13 Things to Consider Before Buying a Home in Switzerland

Are you considering buying a home in Switzerland? Before you even look at properties for sale, there are a few topics which you should try to become familiar with. Here, moneyland.ch lists important things to consider before buying a home.

1. Affordability

Can you afford a mortgage? Swiss banks have fairly strict affordability requirements for mortgage applicants. In addition to the mortgage, there are also many other administrative and maintenance costs.

The rule of thumb when buying a home as your primary residence is that the total costs (mortgage interest, amortization, other costs related to the property) cannot exceed one-third of your gross income. You can use the mortgage affordability calculator to see how well you qualify.

2. Freehold or leasehold?

A leasehold is a setup in which you buy a house but not the land under it. You pay ground rent for the use of the land under your home. You can find detailed information in the guide to leaseholds in Switzerland.

Land tendentially gains value, while buildings generally lose value over time. Because of this, buying a freehold home (where you own the land and building) makes more financial sense.

Always inquire into whether a home for sale is a freehold or a leasehold (consult a property lawyer if necessary) and do not let yourself get duped into buying a leasehold thinking you are buying a full-title property.

3. Full ownership or co-ownership?

In Switzerland, a property can have just one owner, or multiple owners with clearly defined co-ownership shares. 

Co-owned housing, and particularly properties classified as condominiums, are more complex than full title properties, because you are a shareholder and not a single owner. You must contribute to communal expenses, buildings insurance, maintenance and renovation funds. You share liability for incidents related to the property with other co-owners. You also have to participate in shareholder meetings, and must adhere to decisions which all co-owners vote for.

Clearly understanding the ownership model of a property you are interested in purchasing is extremely important. You should also take time to get acquainted with the property's co-owners before you buy, to find out whether you identify with their plans and goals for the property.

For example, if you just want to buy a home to live in while covering only the minimum necessary costs, then sharing a property with co-owners who have plans for luxurious remodeling may not be ideal.

If you are considering an apartment which is part of a condominium, then make sure to carefully review the condominium’s statutes, as these apply in addition to laws governing property co-ownership.

4. Long-term investment potential

The potential for long-term gains in a property’s value is almost entirely dictated by the property’s location. Factors which affect value gains include accessibility, tax laws, building restrictions, availability of building land, local economies and population density.

Choosing a home in the right location could make the difference between a long-term investment and a long-term liability.

5. Taxes

Taxes play an important role in the overall cost of owning a home. Which Swiss municipality your home is located in will impact the income and wealth taxes you have to pay each year in connection with the property.

When you buy the property, you pay notary fees and property transfer tax. When you sell the property, you pay capital gains tax. These too are levied where the property is located.

Property tax is levied by the canton and municipality in which the property is located. You will have to file a tax return there for taxes linked to the property even if you live in a different canton or country.

Half of Switzerland's cantons have either cantonal or municipal property taxes, or both. The cantons of Aargau, Appenzell-Ausserrhoden, Basel-Landschaft, Glarus, Lucerne, Nidwalden, Obwalden, Schwyz, Solothurn, Uri, Zug, and Zurich do not have a property tax.

Because taxes vary hugely between cantons, comparing cantonal and municipal taxes is worth it, assuming you are flexible with regards to where you want to live or invest.

6. Maintenance costs

As a general rule, every year you should set aside money equivalent to at least 0.7 percent of the property's fair market value for ongoing maintenance, and 0.3 percent to cover future renovations. This rule is generally used by banks when calculating mortgage affordability.

Many experts recommend setting aside higher amounts, such as between 1 and 2.5 percent per year for supplemental costs and maintenance, and between 0.5 and 1 percent per year towards renovations.

Vintage houses and chalets often require more maintenance and renovations than newer buildings. Properties in areas which experience regular freezing and thawing typically need to be renovated more regularly than buildings in areas with less severe weather conditions.

If you cannot properly maintain a property, its value will suffer, and may even decrease over time.

7. Utility installations

If you are thinking about building your own home or rebuilding a long-abandoned cottage, the cost of connecting to utilities is a factor. You will want to consider the cost of installing electricity, water, wastewater, telecommunications, and road connections.

