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Should you buy or rent a house in Switzerland?

Baptiste Wicht | Updated: |

(Disclosure: Some of the links below may be affiliate links)

Last year, we bought a house. Since I shared this fact on the blog, I have been asked several times whether people should buy or rent in Switzerland.

So, I wanted to share my thoughts on the buy or rent subject. In this article, I discuss the different considerations about buying and renting houses in Switzerland.

While I speak specifically about houses, it also applies to apartments. But since we bought a house, I have been familiar with the housing market.

There are some differences between the markets for houses and apartments. But most of the same points apply to buying or renting an apartment in Switzerland.

Your primary house is not an investment

While real estate can be a good investment, you should not consider the house you live in as an investment. What I mean by that is that buying your primary residence is not a way to invest money to make money.

In some cases, you will make money on it. But you should not buy your primary residence to make a good investment. You should buy the house you want to live in. In most cases, you will not make any money by purchasing the home you are living in.

Buying to rent is another entirely different story. I will not cover real estate investment here. If you compare buying to live in and buying to rent or investing in the stock market, your house will be a bad investment. But it could save you some money, which is different.

Just because it is not an investment does not mean you should not consider the financial aspects when deciding to buy or rent. We will delve into these factors as well in this article.

Renting is easy

Sometimes, you will have some trouble finding an apartment to rent. But overall, it is much easier to rent than to buy a house or an apartment.

When buying, you will have to go through many painful steps. You will have to do several meetings with the bank. You must provide many documents to the bank and the real estate agencies.

If you are lucky, you will get the first house you made an offer on. But if you are not lucky, you must make offers for several houses. Then, you will have to wait for answers from agents and owners, which can take time and be very stressful.

Once the owners have accepted your offer, you must still sign a reservation and notary contract. All of this will take time and requires several meetings.

We are happy to have bought a house, but buying a house is not enjoyable. In the buy or rent dilemma, renting is easier.

If you want to know what to do, read my guide on buying a  house in Switzerland.

Buying will require more work later

When you own your house, you must handle everything that goes amiss.

On the other hand, when you are renting and there is an issue, you generally call the building managers, who handle the problem.

If you have an issue with your property, you must call a professional (finding a good one may not be easy) and get them to come and fix the issue. And of course, you will have to pay for the work.

And you can expect to do more things if you are a bit of a handyman. You will need to take care of trees and plants if you have any.

Overall, this will be more work for you if you live in your own house or apartment than if you were renting. On the other hand, you also do not have to deal with possible terrible building managers (I got my load of them). So, it may not be that terrible.

You have more freedom with your property

When you are renting, you will not live on your property. It means you cannot change things in the house.

If you want to repaint the walls, you must ask permission from the owner. If you want to remove a wall, you will probably never be able to do that unless you buy a property.

So, if you want to live in your own house or apartment and change it to your wants and needs, you must buy a property.

You need to remember that even if you own a house, the bank also owns a large part of it. It means you cannot do everything you want with the house without paying the entire mortgage.

Another advantage in the same subject is that you do not have an owner that can decide not to renew your lease. This makes it easier to have long-term plans for your future. Of course, if you run out of money, your bank could force you to sell. So, it is not all that good either. Now, if you are living well within your means, this should not be an issue.

Houses are not available to rent

Sometimes, you will not have a choice to buy or rent a house. In many regions of Switzerland, it is challenging to rent a house. There are some houses to rent. But so few of them that it is tough to find one to rent.

It is the case for us in the region of our choice. In our selection, we have found only two or three houses that met our requirements. On the other hand, we have more than ten available to buy.

I found this is a reason to buy with many people who want a house. It is different from apartments, where a ton of them are available to rent.

In Switzerland, most people buy a house to live in it and not rent it. When they leave this house, they generally sell it. It means that the market is more saturated with renting houses. And obviously, there are also fewer houses than apartments in general.

It is easier to move when renting

Once you own a house, you will unlikely move to another for several years.

With renting, you could imagine moving every few years or even yearly. But you will not buy a house every year. For one thing, it would be too much trouble. And it would also cost too much money.

So, if you do not want to live a long time in the same place, you should not consider buying! Buying is a long-term decision!

Buying requires funds

When you buy a house, you must produce at least a 20% downpayment. 20% is what banks currently ask in Switzerland.

Out of this downpayment, half of it must be cash, and the rest can be pension assets. So, you will have to accumulate this money over time to buy a house.

With that, you must ensure you are not getting low on cash. You need to keep your emergency fund. And you need to keep a buffer for safety.

