Swiss real estate: confidence at all times

Switzerland is one of the most developed countries in the world, it ranks first in a number of indicators, including competitiveness and human development. Major cities such as Geneva, Zurich and Basel are among the top ten in the world in terms of quality of life.

The Swiss franc (CHF) is almost equal to the euro (0.96 for 1 CHF) and slightly more expensive than the US dollar: 1 CHF is 1.07 USD; the Swiss franc exchange rate is about 80 rubles.

The average wage in the country is more than 5,000 Swiss francs (about 4,700 euros).

Switzerland has a measured and calm lifestyle. According to the Global Peace Index, the country has one of the lowest crime rates in the world. Apparently, that's why the locals are quite gullible: many of them, especially in small towns, do not close the entrance doors and personal cars.

Several languages are spoken here, four are recognized as official at once: German, French, Italian and Romansh.

Switzerland is certainly an attractive place to live and invest. However, to purchase real estate here, you need to determine the purchase strategy in advance.

A country unlike any other

Switzerland is a special state, being located in the center of Europe, it is not part of the European Union and differs from other European countries in its structure, legislation and policy towards foreigners. It is a federal republic consisting of 26 subjects (20 cantons and 6 semi-cantons). Each canton and semi-canton has its own legislation, but its effect on a number of global issues is limited by federal laws.

The real estate market is regulated both at the federal and cantonal levels, so the purchase rules, pricing policy, and tax burden vary from region to region. The rules for the acquisition of real estate by foreign citizens also differ - not in every canton foreigners can purchase housing.

Due to the different policies of the cantons, local real estate market experts recommend first of all to determine the goals of acquiring real estate: whether it will be permanent residence or vacation; investment or doing business. Only after the correct statement of the task is it worth choosing a suitable location for the purchase.

In addition to legal restrictions, when choosing a region, you also need to pay attention to its infrastructure, for example, the availability of educational institutions, medical organizations. It is also important to ask what kind of business is developed in the place of interest, what is the tax burden.

It is recommended to pay attention to the landscape and climatic features of the area, given their wide range from tundra-like highlands to landscapes typical of the Mediterranean coast.

The best option to explore the region, experts say, is to take a ride through it and see everything with your own eyes. Moreover, Switzerland is not a very big country, within 6-8 hours you can get to any corner of it.

How to choose a suitable place to buy

The fly in the ointment in the attractiveness of Swiss housing is made by restrictions on its purchase by foreign citizens. However, they do not apply to everyone. Foreigners who have EU citizenship and a temporary residence permit or permanent residence card (Permit B or Permit C), that is, who are residents, can purchase any real estate in all cantons. Citizens of other countries with a residence permit (Permit B) have the right to buy housing throughout the canton of their registration only for living in it. With the receipt of a Permit C, they have the opportunity to purchase any residential real estate objects throughout the country both for living and for investment.

For those who do not have these permits (Permit B, C), a special limitation is provided.

These restrictions are reflected in the federal law Lex Koller and consist in the fact that foreign citizens can purchase and own housing in Switzerland only in those cantons, communes or cities where special quotas are provided. There are few such places left in Switzerland. These are, as a rule, tourist destinations in the French-speaking canton of Vaud, where first of all it is worth considering the city of Montreux, the Italian-speaking canton of Ticino with the city of Lugano, as well as individual communes and cities in German-speaking cantons, such as Andermatt or Interlaken.

What kind of housing can I buy here? It can be an apartment or a house, the living area of which does not exceed 200 sq. m.m, and the land plot is not more than 1000 sq. m. (in some cases 250 sq. m. m and 1500 sq.m.m, respectively). At the same time, foreigners have the right to purchase only one housing per family, which can only be used as a second residence, not for the main residence, but for recreation, and can be rented no more than 11 months a year.

In addition to Lex Koller, the Lex Weber law has been in force in Switzerland since 2016, which prohibits the construction of second residences in those regions where their number exceeds 20% of the total number of buildings. In many regions, this percentage has already been exceeded, especially in ski resorts.

Which property is most interesting

Foreign buyers should pay attention to the secondary housing market. These objects are often sold with a quota for foreigners.

One of the most attractive places for such a purchase is the Lake Geneva region in the canton of Vaud. It has a comfortable climate, developed infrastructure and a fairly high business activity.

It is also worth considering the canton of Ticino, especially the area of Lake Lugansk, which is interesting not only for its climate and lower prices compared to Vo. There is practically no business activity here, but education is well developed, there are a number of international schools, the region ranks second in the country in this indicator.

To buy a home in the canton of Ticino, you need to start from a budget of 400,000 Swiss francs - this is the cost of a small apartment. In the canton of Vaud, you will have to pay 30-40% more for similar housing.

In general, the cost of residential real estate in Switzerland ranges from 9,000 to 30,000 Swiss francs per sq. m. Medium-quality housing will cost 13,000 17,000 CHF per sq. m. depending on the region, species characteristics, quality of finishing. More expensive offers are usually exclusive options that will be more difficult to sell in the future.

You can also look for housing in new buildings, but such an opportunity exists only in Montreux and the new Andermatt ski resort in the German canton of Uri, not far from Zurich.

As for Andermatt, he is excluded from Lex Koller. This means that for non-residents there are no restrictions on the purchase of housing, similar to other Swiss regions.

