A condominium with 3 or 4 rooms, 100 m 2 in size, today quickly costs a million francs in a good location. At first glance, that's a lot of money. But the investment is worthwhile – buying is in most cases cheaper than renting. In addition, those who rent do not increase in value. And real estate is relatively safe compared to other investment options.
Up to 18 percent cheaper
The 2019 Credit Suisse real estate study shows that home ownership is almost always the more affordable form of housing, even with the current high real estate prices. If you calculate the full costs, including maintenance costs, for example, you can save an average of 18 percent with a condominium compared to a rental apartment. The reason for this is, of course, the still very low mortgage interest rate. This is unlikely to change, at least in the near future. Indicative interest rates for short-, medium- and long-term mortgages have fallen further since the beginning of the year. Rates for ten-year mortgages are at a record low of 1.30 percent and five-year mortgages are also at 0.99 percent. Even two-year fixed mortgages are at a low level of 0.93 percent.
The Credit Suisse Real Estate Study 2019 shows that home ownership is almost always the more favorable form of housing, even with the current high real estate prices.
According to experts, the drop in interest rates is partly due to the expected weakening of the global economy. The U.S. Federal Reserve has postponed its announced interest rate hike until further notice. The European Central Bank is also unlikely to raise interest rates for the time being. Under these conditions, no interest rate increase is expected from the Swiss National Bank for the time being either.
Who can, should buy
An initial calculation of whether buying would be worthwhile compared to renting can be made using one of the handy calculators available on the websites of various banks. If you take a four-room apartment, for which you would have to pay a not exorbitant 2,500 francs a month nowadays, it quickly becomes clear that it would be significantly cheaper to buy the property for a million. As an owner, the apartment would cost only 2050 francs, including interest, maintenance and ancillary costs, as well as amortizations. Seen in this light, it is clear: Those who can, must buy. Always assuming that the financial requirements can be met without risk over a longer period of time.
If you want to buy a house or an apartment, you need a lot of money – without equity, even the most favorable mortgage is not available. Several factors play a role in financing: personal situation, income, financial planning as well as marital status and family. In addition, there are the imponderables that must be assessed in advance for their consequences: divorce, unemployment or changing life plans. The more equity brought in, the better, mortgage lenders advise. The self-injected capital reduces the loan-to-value ratio and improves the creditworthiness of mortgage customers as well as the affordability of a mortgage.
Tighter procurement rules
Although significant upward swings in mortgage rates are not expected, banks and insurers have become more cautious in their lending practices. In addition, the state is more or less openly forcing the banks to tighten their own rules. The financial market regulator Finma, the Swiss National Bank and also the Federal Department of Finance are putting pressure on the bankers' association to enforce stricter lending rules for yielding residential properties. This is to slow down the booming granting of mortgages for apartments that are bought as investment properties.
If you want to buy a house or an apartment, you need a lot of money – without equity, even the most favorable mortgage is not available.
But even with private buyers, the SNB and the financial market supervisory authority Finma consistently insist on clearly defined thresholds. So it is more difficult today to realize the dream of owning your own home than it was a few months ago – especially if equity is tight and the purchase price and the bank estimate diverge. The focus here is on portability. The financial burden of owning a home should not exceed one-third of the household income. What is usually meant here is 33 to 33.33 percent on gross income.
Low ownership rate
However, Switzerland has some catching up to do: The home ownership rate is still relatively low by international standards: Only just under 40 percent of all permanently occupied dwellings are occupied by their owners themselves. This is the lowest proportion among all European countries. After all, the homeownership rate has been steadily increasing since 1970 – the reason is the increase in condominium ownership and the recent favorable financing conditions.