Buying a property: Useful information about buying a property
Buying a house or an apartment is always one of life's milestones. But purchasing a property requires a lot of expertise and careful planning, since not every property will be the right fit to meet every need, or every budget. What you need to know about buying property in Switzerland and what to be aware of.
The most important points
- Buying a property: House or apartment?
- Renovating older properties
- Securing financing
- Joint property purchases
- Knowing the property market
- Financing a residential property by rental purchase
- Buying a vacation home or second home
- Viewing property
- Checklist for buying a house
- Stating intent to purchase
- Planning the move early
Buying a property requires careful preparation, so it's important to define your personal needs. What conditions must your new home satisfy? And will it continue to do so in the future? Ideally you should think a few years ahead and take into account all aspects of your life circumstances. For example: Stairs in a multi-level property could become a challenge as you age.
Different factors come into play when you're buying an apartment. In this scenario you become the owner of a condominium. Since you are not the sole owner, you do not have complete freedom when it comes to the decor and maintenance of the living space – if the heating system needs replacing, for instance. Decisions that affect the condominium association always require a majority vote.
The floor area and location can also be deciding factors in whether to purchase a house or an apartment. For instance, a small condominium could be more affordable in an attractive location than a single-family dwelling due to the higher price range. It's important to note, however, that the sharp price increases seen in recent years are limiting the affordable housing size for more and more households.
Not all property purchases are for new properties. The price of older buildings is often lower, which means they can also be an appealing option.
When buying an older property, it's worth taking a closer look in order to avoid any unwanted surprises. If the fabric of an old building is poor, for instance, simply giving it a modern interior finish won't really help. You can find out in this article how to recognize poor building fabric and what other points you need to be aware of with an old building. This will help you to avoid a perpetual cycle of unanticipated renovations that can become a financial burden over the long term.
Provided the property is not a listed building, older houses can also be bought to demolish in order to build a new property on the land. This means that building land in heavily populated or sought-after areas, such as near a city center, can also be developed.
In most cases, buying a property means taking out a mortgage. The mortgage model selected will depend on individual requirements and also on the affordability calculation, which provides information about whether the property can be financed in the long term. The capital available, the amount of equity, and whether or not money from the buyer's pension fund or tied pension provision (Pillar 3a) will be used to finance the purchase are all factored into the affordability calculation. It is also important to remember that additional costs can be expected for furnishings or renovations. The best thing to do is seek expert advice at an early stage in order to identify the various options. Finally, it's important to take a closer look at the situation on the real estate market. You shouldn't underestimate the extent to which supply and demand can influence the cost of your dream property.
It's often impossible for one person to be able to afford a property on their own. But making a joint purchase also has its pitfalls, and it can be a little more complicated for married couples in particular. For instance, the "marriage penalty" can have a negative impact on the affordability calculation. The same is true of the ages of the spouses: A couple approaching retirement age will jointly only receive 150% of the maximum AHV pension for one person. Conversely, if the couple is young, lenders completing an affordability calculation might factor in the possibility of the couple starting a family and therefore one of them stopping work.
For more information, see our article on buying a house together.
Property prices depend not only on the location of the property but also on the prevailing economic conditions. The key factors here are current personal circumstances, mortgage interest rates, and the situation on the real estate market. Right now, for instance, buying is more expensive than renting again, but that won't necessarily be the case forever. Trends like this are driven by periodic fluctuations in supply and demand. There are four distinct phases in the market cycle:
For instance, a recession – due to rising unemployment, reduced purchasing power, and reduced propensity to invest among households and businesses – can trigger a decline in demand for real estate. Supply will then exceed demand. Property prices fall.
When the fall in prices lessens and prices reach their lowest point, the market begins to stabilize. Due to low demand, there is a lack of investment in housing stock. Demand and supply align. Properties become attractive due to the low prices.
In the expansion phase, demand begins to grow again. At a certain point, the rather limited supply of residential property will no longer be sufficient to meet demand. Property prices start to rise. Investors begin to invest in residential construction and newbuilds are constructed.
Next comes the period of calm. Demand reaches a plateau point and remains constant. Housing stock continues to grow, however, creating excess supply of living space. As a result, property prices fall again.
The real estate market is therefore a key factor when it comes to buying a property. Trends in relation to price and location can have a considerable impact on budget and therefore on the choice between a condominium or a house. Any purchase is also an investment in the future though – a capital investment as retirement provision or as a home for offspring.
Read this article to find out about current trends on the Swiss real estate market.
In addition to the conventional property purchase via a mortgage, property can also be purchased via a rental purchase. In this case you initially rent the property and then purchase it at a later date. The rent paid up to that point serves as an advance payment against the purchase. This type of property purchase is suitable for anyone who doesn't want to spend years saving up the equity capital for a mortgage. There are two different approaches: a conventional rental purchase and the purchase option. This article about rental purchases explains how the two approaches differ.
Fancy a vacation home in Switzerland's sun-soaked Ticino region? Many people in this country would love a vacation home or a second home, but fulfilling the wish requires careful planning and plenty of equity capital given that the loan-to-value on the mortgage for a vacation home is often 50%–70%. There are also stricter requirements for repayment and interest rates are higher than on your first home. What's more, pension capital cannot be invested to purchase a vacation home, which makes this kind of purchase even more difficult. Finally, demand for second homes has risen sharply in Switzerland in recent years. This article tells you everything you need to know about buying a vacation home.
Once you have drawn up a shortlist of residential properties that fulfill your personal expectations, you can request to view the properties. Unlike with rental viewings, owners decide who they will invite to view the property. It's best to arrange viewings of several properties so that you have a basis for comparison. If you are buying your first apartment or house on your own, it may be helpful to bring an experienced person with you. In addition, it's always worth taking a second look at the property in order to find out a little more about the condition of the property, its location, the surroundings, and the neighborhood. Ideally, have the relevant person provide you with documentation about the property (if you have not already seen it), such as the floor plans.
When shortlisting properties, you could save some time by consulting a real estate broker, who can generally provide professional support throughout the purchase process. You will have to pay a brokerage commission if you definitively commission the broker to undertake the property search and also conclude a contract.
Once you are certain that a property meets all your requirements, you state your intent to purchase. The next step is to determine the value of the property so that the bank can calculate the terms of the mortgage. It is a good idea to have the property valued by an expert so that you can be sure the price offered in the contract of sale represents value for money. In some cases, you may have the opportunity to negotiate on the purchase price before concluding the sale of the home, or to establish new conditions – such as new flooring or improved technical installations. In Switzerland, the contract of sale must be officially notarized by a notary.
Actually buying a property is often only half the battle – now you have to plan the move. It's worth giving some thought to what fixtures and fittings you still need, and when and how you will be able to move into your new home. Ideally you should obtain quotes from various moving companies and compare them. After all, you don't want shoddy service to spoil the moment of moving into your own home.