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A home of your own: most expatriates in Switzerland rent their homes, but buying can be an interesting option. Swiss News looks into in the logistics of buying a house in Switzerland.

According to real estate specialists at Credit Suisse, purchasing a home in Switzerland has never been such a viable proposition. Historically low interest rates and reasonable property prices, coupled with high rents as compared with other European countries, are making it prudent for more people to become proud homeowners, according to the Credit Suisse website.

Yet very few people in this country own the home they live in--about 36 per cent, in fact. Though the rate of home ownership has been rising, from 30 per cent in 1990, Switzerland has the lowest rate of home ownership of all European countries.

People in Switzerland rent-Swiss and expatriate alike. And, according to an April 2005 swiss-info article, they pay the most expensive rents in all of Europe, spending about a fifth of their income on housing costs. Rental prices have skyrocketed by 85 per cent in the last two decades, to double the average paid by tenants in the European Union.

Vacancy rate

Rent is expensive due to an astonishingly low housing vacancy rate and very expensive construction costs. According to the Swiss Federal Office of Statistics, the housing inventory vacancy rate in 2003 was 0.91 per cent, meaning that only 33,400 housing units in the entire country were vacant at any given time that year. No wonder it's so hard to find a home around here!

Construction cost

In an interview with Swiss News, Maureen Reinertsen, Relocation Specialist and owner of h.o.m.e.s.--housing options for management, executives & spouses GmhH--said rents are high because Swiss labour and construction costs are high. A low level painter is billed out at SFr 70 per hour, an electrician at SFr 120 per hour.

Construction costs often include bomb shelters, which used to be required in all Swiss housing. Most Swiss roofs are sloped, load-bearing, the roofs which are very expensive to build. Flat roots require heavy, expensive construction because they need drainage. They must also be built to withstand the weight of plants on them, as planting is a common requirement to improve their appearance.

Windows, concrete and many other materials are manufactured in Switzerland. This makes the building cost higher, as it is a relatively closed market.

Home size

The vast majority of rental properties in the country are small apartments. In 2000 only three per cent of rental apartments were larger than 160 square metres and only 3.5 per cent had more than six rooms. According to Reinertsen, the average four-person Swiss family lives in a 120[m.sup.2] apartment with 4.5 rooms.

Roughly 70 to 80 per cent of housing is built for the average Swiss market. Larger rental units arc difficult to find and tend to command a luxury premium. Since many expatriates come from places where they are used to larger housing for less cost, they wind up paying a premium in order to live comfortably.

Rent in the five major municipal centres of Switzerland: Zurich, Basel, Bern, Lausanne and Geneva, where most expatriates live, arc higher than those in other Swiss cities. The highest rents per square metre are paid in Zurich, the lowest in Bern.

People are often surprised to learn that most Swiss rental property is owned, not by big corporations, but by private individuals. About 57 per cent is privately held, 25 per cent, by corporations and 18 per cent, by government and other organisations.

Buying

Purchasing a home is a large financial commitment in Switzerland, not only because property costs are high but because maintenance costs are high too. Still, purchasing has its advantages.

Owner-occupied homes tend to be 20 per cent larger then comparable rental homes. They tend to be more luxurious, have customised fittings and, obviously, provide a greater sense of belonging. Furthermore, given current low interest rates, it can be significantly cheaper to make mortgage payments than rental payments provided, of course, you can come up with the down payment.

Mortgages

Swiss mortgage bankers generally require a 20 per cent down payment for property purchases. The remaining 80 per cent can be mortgaged in two parts: a first and a second mortgage.

The first mortgage is generally for 65 per cent of the value of the property and need not be amortised. Only interest payments are required. The second mortgage is used to finance the remaining 15 per cent of the debt not covered by the first mortgage. It carries a higher interest rate and both principal and interest payments are required. It generally has to be amortised within 15 to 20 years.

As in other countries, mortgages can have fixed or variable interest rates. Fixed-rate mortgages have a fixed rate of interest for a certain, pre-determined number of years. Variable-rate mortgages have interest rates that vary with market fluctuations.

A variable rate is generally lower than a fixed rate but carries a higher risk factor. A popular mortgage scheme in Switzerland is to sprit mortgages into two parts, one with a fixed rate and the other with a variable rate of interest.

Five-year rule

The general role of thumb is to buy a home if you intend to keep it for over five years. Selling a home if you have owned it for fewer than five years subjects sellers to a hefts tax penalty. The five-year rule applies to Swiss and non-Swiss residents alike.

Take note

Reinertsen suggests potential purchasers watch out for certain things:

* Make sure you are purchasing both the home and the land it stands on.

* Inquire whether other parties have right-of-way on the property, for example, whether utility companies have the right to pass utilities through the property.

* If you take over someone else's mortgage, inquire about all the costs involved.

* Include any renovation costs in your mortgage.

* If you purchase a renter-occupied home, make sure you can move into it when you want to.

* If you plan to build, allow two years for the entire process, starting with finding a suitable piece of land, obtaining the necessary permits, and building.

Who can buy

Expatriates who are considering purchasing property in Switzerland should be familiar with "Lex Friedrich," the Federal Law on the Acquisition of Real Estate by Non-Residents, in force since January 1, 1985. Named after former federal justice minister Friedrich, it restricts the ownership of real estate in Switzerland by non-residents.

Resident expatriates who may buy property without restriction or special authorisation include those holding a C-permit or working in embassies, consulates, international organisations and foreign railways, post and customs administration. They must have held resident status for five to ten years, depending on nationality.

Non-residents

Despite restrictions on non-residents, things are looking up for them as well. According to information from the Embassy of Switzerland in Washington D C, a non-resident holding a B-permit may now buy a home in his place of residence without having to obtain authorisation, as long as he plans to use it as a primary residence.

Once purchased, he doesn't have to sell the home in the event that he moves. He can use it as a holiday home or rent it out, and can even buy another home in his new place of residence. Undeveloped land must be built on within a year.

Cantons can also permit non-residents to buy a holiday apartment or residential unit in an 'aparthotel'--a hotel with units for sale. The permit must fall within a quota set by the Federal cabinet and based on tourism and rates of foreign ownership. The highest cantonal quotas are in Bern, Graubunden, Ticino, Vaud and Valais.

Lex Friendrich, makes it clear that owning real estate in Switzerland. by a B-permit holder or another non-resident, does not confer resident status.

Whether renting or buying, it is very important to understand the terms you are legally bound to Reinertsen suggests that the documents be reviewed and explained by someone who speaks the local language and understands housing agreements.

Did you know ...

* Working expats and their families comprise around 20 per cent of the population but own less than one per cent of the real estate.

* Five per cent of the country's total housing market is foreign owned.

* Switzerland has the world's highest per capita indebtedness in the mortgage sector.

* In Switzerland, 47,000 residential units will be completed in 2005--more than at any time in the last ten years

* 36 per cent of Swiss homes are owner occupied. In major cities, home ownership rates are much lower, 7.1 per cent in Zurich

Source, Living and working in Switzerland, David Hampshire Credit Suisse
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Title Annotation:Expert Advice
Author:Littlejohn, Simone
Publication:Swiss News
Geographic Code:4EXSI
Date:Sep 1, 2005
Words:1423
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