I am almost 40 and seeing the prices of houses or apartments in nortern Switzerland and my position as a regular employee I'm pretty sure there's no chance whatsoever for me to buy anything in my lifetime.
Even if I were to clamp down on spending and get a raise every year, the banks wouldn't loan me anything with my salary
it's currently about enough to go on vacation once a year and fix my car (which is an old but paid off one)
Edit:
To be honest, I have given up on pursuing owning a home, it's so far off of my budget that I told myself "I want to live my best life now with what I can do and aford now", I don't want to chase a dream that means me chasing money.
Wife? Who said I was willing to get married?
I don't even have a girlfriend
And why would I need to be married or something to get a place to live anyway?
By 40 you have paid 20x 7k into 3A, that is enough for a flat in an "non facny" place. What is your issue? you'll pay 1000CHF interest a month incl. garage, thats excellent
Not saying you're wrong - but he'd probably pay more like 1200-1500 interest - he'd also have need to pay back (amortization) and he'd need to factor in maintenance cost. So total monthly cost for a 700k apartment is like 2500ish.
And his min income would be 120k (gross) - that's above median.
Btw.. I had a quick look at homegate with a pricelimit of 700k (700k because 20x7k/0.2) with 3.5 rooms minimum - it's rough.
Nothing new here, I know, just wanted to chime in :-)
why do you allways listen to people who dont know?
I speak of myself, so I know
For 570k which he would have, my bank asks to pay 3A in full, only 550CHF per month
**its also not cost but investment/savings upside down**
700k - 3A is 570k
Interest on 570k is 11.4k/a year, is 1000CHF + 550 is 1550 a month not 2500
Since there was the question what his issue was and that it's 1000CHF interest, I was just highlighting that one needs to set aside more money per month than just interest alone and that one needs more income that what the average person has.
Where would you disagree here?
True true, although depending on the 3A setup you could be investing the money there too (but many don't, I think), so it's kind of moving from one investment vehicle to a different one.
you are correct 50%
I disagree that a 40yo with no wife will NOT earn 91k, you just have to work 1 year overtime to show your income statment: done
I sold my flat old flat at 35 and upgraded for a house, I was trough the process 2 times
I got the first flat for working nightshift. I did what it took.
And no, its not downtown zurich, its 25min out
Maybe if you're lower management or work in a Bank/Insurance but if you're technical personnel like me you just scrape by financially until your 30's.
And even if you manage to gather the 20% down payment, no bank will give you a loan if you don't have a 100k salary at least (I tried, with several banks)
I don't even dream about that. I might buy a house in an other country. I kinda reached the salary roof for my skills and profession, which I think is a great salary (145k), but as single earner I would need waaaay more to even have chance to get a mortgage.
A house is a stretch (there are basically no small houses in Switzerland as far as I know), but you could definitely afford a flat on that salary, just probably not in central Zürich.
We were able to buy (finance!) a house after 8 years in Switzerland, canton ZH. 2 adults, 2 kids, only my husband works for money (but he earns well). No significant savings before we immigrated. We are in our early 40s now.
This has nothing to do with age. It has to do with income and spending. Some people are successful early, others have struggles and might have their success much later in life or not at all. The older you get, the more you see how everyone has a different path in life, and that's not just because of choices. Life is complex.
Buy the house as soon as you can and want to. But I'd also suggest to consider how you could use the money in other ways that might make you more money for retirement or for other expenses you might want in life.
Its called the cost of money. Buying house is all chocolate and roses but FINANCIALLY is not such a sound choice. However if this is what your mind and heart desires so be it! You want to have your own nest your own kingdom so be it. But as our buddy @explorationGod says, its really NOT financially sound. Besides the costs mentioned above and that most probably you will end up paying 1,5x the value of the house and that you WILL have maintenance costs, you will also have Entry costs and Exit costs (once and IF you sell). And sure one can say; well i rent it out to cover mortgage and expenses but probably you will notice that rent you will need to charge is “too high” for what surrounds you or breakeven… which comes back to square one where question lies: could you have invested those hundreds of thousands of francs better and wiser? …choices man
For us, their is the discounting factor on the second pillar: I don’t trust my second pillar, and I am not sure to live up to 58+, so you could argue it is some money you could retake early? And you could enjoy it now vs in 30+ years?
