by expatica.com
Get the lowdown on how to buy a house in Switzerland, from rules around foreign ownership to the Swiss home buying process.
The Swiss housing market can be a source of great confusion for expats moving to Switzerland, with house prices varying dramatically from area to area, a swathe of rules around foreign property ownership and a unique mortgage system.
In this guide, the expat financial adviser Key Investment explains how you can buy a house as an expat in Switzerland.
Homeownership in Switzerland
Home ownership levels in Switzerland are low, with around 60% of residents here renting their property, and the majority of homeowners living in more rural communities away from the big cities. The reasons for this are many – from constant population growth in cities placing a strain on limited housing stock, to rising prices and bureaucracy that significantly delays property purchases.
This isn’t a new phenomenon, either. Research published in 2016 found that fewer than one in five people in Basel and Geneva owned their own homes, a figure that rises to a nearly a third in Zurich.
Significant house price inflation in Switzerland resulted in the Swiss National Bank bringing in new regulations to lower household mortgage debt, a move that caused house prices in Switzerland to drop in 2017.
Should you rent or buy a house in Switzerland?
With a hot property market and and a slow homebuying process, many expats initially choose to rent when moving to Switzerland.
This isn’t to say that renting here is necessarily a positive experience for everyone. Indeed, in popular areas the private rented sector is ultra-competitive, with landlords receiving many enquiries for each property.
House prices and rent costs in Switzerland
After more than a decade of house price growth, intervention has finally cooled the Swiss property market. In 2017, the average price of rental apartments fell by a little over 1%, while purchase prices dropped by 0.75%, according to figures from the Swiss National Bank (SNB).
This follows a 16-year period where house prices increased by a remarkable 80.5%, a trend that caused the Swiss National Bank to bring in stricter lending criteria and abandon its cap against the Euro in an attempt to reduce investor demand.
SNB data shows that for the second half of 2017, the average asking price per square metre was CHF 11,800 (€10,100) in Zurich, CHF 11,530 (€9,865) in Geneva, and CHF 9,260 (€7,920) in Lausanne.
Are foreigners allowed to buy property in Switzerland?
Switzerland has strict restrictions on foreigners buying property, so depending on your background, you may find your options limited. You can buy property in Switzerland if:
You are an EU or EFTA national with a Swiss residence permit who resides in Switzerland
You hold a Swiss C Permit.
In both cases, you will have the same rights as a Swiss citizen to purchase property, so you can buy investment properties, holiday homes or commercial premises as well as a primary residence.
If you hold a Swiss B Permit, you may also purchase a property, but only to live in.
Those who fall outside these categories, such as non-resident foreigners, foreign residents without a Swiss work permit (including those working for diplomatic missions, UN agencies and CERN) or workers on short term or seasonal work permits, may not be allowed to purchase property or may have to apply for a license to purchase.
Licensing criteria varies from canton to canton but typically favours applicants purchasing a primary residence who have been settled in the canton for five years or more.
Life as a frontier-worker: Working in Switzerland and living elsewhere
Switzerland is a small country and many of its major cities, including Geneva and Basel, are close enough to borders that it is possible to live in a neighbouring country while working in Switzerland.
Property prices are typically cheaper across the border, so if your work permit allows it, you may wish to consider becoming a ‘frontier-worker’, with a residence in France or Germany and a job in Switzerland.
How to find a property to buy in Switzerland
As in many other countries, most Swiss properties are listed online through estate agents and property portals. Property listings can also be found in all the main newspapers and as specialist property papers, which are usually distributed by estate agents and in shopping malls for free.
High competition for rental properties in Switzerland’s major cities means that some apartments may have already been let by the time you see them listed.
In terms of buying and selling, property sales tend to move slowly, but local knowledge remains an advantage, so it is typically well worth registering with one or more local agents who may have access to properties ‘off market’ – i.e. before they are publicly advertised.
Zoning regulations in Switzerland are strict. While existing properties on agricultural land (farm houses, for example) may be bought and used by people who are not agricultural workers, there may be tough limitations on new construction, extensions or even repairs to buildings not required for agricultural work.
