House - $3,549,000
House - $7,489,350
House - $3,966,287
House - $5,864,532
Switzerland: Overview
Last Updated:
May 26, 2009
House prices in Switzerland have bucked the global trend. The single-family homes index rose 5.3% during the year to January 2009 (4.5% in real terms), while the owner-occupied apartment index increased 5.6% (4.8% in real terms) over the same period.
The price index for rental apartments in old building also rose 4.3% (3.5% in real terms) to January 2009 from a year earlier. Only the index for new rental apartments registered price decline during the period, down 3.6% (-4.3% in real terms) compared to a year earlier.
There are several possible reasons for the increase:
1)households took advantage of lower (falling) interest rates in effect since Q4 2008;
2)the increase in the number of non-resident foreigners led to higher demand for houses; and
3)after the collapse of house prices in other countries, Swiss citizens and residents moved their investment back to the domestic housing market which is relatively more stable.
It is unclear whether the house price growth can be sustained for the rest of 2009. The drag on housing demand brought by the recession may be countered by low inflation (hence higher purchasing power), low interest rates, and continued (albeit weakening) net migration.
The Swiss have for a long time restricted the sale of property to foreigners. Now the Federal government has set an annual quota of permits for non-resident foreigners seeking to acquire property in Switzerland. In addition, cantonal authorization is needed before gaining a title. Each canton has slightly different rules, varying from commune to commune within the canton.
However by 2010 each canton will have the responsibility for its own foreign property acquisition laws. This may result in faster transfer of property titles, as opposed to the current delays.
Foreigners cannot acquire residential real estate for buy-to-let investments except for subsidized housing which has below market rents.
The price index for rental apartments in old building also rose 4.3% (3.5% in real terms) to January 2009 from a year earlier. Only the index for new rental apartments registered price decline during the period, down 3.6% (-4.3% in real terms) compared to a year earlier.
There are several possible reasons for the increase:
1)households took advantage of lower (falling) interest rates in effect since Q4 2008;
2)the increase in the number of non-resident foreigners led to higher demand for houses; and
3)after the collapse of house prices in other countries, Swiss citizens and residents moved their investment back to the domestic housing market which is relatively more stable.
It is unclear whether the house price growth can be sustained for the rest of 2009. The drag on housing demand brought by the recession may be countered by low inflation (hence higher purchasing power), low interest rates, and continued (albeit weakening) net migration.
The Swiss have for a long time restricted the sale of property to foreigners. Now the Federal government has set an annual quota of permits for non-resident foreigners seeking to acquire property in Switzerland. In addition, cantonal authorization is needed before gaining a title. Each canton has slightly different rules, varying from commune to commune within the canton.
However by 2010 each canton will have the responsibility for its own foreign property acquisition laws. This may result in faster transfer of property titles, as opposed to the current delays.
Foreigners cannot acquire residential real estate for buy-to-let investments except for subsidized housing which has below market rents.
Read Price History »
RENTAL YIELDS
Last Updated: Aug 18, 2009
In Switzerland, there is a surprisingly large difference in yields between Geneva and Zurich. Average yields for Geneva city apartments are poor, at 4.03%. However in Zurich, Switzerland’s biggest city and the financial capital, apartments return much higher yields, with an average yield of 7.65%. The best yields are on small apartments in Zurich, which produce excellent investment returns, with yields of 8.93%.
TAXES AND COSTS
Last Updated: Nov 22, 2008
Effective Tax Rate on Rental Income |
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| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | 48.6% | 53.2% | 54.5% |
| Click here to see a worked example | |||
Source:
Disclaimer |
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Rental Income: Income is taxed at the federal, cantonal and municipal levels. The total tax liability could easily exceed 50%. Federal tax rates range from 0% to 11.5%.
Capital Gains: Capital gains are tax-free at the federal level (unless the gains are from the sale of business property). All cantons, however, levy their own taxes on gains from the disposal of immovable property located in the canton.
Inheritance: Inheritance tax is levied at the cantonal level, on the net assets transferred to the beneficiaries.
Residents: Residents are liable to pay federal, cantonal and municipal income taxes on their worldwide income.
Capital Gains: Capital gains are tax-free at the federal level (unless the gains are from the sale of business property). All cantons, however, levy their own taxes on gains from the disposal of immovable property located in the canton.
Inheritance: Inheritance tax is levied at the cantonal level, on the net assets transferred to the beneficiaries.
Residents: Residents are liable to pay federal, cantonal and municipal income taxes on their worldwide income.
BUYING GUIDE
Last Updated: Mar 23, 2007
Closing costs are relatively low in Switzerland. Roundtrip transaction costs, i.e., the total cost of buying and selling a property, range from 3.5% to 9%. The estate agent’s fee comprises a large chunk of the cost at roughly 3% - 5% (plus 7.6% VAT), usually paid by the seller.
The buyer pays the Real Estate Transfer Tax which ranges from 0.2% to 3.3%, depending upon the canton. Since January 2005, Transfer Tax has been abolished in Zurich.
The buyer pays the Real Estate Transfer Tax which ranges from 0.2% to 3.3%, depending upon the canton. Since January 2005, Transfer Tax has been abolished in Zurich.
LANDLORD AND TENANT
Last Updated: May 25, 2006
Around 61% of all households are renters; so it is not surprising that the law in Switzerland is pro-tenant.Rents: he initial rent can be freely agreed between the landlord and tenant. However, within 30 days the tenant can appeal against the rent as abusive.
Tenant Security: Tenancies tend to revert to indefinite duration tenancies. This is not necessarily a disaster for the landlord, because three months termination notice can be given by either side.
But the court may give the tenant an extension of up to four years, in cases where and eviction would cause hardship.
ECONOMIC GROWTH
Last Updated: May 26, 2009
Recession, deflation
Land-locked at the heart of central Europe with a population of 7.6 million, Switzerland is a small, majestic, scenic country with one of the richest economies in the world (GDP/capita US$56,711). Despite being surrounded by the founding members of the European Economic Community (now the EU), Swiss voters have repeatedly rejected the idea of EU membership.
Economic growth was relatively strong from 2004 to 2007, with average annual GDP growth of 2.9%. However with the global financial crisis, economic growth slowed down to 1.6% in 2008.
Switzerland officially entered recession in Q1 2009 with the economy expected to contract by as much as 3.9% in 2009 and 0.5% in 2010, the worst recession in over two decades. The country was last in recession in 2003 with a minor contraction of 0.2%. Although unemployment rate is less than half the EU average, the situation is deteriorating, rising from 2.49% in 2007 to 2.6% in 2008 and 3.4% in February 2009. Unemployment is expected to rise to more 4.5% in 2010.
Inflation shot up to 2.4% in 2008 due to high global food and fuel prices. It is higher than the average inflation of 0.89% from 1994 to 2007. However, with consumer demand weakening with the economy, deflation of 0.6% and 0.3% are expected in 2009 and 2010, respectively.