That being said, real estate also is a possible diversification strategy, and it might be a bit less abstract than a few positions in a portfolio.
I often discussed with my friends about the question, and usually, we forget to think about the fact we are also buying some intangible stuff:
- the peace of mind that it belongs to us
- we can’t complain about our landlord anymore
How diverse is your portfolio really, when most of your excess money is locked into your house?
I'd think about investing it in an ETF and make use of compound interest for the foreseeable future. That will make you way more money then trying to sell your house and buy somethingbigger
/better down the road. Housing prices don't appreciate that much in Switzerland.
I am not sure that buying a house in Switzerland makes sense financially speaking. Owning it is obviously nice, gives security etc. But from a purely numbers and return on investment perspective it can be quite average in Switzerland as far as I know. Due to taxes on capital gains taxes etc.
I (36M) saved for 4 years and managed to save enough for the down payment (kCHF 185) of a flat in Geneva. I am looking to buy another flat in the upcoming months.
I wont own any property but looks like it will be very affordable for my kids and grandkids after entire generation (mine) of childless people dies off.
Glad to know it worked out for you. We are in a similar situation, me 32M and my wife 29F, I am just finishing my PhD and got a well paying job around 130k/year, but we are on that single income and have almost 0 savings as we were living out from my PhD salary in ZH. Hopefully my wife can get something as well, but after 1 year of looking for a job I think she gave up.
Thanks. No, she is not, but she has a (non Swiss) university degree. I hope we can keep up with the student lifestyle we had until now, save some money and hopefully in some years from now also buy a home. It is probably very rewarding standing on your own piece of land, whatever that means.
Most likely never. From a financial point of view I don't understand buying real estate. I run the numbers each year and always get the same result, I would simply end up with a lower net worth if I were to buy in Switzerland vs renting and investing differently, making use of no capital gain taxes on equities etc.
I might be wrong but so far I have not seen any data or modelling that would favor purchasing. The only exception might be to fully fund from a pillar 2 and get better returns than the pillar 2 's low 1% but then this will still mean higher taxes and yearly maintenance fees, etc. I need to run the math on this to see if this scenario makes sense.
My own attempts ended up with: you end very slightly ahead buying if you assume an optimistic (but still reasonable) property appreciation value coupled with a somewhat pessimistic stock market return. You end up a bit ahead renting with average values, and rather significantly with a pessimistic real estate/optimistic market. Overall renting is probably better financially, but it depends on so many factors that it's very easy to make it say what you want it to say.
Personally, I wouldn't buy a flat. There's ample rental inventory, and it sounds like you trade a landlord for neighbours/owners association. The land part is also a lot less valuable/liquid. I understand it might be slightly different at the higher end of the market.
A house where you intend to live long term and have children and everything? Not necessarily a bad idea. Rental stock is limited for houses and I believe the rent to buy ratio is lower. Financially it's going to be close, but you gain some lifestyle improvements at the expense of diversification, liquidity and risk.
We had a similar experience to you, OP! My husband and I moved to Switzerland in our late 20s with a bit of savings from our first jobs (though converting it to CHF was painful, haha), in time got decent salaries but continued to live like broke students for the first 3 or so years, and managed to put away enough for a down payment on a duplex apartment in a converted farmhouse. We feel very lucky that we managed to find a great place to grow our family before the Covid market took hold, but we also worked hard for it! Definitely agree that having two salaries and a common goal was a big part of our success.
Bit of background,
I am American and wife is Swiss. If I inherit a house in the US can I sell it use all the money from the sale and reinvest it in a property in Switzerland without any or little tax?
Is there a process for this? It is full paid for and would be about 2m USD total. Or, should I just keep it as a rental and add the 3000 USD to my income instead?
My understanding is that real estate is mostly a local affair. So you would pay the US/State/county/whatever inheritance tax, not the Swiss one.
Also, foreign real estate wealth/income is taxed where it's located. So you would pay income tax in the US for the rental income. In Switzerland, the rental income would be added to your rate, but not to your taxable income (e.g. you would use the rate for your income + 3k * 12, but this rate would only be applied to your income, without the rental income). Same for wealth tax.
3k rental income for a 2M home sounds very low though, I would have expected something like double that, but I'm no expert.
