Should you buy or rent a house in Switzerland?

By Baptiste Wicht | Updated: | Save, Switzerland

(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 will also 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 a house to live in 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 will have to 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 will need to 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 your offer has been accepted, you will still need to sign a reservation and notary contract. All of this will take time and requires several meetings.

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

If you want to know what you need to do, you can 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 take care of the problem.

If you have an issue with your property, you will need to 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 will have to ask permission from the owner. If you want to take down 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 will need to 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 unless you pay 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. So, when you are trying to decide when you want to buy

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 are unlikely to 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 think you will 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 will need to 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 be able 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 the requirements for it.

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 where 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, let’s 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 need to add around 1% of maintenance per year (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 is different for each property and is based on how much you could receive if you were to 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 costs. So, let’s 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 per month for renting. 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 the taxes you pay.

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 came out with saving some money over the long term in our case. 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 much money over renting.

Let’s 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 10 years for owning to be worth it. This is important to compare things properly.

If you want an 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 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 cases. 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?

Baptiste Wicht is the author behind thepoorswiss.com. In 2017, he realized that he was falling into the trap of lifestyle inflation. He decided to cut on 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.

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

  1. @thepoorswiss
    We came out of property ownership (STEW) in Switzerland after a 12-year period of ownership in 2019. I fully agree with all points you list. Further cost points to consider based on experience include:
    – building insurance and how this works in the case of an emergency (fire)
    – more than adequate personal insurance coverage (hausrat) for the case of an emergency and you cannot live in your property for a period of time and therefore need to stay in a hotel and then rent accomodation over many months
    – If taking money out of your 2nd pillar for the deposit, and depending on the size of your mortgage, the bank will require you to enter into gebundene Vorsorge accounts, which are 3b accounts to be saved into every month
    – If you break your mortgage earlier than the agreed timeframe, for example for reasons of a property sale, you are liable for very high penalties by the bank – this can be balanced out through the new owners taking on the mortgage that you have, which cancels the penalty cost, however it also results in the new owners expecting a reduction in the price of the property (can be beneficial for taxes, however)
    – costs incurred if your house is in a housing complex and shares common infrastructure of any kind, including for example Minergie systems or similar which sometimes are rented infrastructures from the cantonal or city electricity boards, and which the housing complex can decide to buy with upfront investments from all complex parties (especially newbuild houses, which are today increasingly built in complexes); these costs affect apartments more than houses yet could still be valid for houses in new communities, or houses built in ‘reihen’ or semi-detached, and depending on the Reglement of the Housing Complex (always check at research phase).
    – Finally, if the property, whether apartment or house, is ‘in baurecht’ (freehold), this can have a negative impact on the resale value in the future.

    Kind regards,
    uaa.

    1. Hi uaa

      Thanks a lot for sharing your experience.
      It’s very important to important insurance and how things are covered in an emergency. Excellent point!
      Indeed, breaking a mortgage is extremely expensive in Switzerland.
      I never had any shared property.
      Checking all these points before buying makes a lot of sense.

  2. Hi,

    I am a 50-year-old, a real poor guy! A tech phd guy like you can never be classed as poor :-)

    Ok, so I live in Zurich, rent a 3.5 room flat worth CHF2000 but due to having a very old contract, pay only CHF1000 per month.

    I am thinking of buying a CHF200’000 flat in Valais to holiday and eventually retire in. I have 600k savings sitting in the bank, too scared to invest it in the market, as I don’t understand it well. On the other hand, inflation and low interest rates are wiping my saving’s purchasing power!
    I am self-employed so will receive basic pension only.

    My options-
    – Buy a 200k flat in Valais mountains/hills
    – Buy a house in Portugal/Spain
    – Buy a rustico in Switzerland for under 100k and do it up for 100k. My needs and space requirements are minimal. No kids etc.

    With property, at least it would be mine.

    Can you advise me please?

    1. Hi

      Yes, I would not say I am poor, but definitely not rich either.

      It’s difficult to know exactly, without knowing everything. But it seems indeed wise to invest some of your large savings in real estate, especially if this could cut down your costs for retirement.