If you are investing in the stock market, you may have to sell some shares. Depending on the stock market situation, it may be challenging to get enough cash without selling at a loss.

When renting, you will probably have to set aside a few months of rent as a guarantee. But this is about all the cash you will need.

Buying can be a burden in retirement

Every time you have to renew your mortgage, you need to meet its requirements.

This burden is not a problem while you are working. But this could be a problem when you are retired. If your income in retirement does not meet the requirements of your mortgage, you may be forced to sell the house.

This situation is sad, but it happens in Switzerland. You need to consider this if you plan to retire soon. You do not want to be forced out of your house at the moment when you could enjoy it the most.

If you do not have enough income in retirement, the other option is that you can transfer your house to your children. I do not like this solution. I do not want to rely on my children when I am old. But many old people have to use this solution to keep their house.

You must be careful about this if you plan to retire in Switzerland.

A house can be a good legacy

If you want to leave a good legacy for your children, a house could be the perfect legacy!

If your children have a good memory of growing up in your house, they will probably be happy to get the house after you. And it could be a good inheritance as a tangible asset.

Now, it is a bit of a dual-edged legacy. If you have many children, it may not be easy for them to share the house. In some cases, maybe your children do not want a house. And finally, maybe your children cannot afford the mortgage on the house. There are often some issues when an inheritance contains a house.

So, you have to be careful about your inheritance and your house. When you are growing older, you should discuss the subject with your children. You do not want to burden them after you pass. The future is something you should think about when questioning whether you should buy or rent a house.

Buying can be cheaper

Finally, we discuss the financial part of the equation.

When you are trying to decide to buy or rent a house, you will need to consider both. In some cases, buying can be cheaper. But it is not as great as people think it is. Computing the real costs of a house is more complicated than it seems. And many people do this computation incorrectly.

Your monthly costs will almost certainly be lower with current interest rates than if renting the equivalent house.

For instance, the kind of house we bought is around 700’000 CHF. With current interest rates, we are looking at about 500 CHF monthly fees. But such a house would cost between 2500 CHF and 3000 CHF monthly to rent.

Based on that alone, we think it is incredibly profitable to buy. But on top of that, we must add around 1% of yearly maintenance (583 CHF per month).

You will also have to consider a stupid tax: imputed rental value. This is a dumb virtual revenue that the tax office adds to your taxable income, which gets taxed as income even though you have never received it. This value differs for each property and is based on how much you could receive if you rent it out.

In our case, this imputed rental adds 1200 CHF to our monthly taxable income. This translates to something like 450 CHF extra taxes per month.

Even with all that, buying still seems like a great opportunity. But we forgot one big thing: the opportunity cost. Many people thinking of buying a house are ignoring this completely.

For a house at 700’000 CHF, you will have to put down 140’000 CHF. You will need more for notary and contract costs. In general, you should account for about 25% of the costs. So, we account for 175’000 CHF. If you invest this at 5% per year, you lose 729 CHF monthly.

The downpayment is not lost since it moves values from cash to real estate. And the same stands for amortization.

It gives us 2262 CHF per month for buying and between 2500 CHF and 3000 CHF monthly for rent. In this case, it seems cheaper. But we have not accounted for everything since you need to pay for insurance, water, and real estate taxes. So, buying can be cheaper, but it can also be more expensive when you consider everything.

To know about your case, you must consider all the facts. For instance, these results will change if you use your second and third pillars as a down payment. And it will also change based on where you live and your taxes.

We considered all these things before we started looking for a house. We did not want to lose too much money on buying when we could have rented.

But as we did the math, we save some money over the long term. It is not a huge difference since a bigger house means more furniture. And owning your house means you will want to improve it over the years as well. But overall, it looks good from a money point of view. It is not a great investment, as mentioned before. But it is not a stupid one either.

Now, there is one important thing here: buying is only interesting financially in the long term. Buying a house has some serious costs you cannot avoid (notary costs, for instance). So, if you buy houses too often, you will lose money over renting.

We can compare the costs for a few periods (taking 5% into lost fees and 2500 CHF rent):

  • 1 year: renting costs 30’000 CHF while owning costs 62144 CHF
  • 5 year: renting costs 150’000 CHF while owning costs 170’720 CHF
  • 10 years: renting costs 300’000 CHF while owning costs 306’440 CHF
  • 20 years: renting costs 600’000 CHF while owning costs 577’880 CHF

As you can see, it takes a little more than ten years for owning to be worth it. This is important to compare things properly.

