Switzerland: Overview

RENTAL YIELDS

Yields are generally low in Switzerland

Swiss gross rental yields are around 3.8% to 5%, with smaller units (around 40 sq. m.) earning higher rental yields, according to Global Property Guide estimates. In Geneva, home to various international organizations, city centre apartments have gross yields of 4.1% - 4.9%. In Zurich, Switzerland’s biggest city and the financial capital, apartments have gross yields of 3.8% – 5.1%.

About 57% of rental dwellings belong to private individuals, usually self-employed. Another 22% are owned by companies.

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TAXES AND COSTS

Swiss rental income tax is very high

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	48.6%	53.2%	54.5%
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Source: Disclaimer

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.

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BUYING GUIDE

Total transaction costs are low in Switzerland

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.

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LANDLORD AND TENANT

Swiss law is pro-tenant

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.

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ECONOMIC GROWTH

Strong economic growth expected to continue

Land-locked at the heart of central Europe with a population of 7.5 million, Switzerland is a small, majestic, scenic country with one of the richest economies in the world (GDP/capita US$52,484).

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.

Swiss GDP growth had been anemic from 2001 to 2003, but has now recovered. GDP growth in 2006 was 2.7%, following 2.3% growth in 2004 and 1.9% in 2005. Economic growth to be a little over 2% in 2007.

The labour market is already showing signs of improvement and all major markets have posted favorable sales trend. Unemployment is less than half the EU average, around 3.8% in 2006, down from 4.3% in 2005.

Inflation is low at 1.1% in 2006, in line with the average inflation of 1.0% from 2000 to 2005. It is expected to ease down to 0.2% in 2007.