
Amortization is not a cost. It is savings that are forcefully directed toward reducing debt.
CHF 1529 for interests means a ~1.5% interests, that can be obtained for the next 10 years but there’s no telling where rates will be in 10 years. Banks usually stress test our affordability by using 5% interests as a test.
Incidental expenses tend to not happen much most years but when they do, do so by potentially big chunks at once. Be sure to provision that.
Taxes and fees should be assessed. Both one time if there are (notary, land register, mortgage creation, withdrawal of pension assets if applicable - some may not apply and there might be others, it varies by canton) and recurring ones (own ownership, which might change this autumn, and the effect on wealth and income tax of the mortgage and the taxable value of the asset).
Co-ownership inside a building might not be frictionless and it’s harder to move away from the hassle once you are a owner. See for example: Problem with neighbor :)
Otherwise, if you can find an appartement you enjoy for 1.5M, that might be a good deal for you. There is an opportunity cost but it’s hard to compare savings on rent vs stock returns due to the different risk profile of both (the appartment may appreciate or loose value too so there’d be fluctuation there too if you’d need/want to sell at some point).
Think about buying in a bigger building (rather than a house or smaller building), it has its drawbacks, sure, but your monthly incidentals will be far lower. Fwiw in Zurich for just 1 bedroom I pay less than 300 a month on incidentals (not including the quarterly EWZ because that is separate always, also as a renter). However, I also got ‘lucky’ in the sense that the contractors including for heating were chosen well, it is EWZ in most cases where the service is something they offer. I know someone in a much smaller building (2 houses, I think 8-10 apartments in total), the building company very likely received kickbacks or something because they have some shitty long ass contract with the heating provider and prices have gone up a lot every year. But overall were also more expensive, not just the heating part. In a bigger building, costs distribute better. So find out, if it’s an older place, what current prices are, and if it’s new, make sure to get an overview of who has been contracted to do what and check their offerings.
Saying all this, I absolutely do not think buying a big place in CH is a good financial decision. As someone else already said yields are typically low, meaning renting is good value versus buying. The amount of capital you put into this one asset is huge and has a big CoC. Also, owning can be a hassle if something bad happens.
Would moving outside of Geneva, but within reasonable commute distance, be a consideration? You would have a much better chance of finding either a much lower rent, or a freehold single family house that you can afford. Depending on the municipality, you might also substantially reduce your tax and health insurance bills (Geneva is among the least-favourable municipalities for both).
Of course, there’s also work/school/social life/personal preferences. But taking a look at competing offers (with regards to municipalities) can help give you a picture of what the market looks like.
Notary fees, with 1k per month saving it could take a couple of years to break even…it doesn’t mean that it’s not worth doing, but your time horizon should be longer than your transaction costs, if you see what I mean.
But that also means you don’t own this property anymore. So no more price appreciation/rental income from that.
That’s the opportunity cost at minimum.
Not effectively deploying capital you own always has opportunity cost.
Yes, this I got. But you would have to sell it to finance a downpayment anyway. So you actually have 3 options, and doing nothing is not a lack of decision, but a decision in itself.
There was a lot of research showing that buying in most of the cases is more expensive than renting (eg. Ben Felix). So I think it’s more emotional decision, depending on what you want to do/have in life.
From financial perspective, there is always, potentially huge opportunity cost. But if you are not comfortable keeping everything in stocks, maybe buying is an option for this? Maybe there are other, non-financial reasons?
Already a few years after buying (in 2021) I can tell you one thing - doing anything inside or around house, is crazy expensive here (and probably in most places anyway). So it is a “good” incentive to learn a lot of stuff and just do it by yourself, engaging companies only for more complicated stuff. Not sure if accounting 1% yearly for future renovations be enough .
Well I am ok with 100% in stocks. It’s just that I used to pay 1.5k for the same space for a flat abroad and now the prices in Geneva are so crazy that make me think all these scenarios.
It just feels very bad and weird paying 4k (or even 3k for lease agreements made years ago - I have some lucky colleagues). My brain tells me to try to “get rid” or “do better”.
Owning is a big deal and responsibility, I know as an owner (abroad).
I will have to reassess some things. Thanks
Indeed (side note that we still have a mortgage at a below 1% rate) but when completely paid off we expect 24k per year net (after costs and taxes in France).
You own a RE already and it has a net income of X
Your rent in CH is Y
NET cost , Z = Y - X
If you sell the RE, buy a new one. What would be the new NET cost? Is it higher than Z or lower?
As your main driver is cash flows, let’s ensure Z* the new net cost is actually lower. Otherwise what do you gain ?
Since we don’t know the capital appreciation potential of RE in CH vs other country, let’s just assume it’s same in real terms.
Another motivation one can have is to benefit from leverage that CH RE can bring for you. But that’s next level of financial jugglery and only results is real cash when RE is sold again.
By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, tu confirmes avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/
Durch das Lesen und die Teilnahme an diesem Forum bestätigst du, dass du den auf http://www.mustachianpost.com/de/ dargestellten Haftungsausschluss gelesen hast und damit einverstanden bist.
.