Owning Your Own Apartment or Chalet in Switzerland

The information provided in this section details some of the extensive knowledge we have accumulated during the purchase of our property as well as working with Notaries for clients purchasing their apartments and chalets and hope it assists you with your decision to buy one of the properties we are marketing on behalf of our developers and constructors.

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Permits

Switzerland currently restricts the sale of second homes to foreigners by imposing an annual quota of 1440 permits available to buy property. This is subsequently subdivided among the Cantons and further subdivided among the communes. For example, the very popular Canton of Valais receives just 330 foreigner permits per year.

It is only possible for foreigners to buy in certain Cantons and in certain tourist resorts, with your notary applying for your permit as part of your purchase procedure. In some areas you are also restricted on what type of property you can buy and we’ve seen a big increase in the number of clients applying for Residency to allow them to purchase in resorts that they are currently prohibited from buying in. Please refer to our Residency Section below for more information.

The Swiss Government are currently reviewing the system of foreigner permits as part of their further integration with the EU and it is currently believed that each Commune will control their own development through their own imposed planning regulations which is already happening in some tourist resorts.

Canton Valais

On 1st January 2007, owing to the excessive demand for second homes in certain resorts and the resultant extended waiting times of up to 6 years for the foreigner permit, the Canton of Valais imposed a Moratorium on foreigners purchasing property in 7 communes, while at the same time, other villages imposed their own Moratorium.

This Moratorium was aimed at reducing some of the backlog of outstanding waiting times for foreigner permits in Valais but such was the demand in resorts not affected, the Canton found it had an increased backlog of 1500 permits to clear. The resultant action was the lifting of the moratorium on the 23rd November 2007 and it’s replacement with the current system.

In 2008 it is now possible for Foreigners to once again purchase new build, off plan properties in Canton Valais but there are limited foreigner permits available. Of the 330 permits allocated to Valais in 2008, 165 will go to “warm bed” developments where the foreign owner is obliged to rent their property (some of these involve Apart—Hotels), 66 allocated to begin clearing the backlog of outstanding permits in the system and 99 for new buyers in 2008 (no obligation to rent).

Under the new system, Notaries are no longer allowed to proceed with the signing of the Deed of Sale until the Building Permit and a Foreigner authorisation have been granted by the Ground Register on behalf of the Canton.

It is also no longer possible to purchase a re-sale property unless it is owned by a Foreigner and thus comes with a Foreigner permit. All purchases of new build or re-sale property with permit by foreigners post November 23rd will now require them to keep their property for 10 years unless they can prove extreme circumstances such as divorce, bankruptcy, death of a family member or ill health. Purchases made by foreigners prior to this date cannot re-sell for a period of 5 years.

Canton Vaud

Including the resorts of Leysin, Villars, Les Diablerets and Chateau d’Oex among others, Foreigners buying in Canton Vaud is a lot simpler with access to a wide range of properties. Each Commune has a set number of permits it allocates every year, but in some areas there are not enough and the current waiting time for your purchase permit can be two years. The Developers are happy to assist you with your purchase to resolve these waiting times. Please contact us for more details specific to the project you like.

Unlike Canton Valais, you can re-sell your property after 5 years.

Canton Berne

In the picturesque resort of Grindelwald, foreigners can buy both apartments and chalets with prices in excess of 750’000 CHF.

Swiss Residents holding Permits

If you live in Switzerland or have the relevant B, C or L Permit it is possible to buy properties in locations that foreigners cannot and we have a wide range of properties available to choose from in some fantastic locations. For those foreigners looking to buy in resorts with current restrictions, please see our Residency Section below to find out how you too can become a Permit B Holder.

For more information about what your relevant permit will allow you to buy, please visit our Swiss and Permit page by clicking the link above.

Obtaining Residency to purchase a property

The most common Permit that allows you to buy a property in Switzerland is the Residents B Permit and these are quite easy to obtain, allows you to reside in Switzerland for more than 6 months of the year and therefore take advantage of the high standard of living, the healthy lifestyle, low crime and taxation if you plan to live there for tax purposes.

Obtaining your permit also has the added advantage of removing restrictions on the size of chalet you can build, the number of properties you can own, where you can own, being able to sell immediately, as well as allowing you to buy as soon as your Permit is processed. For more information on the advantages of buying as a Swiss Resident, what permits allow you to buy Swiss Property and where you can buy, please refer to our Swiss and Permit Section.