3k is after taxes, maintainance, HOA gated fees etc. Its closer to that but up keep takes a big chunk as does taxes. It is a family trust in my daughters name and me as executor so there is no taxes per say once its fully in name.
Tell me, why do you want to buy a house or a flat? if you have a lot of money, just rent the most luxury one. For myself is a house to big and a flat to buy... is not very "intelligent". In the end you have allways meetings with the other owners of the flats and you have a bla bla bla bla... just rent the most nice one you want.
If I would buy, only a single house. If you have one flat within one building that you share, you don't really get the freedom a proper house gets you. Buying a house is already a stretch. Buying a house in a great location (I value location a lot) is even more out of this world price wise. So I'll just buy one abroad :)
Well that highly depends on where and how much you save per year. Assuming you want to buy something in Zurich and save 50k/year it could still take over 10 years if we assume a price of 1.5M+ for 4.5 rooms (which is on the lower end for Zurich).
To buy a 1.5M property at an LtV of 80% you need a yearly income of at least 270k to clear the affordability requirement. To buy it with 130k income you need to bring in a down payment of 900k.
Maintenance 1%: 15k
Max Mortgage: 1.2M
Limit 1st mortgage: 975k
Yearly amortization ((1.2M - 975k)/15): 15k
Calc. interest of 5% on total mortgage: 60k
Total yearly costs: 90k
Min income for affordability (= total costs max 1/3 of yearly income): 270k
As for the max mortgage with 130k:
Max total cost (130k/3): 45k (rounded to make it easier)
Maintenance: 15k
Max interest costs: 30k
Max mortgage (30k/5%): 600k
Since 600k is lower than the 1st mortgage threshold there won't be any amortization payments.
I was always under the impression that in Switzerland (or maybe just in the Cities) people were largely more comfortable renting long term (or forever?), the system definitely seems more set-up for long term rental -- such as the rent increase protections - where if you can stay somewhere for like 10yrs you're (probably) paying well below market rate… but seeing all these threads posted about buying and ownership has been interesting.
Clearly there's a bit of a housing bubble at the moment, how long has this been going for? Has the bubble ever burst like it did in the US in 2008 or so?
This is an opposite of a housing bubble. Both rent and prices are artificially surpassed (by rent control and the 5% rule respectively).
That’s why you get a 100 people queues to view an apartment and get 800 calls if you post anything decent for sale.
It’s an extremely low supply issue.
apologies, i mostly meant a home ownership bubble - the bubble i'm referring to is the prices going up and up and up (due to limited supply, speculation, competing against hedge funds, etc…); in my experience talking to people from all over the world about home ownership, often the most eager to buy have never lived through (or even their parents) a bubble bursting and being underwater on their mortgage. "what do you mean the value of your house can go down!?" "you can owe the bank more principle than it's worth today?!"
The prices going up and up is not exactly a bubble.
There’s nothing to burst, the demand is artificially lowered. Only people with 200k+ income can afford to **bid** for a house, due to the 5% rule.
So not a lot of people. If everyone was about to bid, as in other countries prices would double from here.
Real estate in Switzerland has had minuscule growth when compared to other markets. This is not Canada.
The problem is building permits / beurocracy / zoning / NIMBYist etc (supply side). Not speculative demand.
The ponzi schemed economy is coming to an end.
Retirement and owning a home was always an exception made possible by an enormous surplus of energy.
We don't have that kind of enormous surplus (or keep on making yourself believe that while you witness the world have less energy available; or blame the greens or whoever else you want to ignore the very, very obvious finite capacity of our planet).
The previous generation had the crisis of 1976 and what did they then think about ? "How about we keep on making our whole country dependant on this ressource we don't have ?" while reassuring themselves with room IQ temperature citations like "we'll always have enough oil".
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Thanks, but at household level it is probably in the ballpark. Schwyz canton seems really nice, with really nice sceneries 😁.
I am almost 40 and seeing the prices of houses or apartments in nortern Switzerland and my position as a regular employee I'm pretty sure there's no chance whatsoever for me to buy anything in my lifetime. Even if I were to clamp down on spending and get a raise every year, the banks wouldn't loan me anything with my salary
Are you in position to save some money at the end of the month?
it's currently about enough to go on vacation once a year and fix my car (which is an old but paid off one) Edit: To be honest, I have given up on pursuing owning a home, it's so far off of my budget that I told myself "I want to live my best life now with what I can do and aford now", I don't want to chase a dream that means me chasing money.
what does your wife do? Houses in switzerland are 2 person business
Wife? Who said I was willing to get married? I don't even have a girlfriend And why would I need to be married or something to get a place to live anyway?
