This is a completely unprecedented situation in the Swiss real estate market. In recent months, rates have risen, prices are rising and demand continues to rise. To understand this phenomenon, but above all to answer the dozens of questions asked by Internet users, time organized a webinar on this topic, offered by Retraites Populaires. Sandrine Duvoisin, Head of Private Clients at the Vaud company, answered dozens of questions from internet users.
Le Temps: The real estate market is in a confusing situation. Prices go up, prices go up and demand keeps growing. What’s happening?
Sandrine Duvoisin: We live in a paradox. The rates are increasing mainly due to inflation, the increase in energy prices due to the crisis in Ukraine. Due to the shortage of space and the extremely low vacancy rate (properties not rented on the market), demand remains high.
Will demand stop growing?
Real estate specialists such as Wüest Partner and CIFI expect a small correction in PPE (Ownership Per Floor). On the other hand, they see price stabilization for individual houses, especially in the area of private property.
And in yield goods?
It can be seen that some financial institutions have a more conservative view. But the banks and Finma (financial market policeman) have already taken action, such as requiring 25% equity for the purchase of an investment property. Some financial institutions even require up to 35% equity. These are securities to avoid real estate bubbles.
There is a netizen’s first question about mortgage renewals. This internet user has to renew his loan in 2023. What is the right strategy?
Interest rates have risen sharply over the past six months, but the situation has eased in recent weeks. For a five-year loan, the interest rate is around 2.5%. After ten years we are at 2.9%. This rate cut brings us closer to where we were ten years ago. My advice is to take out a so-called blended mortgage loan, i.e. one part with short and/or medium-term interest rates and another with longer maturities.
And index his credit to the Saron rate? The former Libor?
It should always be compared to a one-year fixed rate. Banks set the Saron rate at the end of the quarter. If the SNB base rate rises, it rises. But don’t forget that you have establishments that have a fixed rate over a year, which is very interesting. It may therefore be worth extending it by a year and waiting to see how the situation develops. Be that as it may, rates of 2.5% over five years remain attractive. I also remind you that financial institutions calculate the financial capacity of the borrower based on a rate of 5%…
At what age is it no longer ideal to invest in real estate…
There is no specific age. Rather, it depends on your income (retired or active) and how much money you have. Age is secondary in thinking. It should also be noted that from the age of 50, if you buy a property for your main residence and want to withdraw money from the 2nd pillar, your pension fund will protect you and will not approve a total withdrawal.
Isn’t the real estate financing system in Switzerland conducive to the development of a bubble?
I remind you that in Switzerland you have to provide 20% equity, while in France, for example, you can buy a property with almost no deposit. I would also like to remind you that the value of real estate has risen sharply over the past decade, which gives a certain margin of safety to the various financial institutions that have provided loans for apartments and private houses to the PSA.
If you own the land, is it better to build it yourself or rent it?
Owning the land puts you in an ideal situation. Because if we consider all the above points, the cost of land has increased significantly in recent years, and not the cost of construction. So land ownership is a real opportunity today. To answer the question: both options are possible, it depends on the situation and personal plans.
What if we don’t have a 66% amortization of our purchase by the time we’re 65?
They have no choice. When buying a property, Finma requires the entity that lends you money to calculate that your mortgage debt does not exceed two-thirds of the value of your property at the time of purchase. It is important that you contact your financial institution to inquire about your options. And if there is an agreement of your establishment, it will be interesting to keep your money for projects such as renovations, adapting your accommodation to stay at home as long as possible and other projects to complement your pension when you retire.
Will the state soon introduce energy-related building refurbishment obligations for private individuals as well?
Difficult to answer this question. By ignoring the political aspect, investing in the renovation of your property is very interesting. Firstly, because the energetic refurbishment increases its value. Then because these improvements reduce your energy bills. And finally, you can deduct that from your taxable income. In any case, it is beneficial to make these renovations.
Current reports on the situation are contradictory. On the one hand, the agencies continue to communicate about rising prices and demand, on the other hand, I have the impression that the objects are taking much longer to sell. What are you thinking, you who are on the ground?
I think the sales are still happening but at a fairer price. After the excitement of rising prices, financial institutions are now taking a more conservative approach to the market and doing double-checks before financing a property purchase. In view of the high prices and the current situation, there is room for negotiation.
And what is the scope for negotiating the interest rate? Does it make sense to play off several banks or insurance companies against each other?
Whether you’re going to become a homeowner or renew your mortgage rate, you need to find out. Every financial institution has advantages and disadvantages. Tariff is not everything. All institutions offer different advantages, be it for example in relation to energetic renovations or penalties when selling the property. You need to do a little market research.
A user asks if it is possible to stagger the renovation of his home over several years to improve his tax deductibility?
Yes, absolutely, but you have to plan your work well. From a tax point of view, the invoice date that is taken into account is important.
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