By Swiss Alps Properties
The Swiss had feared that overseas buyers were pushing up property prices and so introduced limits on where and what non-residents could buy. Yet the Swiss recently voted against any further controls over foreign property ownership and, while the process of acquiring a property may seem complicated to foreigners, this guide will attempt to clarify and explain the requirements for owning a Swiss home.
Switzerland currently restricts the sale of second homes to foreigners by imposing an annual quota of 1,440 permits available to buy property. This figure is subsequently subdivided amongst the cantons (the majority of which are in the major tourist areas, for example 330 in Valais) and further subdivided among the communes.
Under the law, foreigners are not permitted to buy in the major cities such as Geneva, Berne and Zurich and may only buy in certain cantons and in certain tourist resorts. In some areas buyers are also restricted on what type of property and size they can purchase, with a maximum of 250m2 living space, not including balconies and basement on a land plot of 1,000m2. This would be the equivalent of a spacious four-bedroom chalet.
Once you or your estate agent have found the property you would like to buy, your agent will refer you to a notary who works on behalf of both buyer and seller and is legally bound and professionally indemnified to conduct the sale fairly. The notary will apply to the canton on behalf of the buyer for an authorisation to buy.
Authorisations are allocated every three months and once granted, the buyer must sign the deed of sale within 30 days. Should the buyer not be able to return to sign the deed of sale easily, it is possible to sign via a power of attorney.
For re-sale property that is owned by a foreigner already, the permit simply transfers with the property so there is no need to apply for another permit. On completion of the deed of sale, the notary submits the documents to the canton and transfer of ownership usually takes from four to 12 weeks.
All purchases of property in canton valais require the owner to keep the property for five years unless they can prove extreme circumstances such as divorce, bankruptcy, death of a family member or ill health.
There are a number of additional legal restrictions that have to be considered when looking to buy property for sale in Switzerland. Only one property per family (husband and wife) may be purchased in Switzerland by non-Swiss residents. 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 one week, as you, your family or friends are supposed to use the property for at least three weeks of the year.
It is not possible for a foreigner to purchase a property in the name of a company.
To purchase larger properties in excess of 240 – 250m2 it is possible for two siblings or parent/child (over 20 with own income stream) to purchase together. Under these circumstances the notary will apply for two authorisations.
If you need a mortgage, local banks will lend up to 70% of the property value depending on your financial circumstances. Due to Switzerland’s monetary policy, interest rates are among the lowest in the world and banks will lend for ten years at fixed rates below 2%. A Swiss mortgage (both variable and fixed options available) is effectively an overdraft secured against the property with the borrower paying interest on the capital. Capital repayments on loans can be taken for up to 25 years.
In Switzerland there is also a mortgage registration fee you have to pay and this varies by canton. In canton Valais this is a flat fee of 1.6% of the loan value, while in canton Vaud it is based on a sliding scale ranging from 0.6% to 0.44%.
The notary will liaise with the bank for the registration of the mortgage.
New-build off-plan developments are usually paid in stages via the notary. The buyer signs a reservation agreement and pays a deposit. The bank will make the remaining stage payments as the construction proceeds (typically when the foundations and roof are started) with the final payment taking place after a satisfactory snagging inspection has taken place. New build construction carries a five-year guarantee for construction defects and ten years for hidden defects.
Switzerland is one of the cheapest countries in Europe to buy or sell a property. Purchase fees include the notary’s fee, land registry fees and taxes which vary from canton to canton. In canton Valais they total around 3% of the purchase price, in canton Vaud they are around 5%.
Annual running costs are around 0.75% of the purchase price and should easily be covered if the property is rented out when not in use.
Since the Swiss have imposed a law setting a 20% cap on the proportion of second homes in every commune, once the current stock of new builds has been sold, those wishing to buy a Swiss property will have to purchase resale properties.