The dream of home ownership remains deeply rooted in the hearts of many in Switzerland, despite mortgage rates rising in recent years. Now, with forecasts stoking hopes of interest rates falling in 2024, this desire is gaining new momentum. But the decision of whether to rent or buy the property of your dreams shouldn’t be made lightly.
The decision to rent or buy depends on a variety of factors. Renting offers flexibility, which is particularly important in uncertain times, and relieves you of responsibilities such as maintenance. On the other hand, buying a property is often a cheaper option than renting in the long term. Particularly in times of low interest rates, which are predicted for 2024 too, buying a home can be a sound investment that not only offers financial benefits, but also allows you to customise your home.
1. Financial considerations
When buying a property, financial considerations are crucial. These include borrowing and affordability. At least 20 per cent of the purchase price must be available as equity. So for a property worth CHF 1 million, you will need around CHF 200,000 in equity. As a rule of thumb when renting, housing costs should never exceed one-third of your gross income.
2. Risk assessment
In addition to affordability, potential risks such as job loss or health problems need to be taken into account. It is advisable to keep an eye on interest rate developments and talk to financial professionals to get a holistic picture of your financial situation.
3. Tax considerations
As an owner, you have to tax your imputed rental value as notional income. This can lead to a higher tax burden, especially if mortgage rates and maintenance costs are low.
4. Personal considerations
Choosing between buying and renting also involves personal values and life plans. Consider whether you want to stay in one place for the long term and how important the freedom to customise your home is to you.
Owning a property has many advantages. In addition to the ability to invest capital in a usable asset that offers both financial and emotional returns unlike stocks or bonds, home ownership is an excellent retirement provision. If you pay off your mortgage by the time you retire, your housing costs will be considerably reduced in old age. Furthermore, a well-located property can increase in value, making a later sale profitable.
However, owning a property also has disadvantages. You will be less flexible when changing jobs or moving and will have to deal with renovations and replacements of electrical appliances. What’s more, your own rental value can increase your tax burden, especially if you enter a higher tax band.
Choosing between buying and renting requires a comprehensive consideration of financial, personal and tax-related factors. Both options have their advantages, and the decision depends on your individual circumstances and preferences. We will be happy to help you make the living situation of your dreams come true – whether you choose to buy or rent.