For example, I published a breakdown of all the fees we paid for one year of house ownership.

Conclusion

If you were hoping for a definite answer as to whether you should buy or rent a house in Switzerland, you would be disappointed. There is no such answer.

There are pros and cons to both buying and renting a house. You will get more freedom by buying your house. But you will also need to do more things yourself.

From a money point of view, there are cases when buying is advantageous. Given the current interest rates, it could be a perfect time to buy if you want to do it.

In some cases, you may be almost forced to buy. For instance, there were almost no houses for rent in the region we were looking for in our case. And the few that were available were highly overpriced.

When you are considering whether you should buy or rent, you should think about retirement. When you are in retirement, you will have a lower income. It means it could be difficult to keep your mortgage.

So, buying can be great, but it is a lot of work and responsibilities. You can live a great financial life by renting your house. And you can live a great financial life as well by buying it. You should not believe people that tell you that only buying is right or that only renting is right. The buy or rent debate has no definite answer. There are too many parameters.

You need to choose the solution that suits your situation the most!

  • For houses, there are more opportunities to buy since not many houses are available to rent.
  • For apartments, there are many more opportunities to rent, so it is another story.

As mentioned before, there are some differences between houses and apartments. So your mileage may vary. But overall, the same points apply to whether you should buy or rent an apartment.

If you are interested in real estate as an investment, you should read the example of Iain, who invested in foreign properties from Switzerland.

What about you? Do you prefer to buy or rent your house?

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Baptiste Wicht started thepoorswiss.com in 2017. He realized that he was falling into the trap of lifestyle inflation. He decided to cut his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

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89 thoughts on “Should you buy or rent a house in Switzerland?”

  1. Hi, thank you so much for your blog, very useful. If my understanding is correct you did not factor in the increase in value of the property. Again, you would have to wait for at least 10 years and there is no guarantee, but real estate value in CH has been steadily increasing for the last decades. So depending on when and where you buy, the opportunity cost could be offset. For me this is what really complicates the decision.

    1. Hi Cat,

      If you buy a house to live in, the value of the house is not really doing anything for you:
      * If you don’t sell it, you will never realize this value, so it’s paper value
      * If you sell it, you will much likely buy another house and on average more expensive than the one you owned

      So, for me, real estate appreciation is not interesting if buy to live. It’s really interesting if you buy to rent.

  2. Hello,

    Thanks for the informative and helpful article!

    Pardon me for my ignorance, but what about the part the monthly payment that in a way is converted into a real estate value, where in rent it just lost?

    1. Hi Anton,

      Good point, it is important to take this into account.
      This is called amortization and is mentioned in the article that we don’t consider this a cost since it’s just a transfer of value from cash to real estate.

  3. Hi Baptiste,
    Thanks for the super useful article.
    I have a question which is more on the legal side.

    Do banks have rules that strictly prohibit (partial) repayment of the 65%? I am specifically asking about a scenario where someone plans to repay his debt by a small amount, say 10k per year.

    I know the negative financial aspects of this decision but let’s ignore them for a moment.

    thanks

    1. Hi Ollie,

      You will have to clear this out with each bank. But they can have such rules. For instance, Migros Bank, where we have our mortgage, prohibits us from doing extra amortization on our fixed-rate mortgage for the duration of our mortgage. We would need to wait for the next renewal to discuss extra amortization and bring that up in the new contract.

      If you plan this in advance, I think you can get banks onboard, but they may give you worse conditions since they will make less money.

  4. Hello

    Thanks for posting these articles, they are really useful. I wondered about your assumptions when you write about the disadvantages of buying:

    “If your income in retirement does not meet the requirements of your mortgage, you may be forced to sell..”

    I am from the UK, and typically people take out repayment mortgages over 25 years and are usually ‘mortgage free’ at retirement. Are mortgages in Switzerland like this, or are you assuming that only the interest is being paid i.e. the principle is never repaid, even in retirement?

    Thank you

    Matt

    1. Hi matthew

      Indeed, we have a weird system compared to the UK or the US. In Switzerland, we only have to pay 35% of the total value of the property. The rest can stay in debt forever.
      But you must met the requirements of the debt every year. So if you have much lower income, you may be forced to amortize (buy back the debt) or sell in the worst case.

