Swiss real estate has long been considered a safe investment, and in recent years prices have been on the rise. Renowned ski resorts, picturesque mountain views, and the chalet design legacy can make a Swiss holiday home that much more attractive to investors. Whether you are looking for rental returns or own-use holidays, the stunning views of chalets perched atop the peaks of Switzerland can be enjoyed year-round by both tenants and owners. From rustic charm chalets to luxury retreats, there are myriad housing options available when it comes to investing in a Swiss holiday home.

The idea of owning a holiday home in Switzerland might sound far-fetched to many, but for those who live in Switzerland, owning a holiday home in the beautiful Swiss mountains is not uncommon. Between 10% to 15% of Swiss people own holiday homes in Switzerland. If you are an investor considering investing in a swiss holiday home, you might look at it differently.

In this article, I will explain the regulations, financing requirements, and costs of buying a holiday home in Switzerland. We will find out if a holiday home is a good investment.

The Advantages of Owning a Swiss Holiday Home

Your Personal Holiday Home

Switzerland is a beautiful country with stunning alpine scenery, and its coziness makes it an ideal destination year-round. Additionally, when you purchase real estate in Switzerland, you benefit from its strong legal system, reliable infrastructure, and fantastic lifestyle.

Given the well-established road infrastructure and public transportation system, people who live in Switzerland can easily reach a ski resort or mountainous region in a couple of hours. Therefore holiday homeowners can easily get there and use their holiday homes frequently throughout the year.

Holiday homes are usually located near ski resorts where owners can enjoy plenty of outdoor activities in Winter and Summer. There are miles-long hiking trails, ski pistes, mountain biking roads, etc. It truly elevates your quality of life and provides you and your family with nice memories.

Unlike hotels where you book in advance, then you have to pack and check in/out. You have everything you need in your Swiss chalet or mountain home. That saves a lot of hassle.

Possibility to Rent it Out

When you are not using your vacation home, you can list it on Airbnb or many another holiday home short rental websites. It is very common that during the winter season, swiss families rent a holiday home for a week to take a ski vacation. Especially almost all kids learn how to ski at a young age, so it is practical to book a week-long vacation, and the kids can take ski lessons.

As a vacation home owner, you can practically rent your apartment for about 10 weeks during the ski season. A weekly rental income for a 2 bedroom apartment can be around CHF1500 or even higher depending on the location, quality of the apartment, and so on. No matter what the amount is, it will definitely help you cover some costs associated with owning a holiday home.

During the summer holidays, you can again rent it out for several weeks. Overall, it might just break even your yearly cost.

The Disadvantages of Owning a Swiss Holiday Home

Most of the disadvantages come from the financial side – the cost of owning a Swiss vacation home. There are many different types of costs to owning a vacation home in Switzerland; depending on where your property is located, it will be subject to cantonal taxation and regulation. Some costs are:

• higher down payment
• higher interest rate
• higher amortization
• transfer tax/property tax
• income and wealth taxes
• contribution to renewal fund or renovation costs
• cleaning fees, property management fees etc; if you were to rent it out when not using it.

Most Swiss Chalet or holiday homes are quite old. Therefore they need a lot of renovation work over the years. You have to contribute to the renewal fund or even spend a large sum on replacing windows and roofs for better isolation, a common problem with many old buildings. Additionally, when the building is not yet renovated, the monthly utilities and heating costs will be very high.

Another disadvantage is the ease of resale. Due to the stringent requirement, not everyone can afford to buy a holiday home. Therefore the property is less liquid than primary residential properties, particularly in a high-interest-rate environment.

Cost of Buying

Downpayment

When you purchase a primary residence, you only need to put 20% as a downpayment, among which you can use your second and third-pillar pension fund to finance a maximum of 10% of the purchase value. For holiday homes, many banks require a 35% to 40% downpayment. And you can not use your second or third-pillar pension fund to finance it.

Amortization

For a primary residence, you can amortize your property to 65% loan-to-value ratio within 15 years, leaving 65% of your purchase price as the loan, and you never need to pay it back. You can pay interest on it as long as you want. For a holiday home, you have to amortize it to 50% loan-to-value ratio within 15 years. That means the monthly amortization amount is bigger.

Interest

Regarding interest rates, banks usually take a more conservative approach. Because when there is a crisis, owners usually forgo their secondary homes instead of their primary residence. The risks are higher for the bank. According to Migros Bank, the interest rate for a holiday home is 0.25% higher than financing a primary residence.

Tax and fees

In certain cantons, there is an additional tax for buying. In canton Bern, you will pay a change of ownership tax (Handänderungssteuer). For holiday homes, that is 1.8% of the total value of the property. There are the other usual taxes and fees such as notarization, change of land registry and so on. The total tax and fees can mount to tens of thousands depending on the property value.

Swiss real estate has long been considered a safe investment, and in recent years prices have been on the rise. Renowned ski resorts, picturesque mountain views, and the chalet design legacy can make a Swiss holiday home much more attractive to investors. Whether you are looking for rental returns or own-use holidays, the stunning views of chalets perched atop the peaks of Switzerland can be enjoyed year-round by both tenants and owners. From rustic charm chalets to luxury retreats, myriad housing options are available when it comes to investing in a Swiss holiday home.

Cost of Owning

When you take the interest payment, amortization payment, and utility cost into consideration, the monthly cash flow required to own a holiday home is quite significant. Let me show you a simple example of a CHF600,000 worth of holiday home in the canton of Bern.

 

*Assumptions

Be aware here that for the simplicity of calculation, I used the flat interest payment amount. As you will pay the amortization every year, the loan amount will be reduced, and therefore interest payment will be CHF500 less each year (20,000 X 2.5%=CHF500).

You can see that the monthly cash flow required is CHF2650 to keep owning this holiday home.

Opportunity cost

If you invest CHF210,000 in a stock market or elsewhere, that could generate a positive return over time (my favorite example is the S&P500 ETF with an average annualized return of 10%).

If you were to invest it in the S&P500 ETF, your annualized return would be CHF21,000 per year.

Property management

If you were to rent it out in summer and winter, don’t forget to factor in the property management cost. You would need someone to help you with cleaning, guest check-in/out, managing the property, and doing repairs if required.

Conclusion

In conclusion, buying and owning a holiday home can be exciting, but being aware of all the associated costs is essential. As with any real estate purchase, there are upfront costs, such as a down payment and various taxes and fees. Additionally, there are ongoing costs such as interest payments, amortization payments, utilities, and property taxes. Is a holiday home a good investment? I don’t think so. From my point of view, it is more like a consumer good than an investment.

However, if you can find a good property with a great price in a popular tourist location, you might make a good profit from short-term rentals.