A typical Ticino street.
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:
- The Global Property Guide published in June 2010 that the Swiss housing market has remained resilient, despite downturns in many European countries. Prices of single-family homes rose 4.54% over the year to Q2 2010, while prices of owner-occupied apartments rose 5.26% over the same period.
- 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%
- The Knight Frank Global House Price Index has reported the following price growths of Swiss Real Estate:
- For 2008: +4.6%
- For 2009: +6.9%.
- For 2010: +5.2%
- For 1st half of 2011: +1.9%
- 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.
Finally some words of wisdom from Cor van Zadelhoff, a Dutchman who founded the Zadelhoff Makelaars real-estate company back in 1968. Real estate is ultimately bricks and mortar, the key questions one has to ask oneself when buying are always the same: are the quality and location of the building sound? is it worth the money?
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.
