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Switzerland: How buying real-estate can kill you financially/reasons for stocks

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Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#11

Post by sulam »

cgb223 wrote: post #9
marklit wrote: post #7

I would suspect a few of these wealthy foreigners buying property are trying to make sure there wealth is tied up in something their home state cannot take away ownership of. If it depreciates a bit, it's probably fine. 97% of something is better than nothing. I also suspect they have nice stock portfolios already as well.

Makes sense A lot of Chinese nationals are buying property in the states and Canada in order to accomplish the same thing I wonder how this kind of cash parking affects property values?

You wonder? It's easy to guess. They go up. A lot.

But you don't have to guess, just look at property values for anything at all nice in Vancouver. Practically the whole city could not afford to buy a house there on their current income.

Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#12

Post by corford »

ryanbertrand wrote: post #8
alecco wrote: post #2

Buy a small place enough to live. If you take a mortgage pay it as soon as possible to be debt-free. Then invest in diverse things with best return while being tax smart. Perhaps barbell method.

Switzerland makes home owners pay taxes as if they rented the house out for 12 months each year. This could add a nice chunk to your net cost of owning.

Which I guess most landlords would simply pass on to the tenants?

Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#13

Post by marklit »

s3nnyy wrote: post #10
marklit wrote: post #7

I would suspect a few of these wealthy foreigners buying property are trying to make sure there wealth is tied up in something their home state cannot take away ownership of. If it depreciates a bit, it's probably fine. 97% of something is better than nothing. I also suspect they have nice stock portfolios already as well.

OP here: I heard from people working in hotels that some expensive ones loose millions each year but wealthy people from Arab countries who own them don't care.

Their assets in Switzerland would be priced in CHF. It could be a good diversification from USD-priced assets they have at home. There was a single-day 30% pop in CHF a few years back.

Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#14

Post by Retozi »

davidgay wrote: post #4
alecco wrote: post #2

Buy a small place enough to live. If you take a mortgage pay it as soon as possible to be debt-free. Then invest in diverse things with best return while being tax smart. Perhaps barbell method.

My understanding is that's not a wise Swiss-property investment strategy (the subject of this article after all...). There, the combination of no capital gain taxes, a tax on wealth, very-low-and-stable interest rates means that one should take an interest-only-mortgage and invest what would have otherwise been your principal payments...

This is a quite common myth that is factually wrong. It's the main way for a private wealth advisors to talk somebody into a unecessary mortage.

The interest rate on mortages is always higher compared to the interest rate on leverage for stock (by using the stock itself as collateral).

You can get close to the yield on swiss confederation bonds if you buy well priced, leveraged ETFs.

Obviously that interest rate is as stable if not more stable than the interest rates on mortages.

Please DO NOT buy stocks with money from a mortage. you're just giving up at least 1% yield.

Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#15

Post by jondubois »

I'm not so sure that it's a safe bet to assume that stocks will keep going up by 10% per year every year in the future.

I think we've already reached a point where people are starting to complain about corporations getting too big and becoming too powerful.

What drove increases in the stock market in the past few decades has been the replacement of many small businesses by few large corporate entities.

Economies of scale have been a double-edged sword; while they have allowed consumers to purchase non-essential goods and services (such as electronic devices and appliances, holidays, clothing, entertainment...) for cheaper, they have also been responsible for driving up the prices of essentials likes housing, transport, electricity, medicine, education, etc (e.g. by shifting the workforce to big cities where corporate HQs are)...

I think we'll reach a point in the near future when city-dwellers will start running out of resources to support basic living essentials and this will force them out of cities - This will drive real estate prices down but it will also drive down stock prices which depend on that lifestyle.

I think the bubble that we're in now affects every person on the planet so if/when it bursts, the repercussions will be massive.

Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#17

Post by walshemj »

jondubois wrote: post #15

I'm not so sure that it's a safe bet to assume that stocks will keep going up by 10% per year every year in the future. I think we've already reached a point where people are starting to complain about corporations getting too big and becoming too powerful. What drove increases in the stock market in the past few decades has been the replacement of many small businesses by few large corporate entities. Economies of s…

yeh a lot of investment pros are worried that the market is getting to high I am wondering if I ought to take some of my profits and buy gold etf's or just got cash and wait for the fall to buy back in

Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#18

Post by petre »

corford wrote: post #12
ryanbertrand wrote: post #8

Earlier quoted context omitted.

Switzerland makes home owners pay taxes as if they rented the house out for 12 months each year. This could add a nice chunk to your net cost of owning.

Which I guess most landlords would simply pass on to the tenants?

It's rent adjusted. So if everyone passes it on to the tennants they end up paying more tax.

Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#19

Post by pjc50 »

Retozi wrote: post #14
davidgay wrote: post #4

Earlier quoted context omitted.

My understanding is that's not a wise Swiss-property investment strategy (the subject of this article after all...). There, the combination of no capital gain taxes, a tax on wealth, very-low-and-stable interest rates means that one should take an interest-only-mortgage and invest what would have otherwise been your principal payments...

This is a quite common myth that is factually wrong. It's the main way for a private wealth advisors to talk somebody into a unecessary mortage. The interest rate on mortages is always higher compared to the interest rate on leverage for stock (by using the stock itself as collateral). You can get close to the yield on swiss confederation bonds if you buy well priced, leveraged ETFs. Obviously that interest rate is a…

> leverage for stock

Please note that with leverage (stocks or real estate) is is possible to lose more money than you invest.

Re: Switzerland: How buying real-estate can kill you financially/reasons for stocks

#20

Post by s3nnyy »

j7ake wrote: post #16

So what happens when if you move back to USA would you still get advantages of 0 percent capital gains? Or would you have to move everything to the USA ?

Good question. I think usually you are taxed where you live. Unless you are a US citizen, then you are taxed also by the US if you earn more than $100k.

(As an American, if you open a bank account in Switzerland you have to declare a special form, stating that you will correctly declare taxes to the US etc. I think you even have to fill this form if you hold a green-card or ever worked/paid taxes in your life in the US).

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