The dream of owning a home in picturesque Switzerland is enticing for many. However, buying a house involves numerous costs that go beyond the actual purchase price, making the entire acquisition process complex. This includes not only the directly visible costs such as the purchase price itself but also a range of additional and hidden costs associated with home buying
Table of Contents
- Direct costs in home purchase
– Purchase price
– Notary fees
– Land registry fees
– Property Transfer Tax
– Mortgage deed
– Calculation example: Costs in home purchase
- Costs arising in the financing of a property
- Hidden costs
- Tax aspects in home purchase
- Building insurances
- Future and potential costs
- Influence of location and property type on costs
1. Direct costs in home purchase
The purchase price
Undoubtedly, the purchase price is the most conspicuous and typically the highest item among the costs associated with buying a property. However, it is not merely a fixed number; it consists of various components.
In addition to the actual value of the property, determined by factors such as size, location, condition, and amenities, market dynamics such as supply and demand also influence the final amount.
For example, a modern single-family house in a sought-after location in Zurich can quickly reach a purchase price of over two million Swiss francs, while similar properties in more rural areas may be significantly more affordable. A professional real estate appraisal is essential in this context to determine and negotiate a fair and market-appropriate price.
Notary fees: How much are notary fees?
Notary fees, incurred in the process of buying a house, should not be underestimated. These fees are charged for the notarization of the purchase contract and can vary depending on the canton in which the property is acquired. Notary fees often range between 0.1% and 1% of the purchase price.
It is also important to clarify who pays the notary. In Switzerland, it is common for buyers and sellers to share the notary fees, but other arrangements are possible and should be clearly defined in advance.
Land registry: How much are land registry fees?
Registration in the land registry is another cost item. The land registry maintains records of all plots and properties, making registration in the land registry a mandatory formality in the home purchase process.
The fees for this in the land registry also vary by canton and typically range between 0.1% and 1% of the purchase price. Land registry fees are often shared between the buyer and seller in Switzerland, but other agreements are possible and should be clearly defined in advance.
Property transfer tax: How much is property transfer tax?
When buying a property, property transfer tax is levied in many cantons. The percentage varies significantly depending on the canton. For example, in Zurich, there is no property transfer tax, while in other cantons, it is borne by the buyer and can range between 1% and 3.3% of the purchase price. Additionally, there are sometimes reduced rates for property transfer tax, such as for owner-occupied properties or transfers to descendants or spouses.
In Neuchatel, for instance, a property purchase of CHF 700,000 would incur a property transfer tax of CHF 23,100.
Mortgage deed: How much does a new mortgage deed cost?
The mortgage deed is an essential component in financing a home purchase in Switzerland and represents the loan secured by the property. There is a distinction between a mortgage deed and a register mortgage deed, with the latter being in electronic form and offering greater flexibility in case of changing banks.
Costs are incurred when creating a mortgage deed, usually borne by the buyer. These costs are often set as a percentage of the mortgage amount and can range from approximately CHF 100 to CHF 300 per CHF 100,000.
Calculation example: Direct costs for the purchase of a property valued at CHF 1,000,000
|CHF 1’000 – 5’000
|Buyer & Seller
|Land registry fees
|CHF 1’000 – 5’000
|Buyer & Seller
|Property transfer tax
|CHF 0 – 33’000
|CHF 1’000 – 3’000
|Capital gains tax
*In this example, the capital gains tax could be CHF 20,000 for a gain of CHF 200,000 after a certain holding period.
2. Costs arising in the financing of a property
Credit conditions are a central element of financing, as interest rates and processing fees for loans have a significant impact on the overall costs of buying a house. While mortgage interest rates vary depending on the provider and market conditions, one should currently (as of 2023) expect rates between 1.5% and 2.5%.
In financial planning, the strategy for loan amortization should also be considered. Buyers in Switzerland typically have two options: direct or indirect amortization.
Direct amortization reduces the debt regularly and directly, while indirect amortization involves depositing repayment amounts into a tied pension insurance (3a), which can bring tax benefits.
This point requires individual consideration and should be discussed with a financial advisor to develop a strategy that aligns with personal and financial circumstances.
3. Hidden and often overlooked costs in property purchase
Renovation and Moving Costs
While the costs of a house itself can be a challenge, renovation costs pose additional financial hurdles that are often underestimated.
Renovation work may need to be carried out before moving in, whether in the form of painting, floor installation, or installations. These costs vary significantly depending on the effort involved and can range from a few thousand to tens of thousands of Swiss francs.
Additionally, moving costs, which can range between CHF 1,000 and CHF 5,000 depending on the distance and volume of goods to be moved, should be taken into account.
Connection fees for electricity, water, gas, and possibly district heating are other points to consider. This can involve both one-time fees for the connection itself and costs for the installation of meters.
In some Swiss cantons or municipalities, the total for this could amount to up to CHF 2,000. It is also important to inquire about possible annual basic fees from utility companies, which may apply despite low consumption.