      Regarding options 1 and 2, I am thinking it would highly depend on where you want to retire. And it’s probably easier to manage one flat in Switzerland than in Portugal.
      Another option you could consider is renting it out while still working, to make a little income. You could even make it temporary renting. But obviously, it means you don’t enjoy it as much while working.
      As for option 3, it depends on how ready you are to go through all the troubles of renovations. I would personally not do it.

      When you say 200K flat, do you mean downpayment or full price? Downpayment sounds high, but full price seems low, no?

      1. Hi,

        Yes, you can get decent flats, 65-80 square meters, full price for CHF200,000 in mountainous areas. Houses for around CHF400,000 too (I love mountains). Obviously they won’t be brand new, but in decent condition.
        Also, not in hot spots, as similar flats would go for 1.5million+ in sort after areas! Recently I saw two really crap flats in Murren, I enquired the price, 800k for the studio flat and 1.6 million for the 2 room flat!!!!!

        Btw, this guy, Martijn Doolaard (YouTube him) bought his property for 26k in the Italian Alps and is living his dream. Stuff like that appeals to me, but maybe I settle for something safer, i.e a flat in a small village in a mountainous region. Decisions!!!!

        Example of relatively “cheap” house-
        https://www.remax.ch/index.php?t=2&srid=4136304&s=1&page=objekt&id=14314&p=3&lang=en

        1. Hi,

          Interesting, I would not have thought it was that low, that’s interesting.
          Obviously, we are not talking about high-end ski stations :)
          I came across his videos randomly on youtube recently, it’s quite cool indeed but too extreme for me.

          Thanks for all the info!

          1. Curious about your opinion on any of these points, if you can spare some time :-)

            I am semi interested in a 85m2 flat in the mountain for CHF200k. It looks in decent condition, but the building is from 1985, so 37 years old. Some things that are going around in my head-

            1) If I live another 40 years, the building would be 87 years old. Any idea on how long buildings usually last? The group repair pot for the building currently stands at CHF170k.

            2) “Das Grundstück ist Eigentum der StWEG zu 100%”. This means all the building occupants own a % of the land, correct?

            3) Nebenkosten are around, 4500 per year, so by the time I actually move there in 10-15years, I would have wasted almost CHF75,000 without even living there full time.

            I like everything about the flat, and decent mountain views too, but maybe I should not buy it?

          2. Hi,

            I really don’t have much experience with real estate. At 200k, if you manage to make it last 40 years, it’s a fair price.
            1) I would say a building is generally made to live from 80 to 100 years. But of course, mileage will vary some are of high quality while some are of poor quality.
            Renovating will help keep the building longer and having already 170k for the building looks good even though large restoration work can very expensive.
            2) I have no idea, my german is bad and google translate is not enough here
            3) Don’t waste the money, rent the flat out.

            If you don’t move there for 10-15 years, I don’t think it’s a great plan. You should ideally rent it out for this duration and then move in. Otherwise, paying 4500 per year plus interest of the mortgage will be expensive for a vacation home. But it depends on how much you want it and how much you can afford it.

  3. Thanks for this article, I’m 42 and I’m considering buying a second house which would be actually my main house. I bought my first house when I was 30, of course I have a mortgage. Then I moved to Switzerland because of work. So I rented a house in my country and live in a rented apartment in Switzerland. I’ve managed to save enough money for down payment and now I’m considering buying a property here in Switzerland. The problem is that every time I do calculations it seems that renting is better. However emotions play a role and owning a house is something I want so I may still do it even it looks like it doesn’t make much sense financially. Anyway, thanks for the article.

    1. Hi,

      It depends on several factors. There are indeed several areas in Switzerland where renting is better financially.
      But as you mentioned, they are several advantages to owning your own place (and disadvantages obviously).

      I would say it depends on how bad it is financially. If you are looking at 10% worse, it is not a huge deal if you feel better owning your house. But if you are looking at +50%, you should be careful!

