Reader question: Does buying a home make financial sense in Switzerland?

Less than 50 percent of Swiss residents own their home, making it the only country in Europe where more than half of the country rents. 

The reasons for this are many and varied, from high house prices to a large foreign population who live in the country on a medium-term basis. 

But for those who are thinking of buying a home in Switzerland - whether on a short or long-term basis, or as an investment - there are several questions to answer. 

Here’s an overview of the biggest issues and questions you should consider when thinking of buying a home in Switzerland. 

Do Swiss really prefer to rent than buy?

Approximately 59 percent of Swiss people rent – making it the highest percentage of renters anywhere in Europe. 

One misnomer in considering renting and buying is that in many cases people in Switzerland and other parts of Europe where rental rates are higher is that they “prefer” to rent. 

Successive studies have shown that high numbers – i.e. above 80 percent – of people would prefer to own their own home rather than rent. 

The high percentage of renters is instead probably more accurately described as people being ‘content to rent’, rather than actually preferring it.

Another factor is the number of foreigners who are only in Switzerland for the medium term. 

Around one quarter of the Swiss resident population is foreign. 

While it is difficult to determine how many of those do not see themselves staying long term, Switzerland’s strong employment sector and difficult naturalisation processes often act as a barrier to settling. 

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With buying a home seen as a major sign of a long-term commitment, it is clear that this plays a role. 

Is buying a home in Switzerland a good decision?

Whether buying a home in Switzerland or anywhere is right for you will depend on your specific circumstances. 

One surprise for new arrivals - particularly those from English speaking countries - is the strength of tenants rights protection laws in Switzerland. 

In Switzerland, tenants are typically given long-term leases with significant permission to change and alter aspects of the house or apartment. 

There are also restrictions on rent increases in some parts of the country. 

READ MORE: What are The Local Switzerland’s reader questions?

Tax is another factor which can discourage people from purchasing a home. 

Despite its reputation, Switzerland’s income tax rates are not as high as some might expect. Other taxes are however quite high in comparison – and contribute to the Swiss being more content to rent than people in other countries. 

Some cantons allow rent to be deducted from tax, while cantons also provide subsidies for renters in some situations. 

Researchers Bourassa and Hoesli write that “income tax rules in Switzerland seem less favourable to home ownership” than those in the United States and elsewhere. 

This sometimes amounts to a high percentage of the overall cost (i.e. as high as 3.4 percent in Geneva). 

Swiss home owners on the other hand are often hit with taxes, including income tax, property tax and capital gains tax. 

Several Swiss cantons also levy a wealth tax, which disproportionately hits home owners. 

Will anything change in the future? 

One important factor to consider is whether you are buying a home purely as an investment, or whether you intend to live there. 

A consequence of the stronger tenancy laws and lower rates of home ownership is that property becomes a less attractive option for investors, which in turn means fewer properties are built. 

But while Switzerland may not be a property investor paradise, buying a home can still be a good investment in comparison to renting, as investing is not the sole purpose of the purchase. 

Recent interest rate rises haven’t quelled rising demand for properties, nor has the impact of the pandemic. 

Speaking with Swiss news organisation Tamedia, property expert Patrick Schnorf said demand is set to continue. 

"We assume that due to immigration, high birth rates and household divisions, demand will remain the same in the near future,” Schnorf said. 

"People have saved a lot (during the Covid pandemic), many have a secure income, these are the driving factors."

In fact, the Covid pandemic has not dampened demand, but has channeled it towards a different type of property. 

Larger properties with more rooms and gardens have seen greater demand as a consequence of lockdowns and working from home requirements 

"The radius of the real estate search has therefore also extended to the surrounding rural regions," explained Schnorf.

READ MORE: What does the coronavirus mean for Switzerland’s property market?

While lockdowns look to be over and the working from home rules have come to an end, experts argue that some of these changes are more than mere trends and are likely to be permanent.

Think we’ve missed something? Got something to add? Have you bought a place in Switzerland or are you thinking about it? Get in touch at [email protected].