Having to pay to get connected to these utilities can easily add an extra expense of between 10,000 and 40,000 francs. Make sure to account for these costs when looking at homes to buy.

8. Property insurance

Most cantons require homeowners to take out buildings insurance. This insurance covers many possible hazards such as fire, lightning and flooding. It is obligatory in all cantons except Appenzell Innerrhoden (with the exception of the municipality of Oberegg), Geneva, Ticino, and Valais.

Some cantons have cantonal buildings insurance schemes, while others require you to take out buildings insurance from private insurance companies. Read the guide to buildings insurance and the guide to earthquake insurance for detailed information.

Even in cantons where buildings insurance is not obligatory, insuring your home makes sense in almost every case, because construction and repairs are very expensive in Switzerland. Premiums vary between insurance providers, and should be accounted for when buying a home.

9. Public transportation

How well is your prospective property connected to public transportation? Availability of public transportation can make all the difference in how much a home is worth, and how much its value will increase in the future.

Homes in areas with good bus connections typically command higher rents than those in areas with no public transportation. Add a nearby train station, and your chances of renting out the property at a good price go up considerably, especially if there is a direct train line to major urban centers.

Always look into public transportation when considering possible homes. In addition to researching current public transportation connections, it is also worth looking into public transportation expansion plans to get an idea of possible future developments.

10. Historical value

Compared to many other countries, Switzerland is a treasure trove of historical housing. From town houses dating back to the renaissance to 200-year-old chestnut chalets, your chances of finding vintage jewels in Switzerland are good, to say the least. However, historical value is difficult to measure because it is primarily about a unique or “feel-good” experience.

Consider consulting with estate agents who specialize in vintage housing before purchasing a historical home.

While a well-renovated and well-located historical property can draw a high price if you decide to sell it or rent it out, if you do not have the skills, knowledge, time and money to invest in properly pulling off a home makeover, a vintage home can become a very expensive hobby.

11. Listed buildings

In Switzerland, buildings of cultural or historical significance are protected by law. This is called “Denkmalschutz” in German and “protection du patrimoine” in French. Around 93,000 Swiss properties fall under this protection.

Owners of protected buildings receive some tax benefits related to their investments in maintaining and renovating these houses. But the many regulations and limitations can make owning these buildings expensive and frustrating. Protected properties are also unpopular among many home buyers, so you may have a difficult time selling the property in the future.

When looking at historical housing in particular, always check into whether or not the property is protected by cultural preservation laws, and to what extent.

12. Legal problems

Swiss laws governing property and land-use planning are complex and are also subject to change. This can result in properties being subjected to special rules and restrictions.

For example, in 2014 changes were made to land-planning laws which limited the amount of building land a municipality could have. The rezoning that followed resulted in some buildings falling outside of construction zones and being subjected to special restrictions. Properties which were renovated or rebuilt without proper permits in the past have become subject to legal action as land-planning and building laws have become more centrally-enforced.

Buying a property which is not correctly licensed can have serious financial and legal implications. Getting legal insurance before you begin looking for a home is generally advisable.

Carefully checking the legal status is particularly important if you are considering older or rural housing. If you want to buy and renovate a ruin, such as an old barn or shepherd's cottage, then you will want to make sure to check whether a renovation or reconstruction is actually possible, from a legal perspective, before you even consider buying the property.

13. Limitations for foreigners

If you are Swiss or a permanent resident, you can buy property with few restrictions. The same applies to citizens of EFTA and EU countries who hold a Swiss B permit (temporary residence).

As a cross-border worker with a G permit, you can buy one property near your Swiss employer solely for use as a secondary residence.

If you hold a B permit but do not hail from an EFTA or EU country, you can buy a property strictly for use as your primary residence. If you want to buy a holiday home or secondary residence, then you need to apply for a license first.

If you are not Swiss and do not live in Switzerland, you have to obtain a license before you can buy any kind of property in Switzerland.

More on this topic:
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Investment properties in Switzerland: A practical guide
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