As Switzerland integrates itself further into the EU, it is now becoming easier for EU passport holders to live and work in Switzerland. For those over 50 who don’t need to work in Switzerland and have the financial means this is an easy process and applications are processed within a couple of months.

It is also possible for younger people to obtain residency with a range of different options to explore without necessarily any negative tax issues though these applications tend to take longer.

Any reservation deposit paid for land, chalet or apartment that is dependant on you obtaining Residency is paid onto the Notary’s Client Account and is completely refundable should you not be granted your permit for any reason.

We work with an English speaking Notary who specialises in the field of Residency and he will be able to assist you with your Permit application as part of the purchase procedure.

For more information please visit the Federal Office for Migration website : http://www.bfm.admin.ch/bfm/en/home.html and click on the Free Movement of persons in Switzerland section.

Plots and chalets size restrictions

The Federal Government of Switzerland currently restrict the size of apartments and chalets that foreigners can buy to 200m2 living space and 1000m2 plots. However there is a small amount of scope to purchase larger sizes should you wish.

Purchase Costs

Purchase costs vary from Canton to Canton and between 2.5—5% of the total purchase price. This includes all taxes, notary and land registration fees. In Canton Valais this is approximately 2.5%,  Canton Berne approximately 3% and Canton Vaud 5%. No notary fees are paid when you sell.

Mortgages & Fees.

Interest rates have always been lower in Switzerland than the UK. Having gone through this process ourselves we can put you in touch with the Bank we used who will be able to arrange your mortgage for you. Mortgages are typically 65% but we work with a bank in Sion that can arrange to 75% depending on your financial circumstances.

Loans of 100% are also possible using other securities such as cash put into the banks investment portfolio and this can be discussed with the director of the bank directly where applicable. The variable floating rate is currently at 3.25—3.5%, while fixed or variable mortgages are available.

In some circumstances such as the brand new apartment project Le Hameau de Nendaz the developer has secured clients an 80% mortgage option.

A Swiss Mortgage is effectively an overdraft secured against the property with the borrower paying interest every 3—6 months (depending on bank) on the capital outstanding and capital repayment on loans can be taken for up to 50 years .

We discovered in the process of buying you are required by Swiss Banks to pay off 20% of the mortgage in 25 years which you need to be aware of and some of the other websites selling Swiss property currently don't mention this.

In Switzerland there is also a Mortgage Registration Fee you have to pay. This is currently 1.6—1.7% placed on the amount of the loan in Valais while in Canton Vaud its based on a sliding scale ranging from 0.6% for a loan of 100,000 to 0.44 for loans up to 500,000.

Please note we do not charge any brokerage service nor get any commission for the introduction to the bank we used. This is merely part of the service we offer, having had to do this ourselves.

Legal Restrictions on Purchase

· Non Swiss may only buy one property per family in Switzerland where a family is defined as husband and wife. Children over 20 who can prove their own financial independence may also purchase one property in their own name.

· An owner or his family may occupy their property for up to six months per year without requiring a residency permit.

· Your property cannot be rented on a full annual basis the maximum being 11 months and 1 week,. as you, your family or friends are supposed to use the property for at least 3 weeks of the year.

· In some Cantons there are restrictions on re-selling your property until after a certain period. Please refer to Permits Section above for more details

· Non Swiss may occupy their chalet or apartment for up to 6 months per year without the need for a Residency Permit.

· It is not possible for a Foreigner to purchase a property in the name of a Company.

Annual Running Costs

Varying from Canton to Canton, these include all taxes (Government, Canton and Commune, National Defence, Land, Tourist), service charges including your own personal costs such as buildings / contents insurance, private utility usage (water, electricity), and any communal charges (heating, service, administration, renovation fund, gardening, snow clearing).

In Valais typically budget 0.75—0.8% of purchase cost for the taxes and 6000—7000 CHF for your service charges, while in Canton Vaud between 1.2—1.4% for your taxes.

For a small fee, one of the many local administration services can handle all of your bill payments, arrange snow clearing, grass cutting, maintenance, delivery of your car to the airport and much more to make your second home as easy as possible to access and  to manage. 

Payment Terms and Construction Guarantees

For new build off plan constructions you will be required to pay at key stages which vary slightly between apartments and chalets as well as developers. The basic rule of thumb applies:

Apartment

· 5% reservation deposit

· 5% signature of the contract at the Notary.

· 20% break ground

· 30% completion of the roof.

