Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

medium.com

Post reply on HN
Print view View original

41–50 of 87 posts

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

#41

Post by bartc »

J-dawg wrote: post #31
uiri wrote: post #29

Earlier quoted context omitted.

Which other "Anglosphere" countries promote home ownership the same way that the US does with e.g. mortgage interest deductions? There are many pairs of otherwise culturally similar countries with differing policies on this (e.g. US & Canada, Belgium & the Netherlands).

Could you explain what you mean by mortgage interest deductions? Does it mean that mortgage interest can be deducted from taxable income? Even if that income is unrelated to the property? In the UK landlords are allowed to deduct mortgage interest from taxable rental income, but this is currently being phased out. (A good thing in my opinion)

Right, in the US, you can deduct mortgage interest and property taxes to lower your taxable income.

There is a mortgage cap of around a million dollars where the deduction ends, which is only relevant in a small number of real estate markets like California, Seattle, New York, and so on.

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

#42

Post by njarboe »

eldavido wrote: post #27

For anyone reading this in the US: don't take this at face value. This (my opinion) is coming from someone who's indifferent between renting vs. owning, so is trying to make the decision purely on financial factors. Reasons why this article does't apply in the US: (1) The "eigenmietwert" the author writes about is known as an "imputed income tax". The idea is, most assets generate income: bonds pay interest, stocks p…

For Prop 13, the assessed value will go up at the inflation rate, capped at 2% a year, from the purchase price. So after thirty years your assessed value be about 1.8 times the purchased price. New taxes can also be added either as a percent of assessed value or a flat per parcel tax. This still produces what you described in (5) but not quite as extreme. Although you did not mention the kicker that Prop 13 allows the low assessed value to be transferred to descendants for a, "let's build a landed aristocracy like old timey Europe" vibe.

Here is a photo of one of these tear-down remodels in La Jolla near the beach[1].

[1]https://njarboe.com/images/LaJollaTeardownSmall.jpg

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

#43

Post by marklit »

iagooar wrote: post #39

Yeah Switzerland is great as long as you don't have children. Once you get a child, well, you're out of luck. Childcare in Switzerland is the craziest expense I've seen in my life, where having your kid looked after for 5 days a week will cost you 2-2,5k CHF / USD per month! And if you have a second child, they might give you 10% discount. So around 4,5k USD per month for 2 kids. It's madness! Besides that, you will…

I have to argue that there are both tax rates and job opportunities available in Switzerland that you'd be hard pressed to find elsewhere in Europe.

If someone it taking home ~300K CHF / year in some sort of support role in a bank in Zurich the above overheads don't seem to be such a deal breaker.

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

#44

Post by joshuaheard »

A couple flaws in the article. If you don't buy a house but buy stocks, you will pay rent. According to the numbers in the article, this nearly cuts the stock return in half. Also, the article states you will lose money on the depreciation of the building, but does not take into account the appreciation of the land. The land appreciation is highly leveraged, as well, since most people typically place only 20% down on the property, but you gain the appreciation on the gross price of the estate.

But I would say that, here is Seattle, and probably all along the West coast, you do have foreign investment, mainly from China, driving up the cost of real estate.

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

#45

Post by s3nnyy »

notadoc wrote: post #34

> While in the US you have regions where people make $50k a year and a house costs $50k — $100k LOL, not on the coastal states. If it's the west coast, people earn 50k while starting house prices are 500k+

In the article, I explicitly mention cities like San Antonio, Houston etc. and link to my source: https://www.numbeo.com/property-investment/rankings_current....

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

#46

Post by fla »

marklit wrote: post #43
iagooar wrote: post #39

Yeah Switzerland is great as long as you don't have children. Once you get a child, well, you're out of luck. Childcare in Switzerland is the craziest expense I've seen in my life, where having your kid looked after for 5 days a week will cost you 2-2,5k CHF / USD per month! And if you have a second child, they might give you 10% discount. So around 4,5k USD per month for 2 kids. It's madness! Besides that, you will…

I have to argue that there are both tax rates and job opportunities available in Switzerland that you'd be hard pressed to find elsewhere in Europe. If someone it taking home ~300K CHF / year in some sort of support role in a bank in Zurich the above overheads don't seem to be such a deal breaker.

If by support you mean IT support, then it will probably a third of that.

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

#47

Post by s3nnyy »

joshuaheard wrote: post #44

A couple flaws in the article. If you don't buy a house but buy stocks, you will pay rent. According to the numbers in the article, this nearly cuts the stock return in half. Also, the article states you will lose money on the depreciation of the building, but does not take into account the appreciation of the land. The land appreciation is highly leveraged, as well, since most people typically place only 20% down on…

OP here.

I think I wrote:

> "the land doubled in value and is worth 200k CHF"

Even if you add up not having to pay rent and possible sale of the house (on which y) you would still end up much better with stocks:

House: You buy the house, after 30 years let's say the value stays the same: You own 500.000 CHF worth of house. (Assuming you had no repairs and the value stayed the same, which is VERY optimistic). You sell the house. you pay a whopping tax on that.

Stocks: You paid rent of 1600 CHF (numbers I used in the article). Within 30 years, you burn ~500.000 CHF on rent but you make 4-8 million CHF with conservative stocks assuming a 7-10% compound interest rate. In Switzerland, you sell this stock tax-free.

Is there anything I am missing?

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

#48

Post by jacalata »

bartc wrote: post #41
J-dawg wrote: post #31

Earlier quoted context omitted.

Could you explain what you mean by mortgage interest deductions? Does it mean that mortgage interest can be deducted from taxable income? Even if that income is unrelated to the property? In the UK landlords are allowed to deduct mortgage interest from taxable rental income, but this is currently being phased out. (A good thing in my opinion)

Right, in the US, you can deduct mortgage interest and property taxes to lower your taxable income. There is a mortgage cap of around a million dollars where the deduction ends, which is only relevant in a small number of real estate markets like California, Seattle, New York, and so on.

Note that this only applies to the mortgage on the house you live in, not for landlords.

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

#49

Post by jacalata »

gnaritas wrote: post #35
tonfa wrote: post #24

Earlier quoted context omitted.

If they rent it they pay income tax anyway (or rather the company that owns the place does). The "virtual rent" added to income is for people who own the place where they live. Switzerland is not very home ownership friendly, at least there are very little tax incentives for it (personally I'd rather have people invest their wealth into productive things rather than real estate, so I find it good). In large cities mo…

I wouldn't call not giving special privileges to home owners over renters unfriendly, I'd call it neutral and fair.

They didn't say it was unfriendly, they said it was not friendly. So, neutral.

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

#50

Post by gilj »

s3nnyy wrote: post #20
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…

One of the very first things they ask you when you open a bank account in Switzerland is whether you are from the US. When I was asked this, and I asked them why this was important (I'm not from the US btw.), the person on the other side of the table told me that if I was, she'd have to get her manager.
Post reply on HN