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Home sweet home, in Switzerland too: buying a home in Switzerland is becoming a reality for many people--including expats. Swiss News takes a look at one couple's experience and talks with two men 'in the know.'.

For John and Erin, living in Switzerland included the dream of buying their own home. So they recently navigated uncharted waters and managed to purchase a 320[m.sup.2] property including a garden not far from Zurich.

"I think it's the mentality in the UK. You're taught to get on the property ladder as soon as possible," says Erin, who is English. "My husband and I still had houses in the UK (hers) and Ireland (his). Instead of paying the humongous rents here in Switzerland, we sold those properties and bought."

Despite their experience, the Swiss process proved wholly unfamiliar. "In the UK, you tend to use an estate agent. Here, it was more 'find it yourself.' I found our property on a website. The agent only came into the picture later. She was employed by the seller, but really didn't do much and it seemed she was only in it for the commission. We agreed to a price with the seller and handled other important details just between ourselves."

When the sale closed, "there were no attorneys involved, just a notary," but the process was very professional. "They wouldn't let us sign the contract until they were convinced we fully understood the German. We had hired a Swiss attorney friend on the side to make sure the contract was standard, but people don't normally do that."

Increased ownership

Looking back, Erin says their European nationalities--she is English and he, Irish--seemed to give them an option to buy in major centres. "We considered buying in the Zurich area and called (local authorities) to find out if it was possible. For this. we were referred to a lawyer. His first question was about nationality. Then he said it wouldn't be a problem."

UBS declined an interview on expat buying trends, but Ulrich Braun of Credit Suisse's Economic Research Division, said bilateral agreements have made it easier for expats from EU countries, like John and Erin.

"Federal law restricts foreigners from buying a home in Switzerland," Braun says. But since 2002, bilateral agreements between the EU/EFTA and Switzerland have permitted foreigners from EU/EFTA countries to buy a home without authorisation-if they make it their primary residence.

Other sources, including American embassies, note that foreigners from outside EU/EFTA, including those with only a B-permit, can now buy a home as a primary residence without authorisation.

Such changes in the law many have led to a rise in the number of foreigners buying homes in Switzerland but Braun is careful to note that there is no official statistic to support that claim In fact, general rates of home ownership remain lowest in the costly major cities where expats tend to be based, namely Basel, Geneva and Zurich.

For her part, Erin believes more expats are entering the housing market. "It's changed incredibly over the last five to ten years," she says. "Expats are forcing the market to change because of their expectations of ownership."


Ultimately, prices and life style choices led Din and John away from Zurich. But the fact they managed to purchase at all max reflect a recent trend in the Swiss property market, according to a Zuric-based architect.

Switzerland is known as a country of renters, but "I think with the EU, many more people are coming into Switzerland. They want to set down long-term roots, says Muller, who declined to use his real name because of professional connections in the housing industry.

Before the recent legal changes, very few expats owned property in Switzerland. Figures from 1999 showed that while five per cent of of Swiss real estate was foreign-owned, working expats and their families owned less than one percent of it--despite comprising around 20 per cent of the population.

Aiming for stability

Muller says this is largely historical. 'Switzerland was unaffected by the war, so people thought it was a good place to purchase. Up until the 60s, there were not a lot of restrictions, which resulted in rampant speculative buying. Property was bought and sold multiple times, sometimes based on the building plans alone. This destabilised neighbourhoods, giving them a transient character."

He suggests this runs against Switzerland's nature. "Neighbourhoods need to be stable. Stability is everything in Switzerland. The whole country is based on that concept. Anything possibly affecting stability is looked upon with scrutiny."

In Switzerland, ownership restrictions--such as the Lex Friedrich Law--have been deemed necessary because land available for urbanisation and development is scarce and the Swiss are concerned about too much of it falling into foreigner's hands. But the government has also said the law aims to prevent speculation and to keep prices from escalating beyond reach of regular people.

In any event, more people seem to be buying homes. In 2004, the number of people who lived in their own homes topped 36 per cent in Switzerland, an increase from 30 per cent in 1990 that is partly fuelled by a spree in the condominium market. And the website of Credit Suisse notes an increase in housing starts in 2005, to 47,000--more housing construction than in any of the past ten years.

Good for buyers, bad for sellers

For buyers, the future outlook is good. "If the legal aspects are ok, it is quite easy to buy." Braun says.

"Financing should be available. Interest rotes are at extremely low levels at the moment," he adds. Of course, this assumes the buyer can pay a deposit of 20 per cent and meet all other relevant credit requirements.

Buyers should not necessarily look to purchasing as a way to make money he adds. "Compared to other countries like the UK, USA, Spain, etc., Switzerland has seen only a moderate rise in house prices in recent years. We believe that house prices will trend sidewards in the years to come."

In all cantons, taxes on property gains give sharp teeth to anti-speculation laws. In Zurich, where only seven per cent of residents own their home, "a capital gain of SFr 100,000 leads to a property tax of SFr 29,400," Braun says.

"The canton of Zurich levies a surcharge on the 'simple' gains tax, of 50 per cent if the property is owned less than a year, and 25 per cent if held between one and two years."

The longer the buyer retains a property, the greater their reward in reduced capital-gain taxes. If the property is held five years, the tax is reduced by, three per cent even, year to a maximum tax reduction of 50 per cent, after 20 years, he says.

Worth the risk

Although capital gains taxes are high, Erin believes the 20 per cent down payment remains the largest barrier to purchase for many expats, especially given the high prices. A down payment can be as low as five per cent in the UK, she adds.

Erin and John also researched the capital gains issue before buying. "Here people really seem to buy in order to avoid paying rent, rather than to make money," Erin says. They're keeping their options open. "A lot of it depends on my husband's job, We'll try to stay as we're very happy with the house."

But if they do ever sell, she remains hopeful. "They're building a motorway connection (to Zurich) near us. If we're lucky, we could do really well."
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Author:Blake, Chris
Publication:Swiss News
Geographic Code:4EXSI
Date:Sep 1, 2005
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