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Why is the real estate market in Switzerland so restricted?

Property for foreigners
Switzerland is a small country and most of it is uninhabitable! Yes, only 41000 sq. km, and 70% of that is covered in lakes, glaciers and mountains with steep sided valleys, and altitudes up to 4634m (the Monte Rosa being the highest).

With nearly 8 million people to house, it's no wonder that careful management of real-estate resources is a priority.

Switzerland for the Swiss?

Even if you are a Swiss national, buying property isn't easy, and to a degree is discouraged. In fact, only 44% of property in Switzerland is owner-occupied, the rest is generally owned by insurance companies, banks or pension schemes.

Many people are put off by the hurdles:
1. You are obliged to supply a minimum of 20% deposit on all purchases
2. Only half of this deposit can come from your pension fund, the rest must be from savings
3. As an owner occupier, you must pay "rates" - a tax on imaginary rental income that you would have received if the property were rented out
4. When you sell you are subject to an onerous (by Swiss standards) capital gains tax of between 10 and 20%, depending on how long you've owned the property.

So can foreigners buy property in Switzerland?

With real-estate resources being such a sensitive subject, and with the Swiss penchant for rules and regulations, be prepared to enter into a maze of complexity, confusion and exceptions. Also be aware that the situation is changing rapidly, as legislation is brought in in response to national referenda and pressure from the EU. The answer therefore is: "it all depends".

Resident or non-resident?

In broad terms if you are non-resident, then you are not allowed to buy property in Switzerland unless you are a Swiss national.

The big exception to this rule is for holiday homes or serviced apartments, providing the dwelling is located in a place designated as a holiday resort, and providing the annual quota for selling to foreigners has not been exceeded.

Additional restrictions and conditions can be imposed on this exception by the canton or the commune in which the dwelling is situated.

A small further exception is made for secondary residences if the person can provide sufficient proof of a strong relationship to that place. Even then, the property cannot be rented out to third parties.

Another tiny loophole exists for frontalier G permit holders who may be allowed to purchase property for their own use near their place of employment

Note that holiday homes cannot be let on an annual basis - only short term lets are authorised.

Note that purchasers who disregard the rules will be forced to re-sell their properties.

Foreign residents in Switzerland

This is where the legal minefield really begins! To be resident in Switzerland in the first place, is a whole separate minefield of rules and regulations, but probably means that you will possess one of the following permits:

  • L Permit - short-term residency permit 3-12 months
  • B Permit - temporary residency permit, renewed every 5 years
  • C Permit - permanent residency permit, valid indefinitely

If you are a resident C permit holder, then you can buy and sell property with no restrictions.

If you are a resident B permit holder, then you can buy property for your own personal use (owner-occupier). If you change domicile, you may be allowed to purchase property in your new domicile without selling in your old.

If you are an EU national or a national of Iceland, Liechtenstein or Norway and have one of the above permits, then you can buy property.

If you work for an embassy, consulate or international organisation based in Switzerland and can prove that you have been resident for 5 or 10 years (depending on nationality), then you can buy property.

If you are not from the EU or Iceland, Liechtenstein or Norway, then you can buy property provided you have a B or C permit.

Note that being married to a Swiss national has no influence over your entitlement to purchase property.

Note that the nationality or status of the existing owner of a property has no influence over your entitlement to purchase the property.

Note that if you already own property in Switzerland and then move abroad, you are not generally obliged to sell. You may continue ownership, even though you are no longer eligible.

Note that owning property does not give you any rights to residency in Switzerland

Note that inheriting Swiss property if you are a direct descendent doesn't require any authorisation. However if you are not related, then the property must be sold within 2 years.

Are there any changes coming?

Yes - A recent referendum (Feb 2014) decided that it's no longer practical to allow completely free movement of EU nationals into Switzerland with full property rights. The federal government is obliged to put legislation in place within 3 years of the referendum date.

Yes - In June 2014, there is talk of eliminating any access to pension funds for the purchase of property. That would mean you need to have the full 20% as savings. At the moment this is only a proposal, but it may be coming.

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