Happy tenant or unhappy owner?

November 23 2021, 3 minutes

Hardly anything can beat the experience of having your own four walls. Many people have a desire to acquire residential property – including Stefan and his wife Ana. A particular attractive aspect is the current level of mortgage interest rates, which are at a historic low. This favourable financing environment makes it the ideal time to really start thinking about buying a property. But is home ownership really all upside?

Buying a property

Stefan and Ana want to realise their dream of owning their own home. Thanks to their combined savings and a gift from Ana’s parents back in the summer of 2019, they have sufficient equity (at least 20% of the purchase price) to finance such an acquisition. They also have enough regular employment income. This young family is already looking forward to long summer nights in their garden, doing their own interior design, and benefiting from lower monthly outgoings thanks to the absence of rent bills. Nonetheless, they are giving some thought to the costs that need to be factored into their budget planning. Home ownership brings with it a number of new expenses, including maintenance and other costs that fall to the owner, the later financial burden of repaying the mortgage or undertaking renovations, and certain tax changes.

Tax repercussions

Tax aspects play an important role when purchasing property in Switzerland. Even if the property is occupied by the owners themselves, the so-called imputed rental value will trigger an additional tax on income. By contrast, mortgage interest costs can be fully deducted from taxable income at the same time. Property maintenance costs that have a value-preserving effect are also deductible. Owners can opt for a flat-rate deduction of 10% or 20% of the imputed rental value (depending on the age of the property in question), or they can deduct the eligible maintenance costs actually incurred.

Advantages of buying a property

Increase in property value: If the property is in a good location, it will always be a sought-after asset. Land is in short supply and is appreciating in many areas.
Cheaper living costs: If mortgage interest rates remain low, the monthly costs of a comparable rental property will be much higher than the mortgage financing costs.
Retirement: The mortgage can be reduced to a reasonable level through annual repayments, which will then make it affordable even with lower retirement income.
Own four walls: No one can serve notice on your tenure and, unlike with a rental property, you can renovate your own home or make alterations to it as you wish.

Disadvantages of buying a property

Liquidity: Your savings are invested in the property as equity and cannot be used for other acquisitions – such as a new car, for example.
Moving house: Switching rental apartments is much easier – for example, if you have to change your place of work, become unemployed, find yourself in a dispute with neighbours, or suffer mobility problems in old age or in the event of disability.
Inheritance: Property is difficult to divide up between multiple descendants. This can lead to unpleasant family disputes. Renters are more likely to have savings, which are much easier to pass on in fractions.
Property maintenance: Any renovation, refurbishment and other maintenance costs are borne by the owner. These are often difficult to calculate, particularly in the case of older properties. Tenants pay simply rent, including ancillary costs.

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Aliu Agnesa

Agnesa Aliu, Tax Consultant, has worked for Zuger Kantonalbank since the start of 2018. She draws up tax declarations for our clients, ensuring that all possible deductions are applied. Thanks to her experience, she delivers the best result for every tax return. She resolves any client concerns professionally and competently. Agnesa likes spending her leisure time most of all with her children.

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