      1. Hi Baptiste

        That’s really interesting and very different from the UK/US as you point out. Would you consider amortizing your mortgage as part of your FIRE strategy i.e. becoming mortgage free as part of your efforts to become financially independent? I guess this is my UK mindset – if I do that I would have massively reduced my biggest monthly expense (when I fully amortize, but I am also reducing the leverage of the loan every year) and then have a significant non-cash/stocks/bonds asset to leave to my family when I die :)

      2. Hi Matthew,

        I am not planning to fully amortize at this point, no.
        The only thing that would make me amortize more than necessary is
        a) if I need to do that for early retirement because of my earnings in retirement
        b) if the mortage rates go much higher (5+) at which point it would become interesting to amortize to pay off debt

        If you have the capacity to invest, it’s better to invest with expected average returns around 8-10% rather tha pay off debt at 2%.

      3. Reflecting on this, if you have enough capital upfront, would it not make more sense to rent an apartment in Switzerland and, with the capital, invest it instead in a SandP500 ETF? My only misgiving about this is putting all my eggs in the same basket (the stock exchange) and, of course, the CHFUSD currency risk (traditionally the CHF keeps strengthening).
        I also reflected on the blog about living in CH but investing in rental property outside of CH. Same concerns about the currency risk for both GBP and EUR if one’s life is in CH.

      4. If you look at the examples at the end of the article, you will see that indeed renting can be cheaper in some cases and buying can be cheaper in some cases. It is also important to note that this article was written when rates were lower, so the example would now look more towards renting than buying since buying has become more expensive.
        Another important aspect of buying is that it’s your house, so you can do what you want inside to change it to your needs and wants.

  5. Hi, this was soooo helpful very insightful for me. One other question that i am asking myself was, “is there any gain, as you cant deduct rent from your tax but can deduct amortisation (if made to the 3. pillar)?” Or doea the stupid virtual tax takes those gains?

    Thank you so much for this blog

    1. Hi Jennifer,

      I am glad it was useful.

      If you are paying more interest than the virtual rent tax, then you can reduce your taxes. Otherwise, you will increase them. In my case, virtual rent is 1200 CHF per month and interest are less than 300 CHF, so this makes a large increase in my taxes.

  6. You mentioned “renewing the mortgage”. Is this something which happens periodically (i.e. every 10y) or it is possible that once the mortgage is granted it is never looked into again?

    1. Hi Catherine,

      Each mortgage has a duration. So at the end of the duration, you can renew your mortgage. You can get a SARON (variable rate) mortgage without duration, but any mortgage with a fixed interest rate will be with a set duration.

    2. Hey Baptiste,
      Thank you for your blog, so useful!
      I have been looking for comments or a post in your blog about buying in Switzerland vs buying in any other country near the border and commute to work in Switzerland, but haven’t found it. Did you consider this option when deciding to buy a house? I don’t know how to do the calculations to understand which financial decision is better, any guidance? Just looking at prices it seems you could get a castle in France and a one bedroom apartment in Switzerland for the same money. There is also the issue of the “Swiss system” where you are never supposed to finish paying your house vs “other European countries systems” where what you aim is to pay down your house as soon as possible. Which system is smarter financially? Which system is safer for retirement?
      We love living in Switzerland but it seems that ownership is a very far away dream, probably much easier to reach outside its borders.
      Thank you a lot!

    3. What do you think of the expected increase in rent prices? In 10 years it is expected that rent continues to increase with the market, while your house payment stays the same. Did you include this in your calculations?

      1. Rents will increase regularly if interest rate increase, while mortage will increase whenever they expire. It’s true that rents also increase based on price of living, so they may increase faster than mortage payments.
        No, I have not factored that in my calculations. I think it’s too much guessing what the future will hold.

  7. Hi Baptiste,

    just an idea to add to the equation of the comparison between rent and buy:
    shouldn’t we also consider the cost-opportunity to invest 140k (in your case) in a house rather than in portfolio investment (e.g. return of 3% to stay conservative).

    Regards
    Ato S

    1. Thanks for the great sum up. I would allow myself to disagree with something. You say 20 years of renting will cost you 60K. But in fact with the years the price augmenting. Especially if you are moving, which is a point of renting. And every move to the more or less same size apartment/house will mean a monthly increase of payment.
      Speaking about the mortgage when you are retired. The general practice in Switzerland, for what I have seen at least, is to make a studio or a small apartment with a separate entrance to rent it, which guarantees you a side income to cover for sure a biggest part of your mortgage. Anyways it all depends as always by the individual case, needs and tastes.

      1. Hi,

        In fact, rents don’t always increase. In the past 10 years, they have mostly stayed flat, except for the last 2 years where they started to increase again. It’s entirely possible to move without having an increase. And your mortgage can also increase if your interest reate are going up. But this is too random to take into account in such a comparison.

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