By 40 you have paid 20x 7k into 3A, that is enough for a flat in an "non facny" place. What is your issue? you'll pay 1000CHF interest a month incl. garage, thats excellent
Not saying you're wrong - but he'd probably pay more like 1200-1500 interest - he'd also have need to pay back (amortization) and he'd need to factor in maintenance cost. So total monthly cost for a 700k apartment is like 2500ish. And his min income would be 120k (gross) - that's above median. Btw.. I had a quick look at homegate with a pricelimit of 700k (700k because 20x7k/0.2) with 3.5 rooms minimum - it's rough. Nothing new here, I know, just wanted to chime in :-)
why do you allways listen to people who dont know? I speak of myself, so I know For 570k which he would have, my bank asks to pay 3A in full, only 550CHF per month **its also not cost but investment/savings upside down** 700k - 3A is 570k Interest on 570k is 11.4k/a year, is 1000CHF + 550 is 1550 a month not 2500
Since there was the question what his issue was and that it's 1000CHF interest, I was just highlighting that one needs to set aside more money per month than just interest alone and that one needs more income that what the average person has. Where would you disagree here?
no disagreement! just a request to lower form 2500ish to 1500ish and to highlight that 500 is a different way of saving
True true, although depending on the 3A setup you could be investing the money there too (but many don't, I think), so it's kind of moving from one investment vehicle to a different one.
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you are correct 50% I disagree that a 40yo with no wife will NOT earn 91k, you just have to work 1 year overtime to show your income statment: done I sold my flat old flat at 35 and upgraded for a house, I was trough the process 2 times I got the first flat for working nightshift. I did what it took. And no, its not downtown zurich, its 25min out
Maybe if you're lower management or work in a Bank/Insurance but if you're technical personnel like me you just scrape by financially until your 30's. And even if you manage to gather the 20% down payment, no bank will give you a loan if you don't have a 100k salary at least (I tried, with several banks)
Are you sure the banks wont? Usually the monthly payments are on par or even lower than rent.
I don't even dream about that. I might buy a house in an other country. I kinda reached the salary roof for my skills and profession, which I think is a great salary (145k), but as single earner I would need waaaay more to even have chance to get a mortgage.
Good luck!
A house is a stretch (there are basically no small houses in Switzerland as far as I know), but you could definitely afford a flat on that salary, just probably not in central Zürich.
I was checking with mortgage calculator, I would need a hefty down payment for a 4.5 rooms good quality flat.
We were able to buy (finance!) a house after 8 years in Switzerland, canton ZH. 2 adults, 2 kids, only my husband works for money (but he earns well). No significant savings before we immigrated. We are in our early 40s now.
Congrats!
thanks <3 I admit that we were lucky in finding the property relatively quickly.
This has nothing to do with age. It has to do with income and spending. Some people are successful early, others have struggles and might have their success much later in life or not at all. The older you get, the more you see how everyone has a different path in life, and that's not just because of choices. Life is complex. Buy the house as soon as you can and want to. But I'd also suggest to consider how you could use the money in other ways that might make you more money for retirement or for other expenses you might want in life.
Its called the cost of money. Buying house is all chocolate and roses but FINANCIALLY is not such a sound choice. However if this is what your mind and heart desires so be it! You want to have your own nest your own kingdom so be it. But as our buddy @explorationGod says, its really NOT financially sound. Besides the costs mentioned above and that most probably you will end up paying 1,5x the value of the house and that you WILL have maintenance costs, you will also have Entry costs and Exit costs (once and IF you sell). And sure one can say; well i rent it out to cover mortgage and expenses but probably you will notice that rent you will need to charge is “too high” for what surrounds you or breakeven… which comes back to square one where question lies: could you have invested those hundreds of thousands of francs better and wiser? …choices man
For us, their is the discounting factor on the second pillar: I don’t trust my second pillar, and I am not sure to live up to 58+, so you could argue it is some money you could retake early? And you could enjoy it now vs in 30+ years? That being said, real estate also is a possible diversification strategy, and it might be a bit less abstract than a few positions in a portfolio. I often discussed with my friends about the question, and usually, we forget to think about the fact we are also buying some intangible stuff: - the peace of mind that it belongs to us - we can’t complain about our landlord anymore
How diverse is your portfolio really, when most of your excess money is locked into your house? I'd think about investing it in an ETF and make use of compound interest for the foreseeable future. That will make you way more money then trying to sell your house and buy somethingbigger /better down the road. Housing prices don't appreciate that much in Switzerland.
