Rent or buy: what makes sense when?

What makes more sense: renting or buying? This question can only be answered individually, on a case-by-case basis. But there are certain factors that can help you decide whether you should buy or rent. Read the article to learn which factors, both financial and emotional, are important when deciding whether to rent or buy.

When deciding whether to rent or buy an apartment or a house, there are benefits and drawbacks to consider. The following table gives you an overview of the most important benefits and drawbacks.

Monthly costs will vary, depending on whether you rent or buy. The calculation is based on the net rent, i.e., excluding ancillary costs, and then compared with the monthly costs at the time of purchase. When it comes to the costs of buying a property, the main factor is the monthly financing costs of the mortgage. In addition, an average amount is added for maintenance, tax aspects (imputed rental value, debt interest deduction, maintenance deduction) and the lost return on equity.

Property prices have continued to rise significantly in recent years. Whether this will continue to be the case in the future is theoretically open, but the increased attractiveness of housing and rising immigration indicate that real estate prices in most regions will continue to rise rather than fall.

Unlike with a rental property, if you have purchased your home, you can sell it at a profit when the market is strong. Before you sell a property, you should always form an idea of the current real estate market and how it will develop in the near future. The important question here is how the market is trending in your region. If the timing of the sale is flexible, you can choose the best time.

Capital on deposit generates hardly any return at present. Even if interest rates soon rise to several tenths of a percent, the rate of inflation is forecast to be higher, meaning a loss of value in real terms. That is why real estate is a sensible form of investment nowadays.

And if you invest more than the minimum of 20 percent equity, the monthly mortgage interest payments will be lower. The difference between the regular costs when renting and buying mentioned in the introduction can then change.

Owning your own home gives you a sense of security and independence: you cannot be forced to leave and may do what you want with your property – as long as it does not endanger or bother anyone else. Homeowners have many opportunities to help protect the environment by significantly reducing energy consumption and CO₂ emissions. With good insulation, a new heating system and perhaps a photovoltaic system, you can both reduce your ancillary costs and help protect the climate.

On the other hand, as a renter you are flexible and can move home quickly if you have to for professional reasons or if you need less space because the children have moved out. A divorce or separation is also easier to manage financially. In most cases, the building administrator takes care of maintenance, repairs, bills and purchasing fuel for the heating.

In principle, renting is much easier when it comes to tax issues than buying or owning residential property. This is of course an advantage in terms of the time and effort required for the tax declaration. One important advantage is that tenants do not have to pay tax on the imputed rental value – something that directly affects property owners.

At the same time, tenants have fewer options when it comes to their tax planning. For comparison: Property owners can deduct the payment of mortgage interest from their taxes – for as long as they hold the mortgage. Conversely, tenants cannot claim the rent, which is usually a similar amount to mortgage interest, for tax purposes. This means you can’t save on taxes like homeowners. Your only option is to invest in pillar 3. Such investments can be deducted from taxable income but are limited annually.

As you can see, the question of whether it is cheaper to rent an apartment or buy a home in Switzerland cannot be answered in general terms. It depends on the region, the property, your financial resources, the time of purchase as well as the timescale, taxes and several other things. In addition, hardly anyone will make the decision on a purely financial basis. Find the right answer and get advice if necessary.