With the 3rd highest GDP per capita globally, it is surprising to see that Switzerland is a nation of home-renters. In fact, only around 36% of the Swiss own their homes or apartments. This is the lowest rate in the West and well below the 70 percent average in the European Union, and the 67 percent in the United States.

 

Although many Swiss dream of owning their own home, others choose not to buy and the reasons for this vary and include the practical nature of the Swiss, such as reducing risk and having funds available for other investments offering a higher return than with properties.

That said, for most young people in Switzerland, the dream of owning a home remains unattainable. The typical first-time buyer in Switzerland is now 58 years old. In Europe, the average age of a first-time home buyer is just 31. In Switzerland, only one in five households aged 35 owns a property. This compared with 55% of people aged 70.

The main reason for this is the cost. Those looking to buy a property valued at CHF1 million, would have to fund it with 20% of their own funds, including 10% of which must be in cash. To obtain a mortgage from a bank, a joint income of roughly CHF180,000 is required, which is higher than the median salary in Switzerland.

Additionally home owners are more highly taxed on their property than equivalent investment capital elsewhere (for example growth stocks or funds). For private individuals there is generally no tax on capital gains, but on homeowners there is a tax on the gain in value of their property when sold, and the effective rental income is also taxed annually. Since income tax is highly progressive the latter can be a significant cost, even though repair and mortgage costs can be deducted.

Renting Living Accommodation

There are several factors that affect people buying their own homes in Switzerland. These include:

Property prices
According to the Swiss Federal Statistics Office, house prices in Switzerland cost twice as much as the average in other European countries.

Interest rates
Although typically lower than in other countries (currently under 2%), the interest rates banks charge in Switzerland, generally put people off buying – as opposed to renting properties.

Tradition
Most young people around the world are taught that owning their own home is a good investment. in Switzerland in comparison, the culture of renting accommodation is traditionally very strong, and the main reason for low rate of homeownership. Many people see the advantages of living in rented accommodation as being:

  • More flexible and easier to move
  • Lower maintenance costs than when owing an own home
  • Free up capital assets for more lucrative investment

Availability of properties to rent
The population of Switzerland has grown from just over 6.7 million in 1990 to 9 million today. Although there are now over 4.7 million dwellings  (this includes one in three dwellings in a large multi-family house with at least seven dwellings), representing a growth of over 1 million from the year 2000, people are still experiencing difficulties finding living accommodation. This is more prominent in major cities such as Geneva. A helpful guide to finding living accommodation as well as the process can be found here.

Average rental prices
Average prices of living accommodation have increased in recent years with the growing population and there are several pricing hotspots including most of the major cities which should be best avoided if possible. The good news is that the Swiss public transport network is one of the best in the world and finding living accommodation outside of a town or city is easier and does not equate to isolation.

Buying or Renting > FAQs on the processes

Whether buying or renting, there are a number of important steps to understand and consider. Here we list the main ones.

Buying a Property 

Q. How does the purchase process work?
Swissroll. This can vary depending on whether the person is buying a new – or resale property, where the property is located and what the nationality of the buyer is.

Q. What is the first step?
Swissroll: Agreeing the deal usually begins with making an offer and having that offer accepted.

Q. Do I need to make a reservation?
Swissroll. After agreeing the price, a reservation contract will be set up for signature by the two parties. A deposit may be required. The property will not be marketed to other potential buyers for an agreed period to allow the purchaser to submit the mortgage application and begin the purchase process.

Q. How can I finance the purchase?
Swissroll. Swiss banks typically lend up to 80% of the purchase price. A 20 % deposit should be calculated, 10% of which must be in cash.

Q: Do I need a notary?
Swissroll: Once a mortgage offer has been secured by the buyer, a notary will need to be appointed to manage the sale. These act on behalf of both buyer and seller.  Generally the notary is appointed by the agency or collaborating agencies who have agreed the sale, and are impartial for both parties.

Q: Can I purchase a property if I am not Swiss? 
Swissroll: All foreign buyers in Switzerland must apply for, and secure a foreigner purchase permit before they can complete a purchase by signing the sales deed. This usually this takes 2-4 weeks.  If you are a Swiss resident (Swiss passport or B/C permit) then you do not need to apply for a foreigner purchase permit.

Q: Is there a deed of sale?
Swissroll: The deed of sale must be signed within 30 days of finalising purchase. This can either be done in person or by power of attorney. The notary will also work with the bank for the registration of your mortgage.

Q: Do I need to enter the purchase in the land registry?

Swissroll: Once the deed of sale is signed, this will be sent to the Land Register and the sale is formally concluded once it has been entered into the Land Register.

Renting a Property

Q: What is the first step I need to consider when renting living accommodation?
Swissroll: The first step is to research an area where you might want to live and learn about property prices there. This can be done online with property comparison or search websites.

Q: Should I contact a local estate agent?
Swissroll: Once the area of interest has been established (think: schools, transport, taxes, services, transport links, rental prices), it is a good idea to register with a local estate agent. These sometimes rent out properties without advertising them and this on a first come, first served basis. So it pays to register!

Q: Should I consider temporary accommodation first?
Swissroll: The search for rental accommodation may take longer depending on the area and one way to ease the stress of a home search, could be to first rent temporary accommodation, while at the same time as looking for a permanent home. There are several online portals such as “BlueGround” that focus on renting furnished accommodation.

Q: Do I need to fill in an application form when enquiring about an apartment or house rental?
Swissroll: The simple answer to this is yes. The application form will also require personal data as well as work and personal references and salary information and bank details.

Q: What will I need to pay for rent?
Swissroll: The average monthly rent for apartments varies depending on area and size. Comparis is a comparison website that helps the renter establish how much they should pay.

Q: Will I need to pay a deposit for the living accommodation?
Swissroll: Yes. By law, rental deposits in Switzerland must be a maximum of three months’ rent. Deposits are paid into a special rental deposit bank account which is held in the tenants name. The landlord can apply to withhold some of the deposit (e.g., to cover any damages). However, if they agree to release the full deposit, it’ll be returned to the renter with interest. For deposit support many people work with SwissCaution which manages the deposit on behalf of the renter for a yearly fee.


Summary
If you live in Switzerland or are moving to Switzerland soon and whether you are looking to rent or buy your living accommodation, the first thing to do is research the different areas. Tax in Switzerland is collected at local, cantonal and federal level, so it is an important consideration when deciding where to live. Transport links, schools, languages, and several other factors including types of accommodation and rental price also need to be researched before an area of interest is selected. The processes for both buying and renting are well documented and there are several e-support platforms available in English for both renters and buyers alike.

Swissroll GmbH was founded over 20 years ago. During this time our team of experts has worked with hundreds of companies and literally thousands of contractors. Also cross border workers. Beyond our core function of payroll management, we offer advice to workers about which engagement model best suits theirs, and the client’s needs. This includes giving advice in French, German and English and on social security, tax as well as working remotely and what to do in the when looking for accommodation either to buy or rent. We also advise on accident insurance! Call or contact us now on: enquiries@swissroll.ch