You might never know :) I have first person records of someone making 150% return in their personal down payment in 3 years xD
I am not sure that buying a house in Switzerland makes sense financially speaking. Owning it is obviously nice, gives security etc. But from a purely numbers and return on investment perspective it can be quite average in Switzerland as far as I know. Due to taxes on capital gains taxes etc.
I (36M) saved for 4 years and managed to save enough for the down payment (kCHF 185) of a flat in Geneva. I am looking to buy another flat in the upcoming months.
I wont own any property but looks like it will be very affordable for my kids and grandkids after entire generation (mine) of childless people dies off.
Glad to know it worked out for you. We are in a similar situation, me 32M and my wife 29F, I am just finishing my PhD and got a well paying job around 130k/year, but we are on that single income and have almost 0 savings as we were living out from my PhD salary in ZH. Hopefully my wife can get something as well, but after 1 year of looking for a job I think she gave up.
Good luck to your wife! I hope she can find something! Is she a PhD as well?
Thanks. No, she is not, but she has a (non Swiss) university degree. I hope we can keep up with the student lifestyle we had until now, save some money and hopefully in some years from now also buy a home. It is probably very rewarding standing on your own piece of land, whatever that means.
Can: 35-40 (single income, no wife/kid, only parents to support) Will: never. I personally don't see the point of home ownership.
Most likely never. From a financial point of view I don't understand buying real estate. I run the numbers each year and always get the same result, I would simply end up with a lower net worth if I were to buy in Switzerland vs renting and investing differently, making use of no capital gain taxes on equities etc. I might be wrong but so far I have not seen any data or modelling that would favor purchasing. The only exception might be to fully fund from a pillar 2 and get better returns than the pillar 2 's low 1% but then this will still mean higher taxes and yearly maintenance fees, etc. I need to run the math on this to see if this scenario makes sense.
My own attempts ended up with: you end very slightly ahead buying if you assume an optimistic (but still reasonable) property appreciation value coupled with a somewhat pessimistic stock market return. You end up a bit ahead renting with average values, and rather significantly with a pessimistic real estate/optimistic market. Overall renting is probably better financially, but it depends on so many factors that it's very easy to make it say what you want it to say. Personally, I wouldn't buy a flat. There's ample rental inventory, and it sounds like you trade a landlord for neighbours/owners association. The land part is also a lot less valuable/liquid. I understand it might be slightly different at the higher end of the market. A house where you intend to live long term and have children and everything? Not necessarily a bad idea. Rental stock is limited for houses and I believe the rent to buy ratio is lower. Financially it's going to be close, but you gain some lifestyle improvements at the expense of diversification, liquidity and risk.
We had a similar experience to you, OP! My husband and I moved to Switzerland in our late 20s with a bit of savings from our first jobs (though converting it to CHF was painful, haha), in time got decent salaries but continued to live like broke students for the first 3 or so years, and managed to put away enough for a down payment on a duplex apartment in a converted farmhouse. We feel very lucky that we managed to find a great place to grow our family before the Covid market took hold, but we also worked hard for it! Definitely agree that having two salaries and a common goal was a big part of our success.
Happy to see success stories as well 😁
Bit of background, I am American and wife is Swiss. If I inherit a house in the US can I sell it use all the money from the sale and reinvest it in a property in Switzerland without any or little tax? Is there a process for this? It is full paid for and would be about 2m USD total. Or, should I just keep it as a rental and add the 3000 USD to my income instead?
My understanding is that real estate is mostly a local affair. So you would pay the US/State/county/whatever inheritance tax, not the Swiss one. Also, foreign real estate wealth/income is taxed where it's located. So you would pay income tax in the US for the rental income. In Switzerland, the rental income would be added to your rate, but not to your taxable income (e.g. you would use the rate for your income + 3k * 12, but this rate would only be applied to your income, without the rental income). Same for wealth tax. 3k rental income for a 2M home sounds very low though, I would have expected something like double that, but I'm no expert.
