[lukasfischer]

I’m from Switzerland and the article tells the truth. Buying is crazy expensive!

And there is one thing the article is not mentioning: if you own a house, there is a fictional “rent” income on your own property, which is “income” on to of your real salary income and gets taxed… there were many approaches to get rid of the law, but it never went through.

Also, in the last years the interest rates were crazy low for loans in Switzerland. 0.6% (!!) you read right was normal. It changed recently as the Swiss national bank increased its the reference interest rate to about 2.5% - still low compared to other countries. Which means, if you have 1m in load it meant 1m0.006 =6000/year of interest rate! Today 1m0.025=25000/year

[mamonster]

Most banks have had advertisements bordering on scam and malpractice to explain why the SARON adjustable rate is better than locking in a fix rate.

I've literally had to explain to like 5 people the amount of risk they were taking on by holding on to a 0.8% Saron adjustable instead of getting something like 0.9-0.95% fixed rate for 15! years. It's unfortunate that most people simply don't intuitively understand that when interest rates go from 1% to 2% your payments double.

[dbrgn]

If you can manage the risk of rising interest rate, then SARON isn't a bad choice. At least in the past, sticking to LIBOR/SARON was the cheapest option on average. But of course, if you can't handle the risk of rate increases, you shouldn't do it. (One option to reduce the risk is to pay the difference between SARON and the current fixed rates onto a dedicated savings account.)

But of course, if had gotten the chance to get a <1% 15-year deal, I'd have done it :) I'm slightly late to the party.

[BirdieNZ]

Is this an imputed rent tax? That sounds like a good thing to me, not a bad thing. It has a similar effect to land value taxes or government-owned land leases, which are some of the most effective ways to reduce rampant property speculation and property value inflation.

[mamonster]

It's a good thing until you realize that the remainder of the system around it encourages speculation.

1) Fully tax deductible mortgage interest

2) Full value of mortgage goes against your assets, essentially removing wealth tax for most people.

3) Within any given year, you can either take a 10% * Imputed rental income deduction for maintenance or a specific fully itemized amount against your tax bill. Except that nothing prevents you from taking the 10% and not doing any renovations, and then slamming all the renovations in one year and removing the add on entirely.

4) The first 66% of the home collateral value are under an interest only mortgage, so if you were smart enough to get the 15yr fixed rate you basically be getting a huge loan for like 1% interest payment per year to control a house which you need to live in anyway.

5) Last but not least, local tax offices have a lot of discretion in most cantons to determine what the imputed rent is. The legal requirement is that the imputed rent must be at least 60% of market rent, but there is basically no consistency between cantons as to what number they shoot through, anywhere from like 65 to 90%.

The end result is that high bracket earners are super incentivized to lever up and get the biggest house they can, since they would essentially be investing into a growth asset that reduces their tax income. Since Switzerland is a small country and not a lot of space the end result is that eventually the high earners overbid normal houses.

[petercooper]

if you own a house, there is a fictional “rent” income on your own property, which is “income” on to of your real salary income and gets taxed…

Is this essentially a Swiss equivalent of property taxes/council taxes?

[secretsatan]

I think it’s a bit messed up and could probably be done better, but doesn’t that tax exist to even things out between renters and homeowners?

[dbrgn]

My wife and I managed to buy (half) a house (from the 1800s) this year, in Switzerland, considerably below 1M. It's in a rural area though (30 km from Zürich), and without central heating (tiled wood stove instead). I guess it depends a lot on your desired standards of living.