· 30% kitchen installed or plastering begins

· 10% within 10 days prior to final completion.

Chalet

· 10%  cost of plot on reservation

· 90% cost of plot within 30 days on signature of the contract at the Notary.

· 30% chalet cost on breaking ground

· 30% chalet cost on completion of the roof.

· 30% chalet cost on kitchen going in or commencement of plastering

· 10% chalet cost within 10 days prior to final completion

For those buying a new build off plan construction, there are federal construction guarantees which protect you. These take the form of 5 years for construction defects and 10 years for any hidden defects.

For those buying a resale property there are no guarantees. As in France the property is sold as seen. For those re-sale properties clients purchase with us, we work with a local architect who is happy to give an examination of the building for a small fee should they wish.

Tax on Profit from Sale of your property

Property in Switzerland is subject to appreciation tax where the taxable profit is the difference between sale price and total purchase price (includes fees, renovations and improvements made. Capital Gains Tax is banded and decreases each year of ownership (30% year one down to 7% if owned for 24 years).

Rental of your property

Easily arranged through local Rental Agencies or Interhome (500 agencies across the globe), these usually charge around 30%+ fees for providing a rental, cleaning, marketing and key holder service.

Rental income can provide an income to cover the annual running costs and is not taxable in Switzerland. It is however taxable in the UK but you can offset interest on your loan and other yearly expenses against tax. See form IR150.

Purchase Procedure

The Swiss Public Notary acting on behalf of both purchaser and Vendor draws up all the legal documents needed for the purchase / sale including the Deed of Sale and applying for your Resident B permit (where applicable) .

Once the property has been selected, the reservation deposit paid and all reservation documents completed and returned to the Notary, they are ready to proceed to signing the Deed of Sale.

In Valais, post November 23rd 2007, unless buying as a Resident B Permit or purchasing a re-sale property with a Foreigner Permit, the Notary cannot actually sign the Deed of Sale until such time as he has received an authorisation from the Ground Register who works on behalf of the Canton.

Similarly, those who are applying for the Residents B Permit will also not be able to sign until they receive their permit. Any reservation deposit paid will be fully refundable should their applications be unsuccessful and will be noted in their reservation form.

The Notary also acts on your behalf to arrange the registration of the required mortgage (see Mortgages and Fees Section).

Should you not be able to return to conclude the sale easily and wish to sign by proxy, clients can either complete the necessary paperwork in either their country of origin or when visiting in Switzerland. If completing this in the UK you will need to go to your local Notary Public with the relevant documents (these will be sent to you) and sign in their presence as well as providing copies of passport(s). In the UK the Foreign Office are legally required to have them counter stamped.

If creating a proxy in Switzerland this can either be the notary handling your purchase or as in most circumstances by our partner in Switzerland who you meet to view properties during your visit.

Inheritance

This is a relatively straightforward process. As each property is Freehold, unless the purchaser is a Swiss Resident, the property passes directly to his or her heir in accordance with English or other European Country Laws. It is advised to have a will specific to your Swiss property registered with one of the local Swiss Notaries such as the Notary that handled your purchase and who is familiar with your circumstances.

Owing to the dual taxation treaty, while In Canton Valais there is 0% inheritance tax, you will be expected to pay the relevant UK amount. In Canton Vaud the tax varies from 1.8% to 4.3% for property valued up to 500’000 and over 500’000 CHF respectively. Property over 1’000’000 CHF pay a tax currently just over 5%. For property registered in multiple names tax is paid on the share of the deceased only.

Viewing Property you are interested in Buying

We spent several days visiting apartments and chalet’s in Valais but it can be done in a day if you so wish. Flights to Geneva are very frequent departing from early in the morning and returning late in the evening should you require it. They are also cheap and can cost from as little as £30 each way including your taxes, making viewing affordable and certainly worthwhile.

We would strongly recommend you visit before buying and would be happy to help you plan your visit and arrange for you to view some of the properties built by our constructors based on what you are looking for and in addition arrange an appointment to meet the Director of the Bank for an informal chat as well.

Disclaimer

Please note these details have been prepared as a guide only. Each Canton applies different rules and regulations pertaining to the purchase and sale of both re-sale and new build off plan constructions and it is not possible to cover every single circumstance in these notes.

We recommend you take further advice with the Notary handling your purchase, Accountant, Tax Specialist or Rental Agency on anything you wish clarified before signing any contract of sale as we cannot be held legally responsible.

 

The Buying Guide to Switzerland