The purchase of property by foreign investors is regulated by Swiss Federal Law under the Lex Koller regulations. This requires non-residents to obtain a permit from the federal authorities and appropriate cantonal before moving forward with the acquisition.
Lex Koller Regulations
Lex Koller enables foreign investors to buy property in specific areas of the main cantons of Vaud, Valais, Fribourg, Bern, Neuchâtel, Ticino and Graubünden, which are all allocated a share of the annual permissible figure of 1,440. It is therefore possible to buy in most of the main ski resorts within Switzerland. However, if the property is bought to serve as the main residence and not rented out, no permission is required. This is commonly referred to as the ‘Permit B’ route and also involves acquiring Swiss Residency.
Making the Purchase
Once you have found a property that you would like to purchase, you will need to check that you will be able to obtain a mortgage, being sure to factor in any savings that you may have along with any necessary renovation costs and the co-ownership charge, if a shared building.
If you are satisfied that you can afford the property it’s time to put in an offer, either through an agent is using one or direct to the owner through phone or email. If your offer is accepted you may be required to make a deposit to the seller via the notary. This will then be deducted from the purchase price.
In case the seller decides not to sell to you further down the line, ensure you have a written agreement in place specifying that your deposit will be fully refunded.
The process is similar if buying off-plan, except that you will need to put down a deposit and sign a preliminary contract, plus the purchase price will be fixed. Further payments may need to be made as the various stages of the property purchase are completed.
Certain new-builds will require an annual payment of interest on the land (Baurechtzins). This is similar to buying a property leasehold rather than freehold. However, please take legal advice if you choose to buy out the lease as you’ll need to be fully aware of the consequences.
Once you have completed on a new-build you will receive a home warranty for the next 5-10 years depending on the extent of the defect identified.
Making the Move
In Switzerland it is quite common to have a period in which you own two properties at the same time, i.e. your new home and the home you are selling. To avoid this, you will need to ascertain whether the sellers are willing to delay their own move.
Your interests will be represented by a public notary, whose office (Notariatsamt) you will visit once your mortgage is fully confirmed. The seller will join you for this meeting and contracts will be agreed, assuming both parties are satisfied.
The notary will charge up to 5% of the purchase price, however depending on the canton this may be split equally between the buyer and seller. You are able to appoint the notary yourself, or even legal advisor, and are not obliged to accept the notary recommended to you. Your notary will also look after the Land Registry deeds, property transfer tax and paperwork. The tax rate will vary but will be covered by the notary fee.
Buyers must be aware that estate agents and sellers in Switzerland are not legally obliged to alert you to problems with a property or location. You will therefore need to be alert to potential issues before purchasing a property. To assist, you will receive detail in the architect’s valuation, while you are also entitled to instruct a structural survey if you have concerns, despite them being rare in Switzerland.
Purchase fees vary from canton to canton, ranging from between 2.5% and 5% of the purchase price. For example, fees in Canton Bern amount to a total of around 3% of the purchase price, comprising Government purchase tax (1.8%), notary fees (0.8%), land registration fees and registration of mortgage.
There are plenty of foreigner purchase permits in the Canton of Graubünden meaning there is no waiting list. Property transfer taxes (Handänderungssteuer) are roughly 2% and notary fees are around 0.5%, bring total sales costs to around 2.5% of the sales price.
Taxes and notary fees in Canton Valais amount to around 2.5% of the purchase price while in Canton Vaud the total fees are 5% of the purchase price (consisting of a one off property transfer tax of 3.3% plus notary and land registration fees of 1.7%).
Mortgage registration charges also vary from canton to canton.
In Canton Valais it is 1.6% levied on the amount of the loan, however in Canton Vaud it is: up to 100,000 (0.6%), up to 200,000 (0.5%), up to 300,000 (0.47%), up to 400,000 (0.45%) and up to 500,000 (0.44%).
“A number of Swiss banks have all their documentation in English and will lend up to 70% of the purchase.”
A number of Swiss banks have all their documentation in English and will lend up to 70% of the purchase. The loan is normally granted as a current account overdraft secured on the property repayable over 25 years.
Interest is payable every quarter on the outstanding capital balance, with repayments being higher in the earlier years, reducing as the capital is repaid. Swiss interest rates are currently around 1.5% variable rate or fixed at 2% for the first ten years which is the lowest in Europe. Foreign investors can defer changing pounds sterling or euros into Swiss francs for three years as the bank will invest your 30% equity in a pounds or euros investment account. The banks do not require any life insurance or charge a set up fee.
Exchange rates can have a huge bearing on the profitability of your investment, so it is prudent to fully understand the currency risks involved when buying a property in Switzerland. In 2015, the exchange rate of 1 GBP to CHF has ranged from a low of 1.27 in January to a high of 1.55.
This is currently great news for Swiss property hunters from the UK, however your purchase decision should also consider whether the pound will continue to appreciate against the Swiss franc. If you’re confident it will then it would be sensible to take out a mortgage in Switzerland as your overall mortgage value will fall in sterling terms, along with your monthly repayments.