How to buy a house in Switzerland
After you’ve found your new home, you’ll still have to make an offer, find a mortgage, agree on the sale and sign a contract.
This isn’t a process that moves quickly. In Switzerland, it is common for the process to last three months or more. When buying a home, you should budget at least 5% of the purchase price for fees and charges, including property transfer tax – which can be as much as 3% in some areas.
Choosing a property in Switzerland
In Switzerland, asking for a professional survey of the property is not common, and builders may take a request for a survey as a negative comment on the quality of their work. However, as the seller is not required to notify you of any issues, a survey may give you advance warning of serious problems, particularly with older properties, so this is definitely something you should consider.
In your home country you might be familiar with paying a service charge for the maintenance of common areas if you live in an apartment. In Switzerland, however, even detached houses are likely to come with annual service charges for the maintenance of shared areas such as a car parks, boat dock or private roads. For apartments, the cost can be around 1% of the purchase price each year.
Local property taxes in Switzerland vary enormously from commune to commune as well as from canton to canton, so it’s important to ask about the level of taxation when shopping around for properties.
Getting a Swiss mortgage
Before making an offer, you will need to apply for a mortgage from a bank. Mortgages can be arranged directly with lenders, but also with a mortgage broker that provides negotiation between the seller, the lender, and when required, signs the contract on the client’s behalf.
When you apply, the lender will assess the value of the property you are considering and decide whether to offer you a mortgage. A 20% deposit is typically the minimum required, including at least 10% in cash.
For more information on arranging a mortgage in Switzerland, read Expatica’s Guide to Swiss mortgages.
Making an offer on a home in Switzerland
How much you can borrow when taking out a mortgage may determine the offer you can make on a property. Once you’ve decided on a bid, you will need to communicate this offer to the seller, either through your estate agent or directly. Estate agents in Switzerland typically work for and are paid by the seller. This means you should take their claims with a pinch of salt.
If the offer is accepted, you may need to pay a deposit at this stage. If so, this will be held in escrow by a notary but you will still need a written agreement covering the circumstances in which the deposit will be forfeit or returned.
You will also need to inform your mortgage provider that your offer has been successful and complete any remaining paperwork with them. They will then inform the notary that the method of payment is arranged, and the sale can go ahead.
Completing a Swiss property purchase
In Switzerland, a property transfer is handled by a notary, who is a public officer working for both buyer and seller. The buyer may suggest a notary or you may wish to select one yourself.
The notary will typically:
Draw up the contract;
Hold the buyer’s funds in escrow;
Complete the official transfer of the property;
Register the change of ownership;
Ensure that all legal formalities are completed;
Be able to advise on the legitimacy and legality of a transaction.
Notary fees in Switzerland
Budget 5% of the purchase price for the notary’s fees. This will cover:
The notary’s own fees (0.2–1%);
Property transfer tax (varies from canton to canton, between 0–3.3%).
Registering the deed with the land registry office (around 1–1.5%). Depending on the canton, this fee may be split between buyer and seller but is more commonly the buyer’s responsibility. These fees will typically be invoiced item by item, rather than as a single lump sum.
Sale contracts in Switzerland
Sales contracts are usually drawn up by a public notary. Indeed, in some cantons, this is required by law – and thus is fairly standard. However, if you are unfamiliar with the area or do not speak the local language, you might want to have your own legal representation to explain the details of the agreement to you. As the mortgage will have been agreed prior to the sale contract, your mortgage provider may be willing to check the contract for you for free. Swiss law stipulates that the buyer and seller must be able to understand the local language or give power of attorney to a person that can sign on their behalf.
Selling a home in Switzerland
Unless you’re buying a retirement home, you’ll probably want to sell your property at some point.
If you’re on a short contract or at risk of being suddenly transferred out of the country, a Swiss house may be a liability.
Capital gains tax applies to property sales in Switzerland. However, as the rental market is strong, the interest rates are low and house prices continue to rise, buying a home here could be a valuable investment.
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