Step 1 - Allocate Budget
An interesting fact is that the majority of Swiss residents are actually tenants and do not own their own home. The high cost of residential property is mainly causing this.
In comparison with other countries it becomes clear how expensive real estate is in Switzerland. A detached house typically costs in excess of 8 times the average household income. The investment is however secure even in times of economic uncertainty:
- According to Credit Suisse on March 10, 2010, the Swiss real estate market is very stable with year-on-year price increases in Ticino of up to 5%
- On 21 April 2010 the Q4 2009 Knight Frank Global House Price Index was published, reporting a 6.9% annual price growth of Swiss Real Estate
- There is also a growing demand as there is a considerable uplift in interest in Swiss property from international high earners driven by taxation benefits and there is an increased focus on Ticino driven by lack of property choice in locations like Vaud and Geneva.
- Through homegate.ch the Zürcher Kantonalbank (ZKB) published that in the first quarter of 2010 compared to the fourth quarter of 2009, the advertised rent rates in Ticino were up by 1.3%.
- Recent exchange rate developments make it possible to take advantage of the strong Swiss Franc. The additional capital that now flows to Switzerland shall ensure that interest rates, including the mortgage rates, in Swiss Francs will remain low. Perhaps there is even a risk that the Swiss government will start discouraging capital inflows from abroad, as in the 70s, when the monetary authorities introduced a negative interest rate on foreign funds deposited in Switzerland.
- The Swiss federal and cantonal tax systems are very attractive and compete with those of the world's most attractive countries.
In order to buy real estate in Switzerland you will need a substantial amount of cash (between 30 and 50%) of the value of the property. It is also no secret that buying a property typically always costs more than you thought it was going to cost. As a result it will be a very worthwhile exercise to calculate the amount of cash you have available and at the same time predict which monthly costs you can afford.
For those interested: there are also technical reasons why construction in Switzerland and particularly in a montainous environment is more costly than elsewhere:
- The building site preparations are typically very costly and involve removing parts of the mountain to create a flat building site (see underneath picture for details).
- Because of the narrow roads in the mountains, transportation of building materials with big trucks is not possible. Therefore smaller trucks as well as helicopters are used for this purpose.
- Construction occurs in a very environmental friendly way which obviously adds cost.