Building Energy Certificate
The energy certificate indicates the energy quality of a property and can play a significant role in the purchasing decision. While the energy certificate is not nationally mandatory in Switzerland, it is increasingly gaining importance.
The costs for an energy assessment of the house range between CHF 0 and CHF 2,100. In the standard version, the building energy certificate costs between CHF 450 and 650. This can prove to be a useful investment, as an energy-efficient house saves costs in the long run and is advantageous during resale.
Finally, property management is a point that should not be overlooked in a home purchase, especially for multi-family properties. If you have no time or experience in property management, you could hire a management company. In Switzerland, the costs for this usually range between 5% and 10% of the annual cold rent, in the case of rented properties, or alternatively, annual fixed prices can be agreed upon.
4. Tax aspects in home buying
Imputed rental value: Taxation of own property
Imputed rental value is a central term in Swiss property taxation. It refers to the amount you would theoretically have to pay if you were renting your own property.
Usually, the imputed rental value is set at 60-70% of the local market value for comparable rental properties. This hypothetical rental value is attributed to your income and must be taxed. In return, interest on debt, as well as maintenance and renovation costs, can be deducted from taxes, which is particularly relevant for older properties or renovations.
Capital withdrawal tax
In Switzerland, there is an opportunity to use funds from the pension fund for the acquisition of real estate. However, this is associated with tax consequences, namely the capital withdrawal tax.
The capital withdrawal tax is levied on the withdrawn amount and varies significantly between cantons. In Geneva, for example, the tax rate can be up to 12%, while in Zug, it is only about 3%. It should be noted that this tax progression varies depending on the amount withdrawn and may have an impact on your financial planning for home buying.
Capital gain tax on real estate sale
Another tax factor is the capital gain tax, which is incurred when selling the property. The tax is levied on the profit, i.e., the difference between the purchase and sale prices.
The amount and calculation of this tax vary significantly by canton. The duration of ownership also plays a role, as in some cantons, the tax rate decreases with longer ownership.
5. Building insurances
Building insurance plays a crucial role in securing your property. It protects the building from damages caused by fire, water, storms, and other risks. In some cantons, such as Vaud, building insurance is mandatory and operated by the state.
Annual premiums can range between CHF 300 and CHF 2,000, depending on the size, age, and condition of the property. Compare different providers and pay attention to the coverage amount and included risks.
6. Future and potential costs
Reserves for repairs and maintenance
Reserves for repairs and maintenance are often an underestimated factor in a homeowner’s budget. To sustainably preserve the value and condition of a house, it is advisable to form a monthly reserve. This amount should be at least 1% of the purchase price of the house per year.
For example, for a house purchase of CHF 800,000, approximately CHF 8,000 should be set aside annually for future repairs and maintenance measures to handle possible renovations or necessary repairs effortlessly.
Depreciation and potential appreciation
Another aspect is the depreciation and potential appreciation of a property. Various factors such as the economic development of the region, infrastructural changes, or the general condition of the house can lead to both depreciation and appreciation.
For instance, a new construction can lose up to 5% of its value in the first few years, while a property in a growing area could simultaneously increase in value. It is essential to monitor ongoing market developments and potentially invest in value-preserving or value-enhancing measures.
Adjustments and increases in property taxes
Another potential financial risk is adjustments and increases in property taxes. Property taxation is subject to cantonal and municipal regulations that can change over time. This affects both the capital gains tax upon a later sale and annual taxes, such as those on imputed rental value. For example, an adjustment in tax rates in your canton could increase your annual payments by several hundred or even a few thousand francs.
The capital gains tax affects the seller and is calculated based on the profit from the sale. Here, not only the canton matters but also the duration of ownership. For instance, a profit of CHF 200,000 after ten years of ownership could be taxed at around 20% in the Canton of Bern, amounting to approximately CHF 40,000.
7. Influence of location and property type on costs
External and internal maintenance (Gardening, Snow removal)
External and internal maintenance often incur unexpected costs and strongly depend on the location of your property. For example, in rural areas or regions with strong winter months, expenses for gardening and snow removal can be considerable. A well-maintained garden can incur annual costs between CHF 500 and CHF 2,000, depending on size and requirements.
Snow removal can, depending on the region and climatic conditions, require additional CHF 200 to CHF 800 annually. Both items are crucial for the preservation and aesthetics of your property and can substantially influence home buying costs.
Special features and common costs in condominium ownership
When purchasing condominium ownership, there are special features and common costs that are often underestimated. These include the maintenance of common areas and facilities such as the staircase, elevator, or external facade.
Here, you should expect monthly additional costs, which can vary depending on the size of your apartment and decisions of the owners’ association. For example, renovations of the communal staircase could quickly mean additional costs of CHF 1,000 to CHF 5,000 per party.
Also, specific regulations and duties may be included in the house rules, concerning the use and maintenance of the property and its surroundings.