  4. Hello Mr. Poor Swiss Man

    First of all, I would like to thank you for this detailed and interesting blog, which gives a great insight into your project. I’ve been on your blog for a few days now and was able to pick up some tips, especially regarding the broker recommendation. Really brilliant, I’ve been looking for something like this all year. Since I am in a similar life situation but still before the decision between buying and renting. This brings me to my question.
    Regarding the comparison between renting and buying, I wanted to inquire if you have done any further calculations or perhaps simulations on these two options?
    I consider your assumptions about the opportunity costs with an interest rate of 5% rather conservative. Just consider what final capital could be created by compound interest over the period as a homeowner. Also, based on the house purchase of 140k, there is no apparent effect on net worth. Except for the notary costs(~20k) in May 2021, I could not find any larger items for house expenses.
    Or is that exactly what you mean by one of the first sentences in this blog post “While real estate can be a good investment, you should not consider the house you live in as an investment.”?
    That a purchase purely financially considered is not necessarily worth it, but there are also many subjective and personal factors, which can be more important. What I can fully understand.
    Can I get in touch with you if I have further questions or would you prefer that questions be placed directly under the corresponding blog entry?
    I’m aware that your nights are currently certainly short after you got a baby ^^. Anyway, all the best to you and I look forward to your further blog updates =).

    Thank you!

    Kind regards
    Mr. Druma

    1. Hi Druma,

      I have not done any further simulations.
      You are correct, that I should take compounding into account and do the computation not per month, but for a period of 20 years.
      Buying a house has very little effect on the net worth. You are just transferring cash into real estate. As you said, you are losing on the notary fees and withdrawal taxes. But that’s about it.
      I will have to rewrite that phrase. Reading it again, it makes little sense. Buying real estate for renting it out to other people is a good investment.
      But if you want to make money (not save) money, buying your own house is not a great deal.
      I was trying to say that while it’s not a great investment, it’s not necessarily a bad personal finance move.

      If you have further questions, either ask them here in an article or use the contact form :)

  5. I generally like your posts, but I stopped reading after the first bullet point: “your primary house is not an investment”. Hell yes it is. You will need to put a 20% downpayment, which is VERY likely to be a significant part (if not all) of your life savings. This has HUGE implications for your future – historically RE has always underperformed equities. Going all-in a house at a young age is a huge financial misstep for the future, in 99% of the cases.

    People have a difficult time grasping this concept because they are convinced that ‘a house is always a solid investment’ while ‘stocks are risky’. Thing is, when you are young and you have 30+ years of investment ahead of you, you should be taking all the “risk”! On 30+ years, investing in equities has always beaten the housing market. A house is an asset like every other and should be treated as such, not with an emotional take of “it is not an investment”.

    Generally it is better to wait 10/15 years of work, so to use the 2nd and 3rd pillars and not have 100% of your wealth invested in a house.

    1. No, it’s not. An investment is something that will appreciate your usable net worth.

      I am not saying it’s not smart, it can be extremely smart. But it’s not an investment because you won’t ever profit from the capital gains on your house. Most people will live in their house for many years and if they sell the house, they will move into a more expensive one. Or, they will give it to their heirs or they will go back to renting in which it may be an investment but then you have to account for paying more rent again.

      And I am not saying that it’s easy. It has huge implications. But you do not buy your primary house to invest money. If you want to invest money, you buy a house to rent it or to flip it or your buy stocks.

      1. Hi there Mr the Poor Swiss,
        how about this scenario: you buy an apartment, pay say up to 30%% less monthly than you would have in rent. you life in the apartment for the next 5 years, or alternatively rent it out, and then sell it in 5-10 years with the assumption that the least – you make your house value back, or best case – have an increase of value due to rising property prices.
        would you go for that option, and what kind of set-up would you consider?

        1. It’s very difficult to know. I would say it depends on whether you can increase the value of your property. If you don’t, you may have lost value due to purchase fees, extra insurance, maintenance costs and opportunity cost.
          For 5 years, I would not consider buying a house or apartment. At 10 years, it starts becoming interesting.

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