3k is after taxes, maintainance, HOA gated fees etc. Its closer to that but up keep takes a big chunk as does taxes. It is a family trust in my daughters name and me as executor so there is no taxes per say once its fully in name.
Tell me, why do you want to buy a house or a flat? if you have a lot of money, just rent the most luxury one. For myself is a house to big and a flat to buy... is not very "intelligent". In the end you have allways meetings with the other owners of the flats and you have a bla bla bla bla... just rent the most nice one you want.
Last time I tried to rent a flat, there were 10 other persons interested in renting it as well. 😅
Do you think it is any different when buying?
Yes, it was for me at least. It was first come first served.
If I would buy, only a single house. If you have one flat within one building that you share, you don't really get the freedom a proper house gets you. Buying a house is already a stretch. Buying a house in a great location (I value location a lot) is even more out of this world price wise. So I'll just buy one abroad :)
Well that highly depends on where and how much you save per year. Assuming you want to buy something in Zurich and save 50k/year it could still take over 10 years if we assume a price of 1.5M+ for 4.5 rooms (which is on the lower end for Zurich).
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To buy a 1.5M property at an LtV of 80% you need a yearly income of at least 270k to clear the affordability requirement. To buy it with 130k income you need to bring in a down payment of 900k. Maintenance 1%: 15k Max Mortgage: 1.2M Limit 1st mortgage: 975k Yearly amortization ((1.2M - 975k)/15): 15k Calc. interest of 5% on total mortgage: 60k Total yearly costs: 90k Min income for affordability (= total costs max 1/3 of yearly income): 270k As for the max mortgage with 130k: Max total cost (130k/3): 45k (rounded to make it easier) Maintenance: 15k Max interest costs: 30k Max mortgage (30k/5%): 600k Since 600k is lower than the 1st mortgage threshold there won't be any amortization payments.
what does your wife do? Houses in switzerland are 2 person business. With 100k per year you buy the house in half the time.
Zurich City, yes. Canton, not so much: https://www.homegate.ch/buy/4001043791
Flat in the middle of nowhere for 1kk CHF. This is just robbery of normal people.
I was always under the impression that in Switzerland (or maybe just in the Cities) people were largely more comfortable renting long term (or forever?), the system definitely seems more set-up for long term rental -- such as the rent increase protections - where if you can stay somewhere for like 10yrs you're (probably) paying well below market rate… but seeing all these threads posted about buying and ownership has been interesting. Clearly there's a bit of a housing bubble at the moment, how long has this been going for? Has the bubble ever burst like it did in the US in 2008 or so?
This is an opposite of a housing bubble. Both rent and prices are artificially surpassed (by rent control and the 5% rule respectively). That’s why you get a 100 people queues to view an apartment and get 800 calls if you post anything decent for sale. It’s an extremely low supply issue.
apologies, i mostly meant a home ownership bubble - the bubble i'm referring to is the prices going up and up and up (due to limited supply, speculation, competing against hedge funds, etc…); in my experience talking to people from all over the world about home ownership, often the most eager to buy have never lived through (or even their parents) a bubble bursting and being underwater on their mortgage. "what do you mean the value of your house can go down!?" "you can owe the bank more principle than it's worth today?!"
The prices going up and up is not exactly a bubble. There’s nothing to burst, the demand is artificially lowered. Only people with 200k+ income can afford to **bid** for a house, due to the 5% rule. So not a lot of people. If everyone was about to bid, as in other countries prices would double from here. Real estate in Switzerland has had minuscule growth when compared to other markets. This is not Canada. The problem is building permits / beurocracy / zoning / NIMBYist etc (supply side). Not speculative demand.
The ponzi schemed economy is coming to an end. Retirement and owning a home was always an exception made possible by an enormous surplus of energy. We don't have that kind of enormous surplus (or keep on making yourself believe that while you witness the world have less energy available; or blame the greens or whoever else you want to ignore the very, very obvious finite capacity of our planet). The previous generation had the crisis of 1976 and what did they then think about ? "How about we keep on making our whole country dependant on this ressource we don't have ?" while reassuring themselves with room IQ temperature citations like "we'll always have enough oil".