You can buy an apartment here both at the construction stage and ready-made. Every 3-4 months, a new multi-storey building is launched here. The apartments are distinguished by modern finishes and successful layouts.

Prices in Andermatt start from 1 million Swiss francs.For example, a one-bedroom apartment with an area of 84 sq.m can be purchased for 1.25 million CHF. A three-bedroom apartment (170 sq.m.) will cost 2.85 million CHF. At the construction stage, similar offers will cost less.

Real estate in Switzerland is getting more expensive

Good objects leave quickly enough, and prices for them grow by 2-3% per year. In Andermatt, the growth is more intense.

In general, since 2019, the Swiss real estate market has seen a steady increase in prices for all real estate in all regions, and, according to experts, this trend will continue in the next 5–10 years.

However, there is also a trend towards a gradual reduction in the number of residential properties suitable for foreigners. New housing in Switzerland is almost not being built. For example, in 2019, the number of quotas for the construction of private houses decreased by 41% compared to the previous year, and apartment buildings by 25%, which creates a shortage of offers and pushes prices up.

The pandemic has increased the demand for real estate in the mountains, especially the sales of detached houses have increased. The main demand for such housing in 2020 was from residents, but commercial real estate at the same time was quite actively acquired by foreigners, including Russian speakers. This is explained simply – in difficult times, the Swiss currency and real estate become a safe haven for investment. Therefore, during the pandemic, commercial facilities were considered by non-residents as a reliable investment in order to obtain passive income in the form of rent. And what is very important is that there are no restrictions for foreigners both on the purchase of commercial real estate and on renting it out.

The cost of a commercial square is almost the same as a residential one, for example, in the center of Geneva, 1 sq. m of an office building can cost about 20 000 CHF. However, the total price of the object will be higher than the cost of housing, due to the large areas. So,commercial real estate with a price of up to CHF 10 million is sold very quickly on the domestic market. Foreigners should count on the cost of more than 10 million CHF.

Tax burden

Despite the fact that real estate prices in Switzerland are quite high, the transaction costs for its acquisition are considered to be among the lowest in Europe. According to the Global Property Guide, the total costs paid by the buyer usually range from 0.25 to 3.55% of the total value of the property. The buyer's expenses include: a tax on the transfer of ownership of real estate, which ranges from 0.2% to 3.3%, a registration fee of 0.15% and notary fees of 0.1-0.8%. The exact amounts depend on the region, for example, in the canton of Zurich there is no tax on the transfer of ownership, while in the canton of Vaud it is about 1.5-2% of the value of the object.

For sellers in Switzerland, there is a tax on the income received on resale, which depends on the period of ownership of the property, starts at 3.23% for long-term ownership and reaches 40% for sale in the first year. But if the property is sold at the price of its purchase, then this tax is not paid at all.

In addition to taxes, the seller also pays in full the commission of the real estate agency that is involved in the purchase and sale transaction.

The transaction is usually concluded with a notary, he is fully responsible for its purity, as well as for the payment of all taxes and fees, which allows both the buyer and the seller to save their nerves and time.

The acquisition of real estate by non-residents is carried out in several stages. When signing the contract of sale, the buyer transfers 10% of the value of the purchased property to a special notary account. Such an agreement must contain a condition for granting a non-resident foreigner a special permit to purchase real estate in Switzerland. Obtaining a permit is usually handled by the same notary who conducts the transaction and certifies the contract. The contract of sale must specify the deadline for the fulfillment of the condition, which is up to two months from the date of signing the contract. After the notary receives permission from the authorities, the buyer transfers the remaining 90% of the value of the property to the notary's account, after which the latter makes a payment to the seller, and the seller transfers the keys to the new owner.

A non-resident foreigner can also purchase real estate by proxy, which is often issued to an employee of the notary bureau conducting a purchase and sale transaction. It is worth noting that in Switzerland this procedure is practiced quite often.

Of course, the homeowner has regular expenses. The total amount of the burden on the owner per year is from 1.5 to 2% of the cost of the object, including all taxes, utilities and additional expenses.

How to become a resident of Switzerland and buy real estate without restrictions

The presence of real estate does not give the right to obtain a residence permit. But if we are talking about a residence permit (Permit B), then the owner of the property can get it by establishing tax residency. To do this, you need, for example, to conclude a tax agreement for the payment of a lump-sum tax (accord tax or tax on expenses). The amount of this tax is calculated based on all expenses of a foreigner in Switzerland and is appointed by the canton's tax authority. As a rule, you have to pay from 180,000 to 650,000 Swiss francs annually. At the same time, the payer of the lump-sum tax is exempt from paying other taxes on his income worldwide. Most often in this way foreigners receive a residence permit in the cantons of Vaud, Ticino, Geneva, Valais and Zug.

It is more difficult to obtain permanent residence (Permit C), a non-EU citizen needs to have a residence permit (Permit B) and live in Switzerland for 5 to 10 years. If there are special merits (investments, job creation, active participation in the company's activities), permanent residence is granted after 5 years. A permit With is actually equivalent to citizenship, with the exception of voting rights.

Swiss citizenship is not easy to obtain. It also takes time, but not less than 10 years. This period is offset by a residence permit and permanent residence (Permit B and C, respectively), while the presence of Permit C is mandatory for naturalization.

Oksana Scan.

Thank you for your help in preparing the material:

Natalia Gamboa, John Taylor

Natalia Zavalishina, Distant Property

Oleg Sharonov, FF Investment