Buying or renting: which option is more cost-effective?

This article presents the key elements for determining whether renting or buying is more advantageous, depending on your personal and financial situation.

Advantages and disadvantages of buying a property

1. Advantages

Protection against inflation: real estate values tend to follow — or even exceed — long-term price increases, helping preserve your real wealth.

Building capital: property can play a crucial role in retirement planning, especially if the mortgage is largely repaid before retirement.

Potential for property appreciation: in attractive areas, real estate prices have historically risen, offering the prospect of long-term capital gains.

Freedom of customization: as an owner, you decide on renovations and interior and exterior modifications, without restrictions linked to renting.

Residential stability: no risk of lease termination by a landlord; you control how long you stay in the property.

Tax advantages: during a first purchase, mortgage interest and certain maintenance costs are tax-deductible, which can reduce overall tax burden.

2. Disadvantages

Maintenance and renovation costs: all repairs, work and replacements (roof, heating, facade, etc.) are financed by the owner.

Reduced mobility: ownership implies geographical commitment; moving quickly is more complicated than when renting.

Market volatility: property values can fluctuate, with potential declines in periods of economic uncertainty or reduced regional attractiveness.

Complex inheritance situations: property transfer can become complicated, particularly when several heirs are involved.

Personal financial risk: life events such as job loss, divorce or disability may affect your ability to manage property-related costs.

Lower liquidity: property cannot be sold quickly; accessing cash in an emergency is harder than with liquid financial investments.

Advantages and disadvantages of renting

1. Advantages

Mobility and flexibility: easier to move in case of career, family or lifestyle changes.

Fewer responsibilities: no administrative or property-related obligations.

No renovation costs: major works and structural renovations are usually covered by the landlord.

Available capital: no need to tie up substantial funds as down payment, leaving more liquidity for other projects or investments.

Reduced maintenance expenses: landlords cover most maintenance costs and their organization, saving time and money.

2. Disadvantages

Limited freedom of customization: major modifications require landlord approval and must be reversed if not accepted by the new tenant.

Rules and restrictions: tenants must follow building rules and landlord/administration regulations.

Lease termination risk: the landlord may terminate the lease within legal conditions, potentially requiring an unplanned move.

No asset building: rent payments do not build wealth — money paid each month does not contribute to personal capital.

Rent or buy: what is your profile?

In Switzerland, the decision to rent or buy goes beyond purely financial aspects. It depends primarily on lifestyle, priorities and medium- to long-term plans. Consider the following questions:

• What are my personal and professional plans for the next five to ten years (international mobility, family changes, etc.)?

• Can I realistically commit to owning long-term, or are changes expected (training, career switch, sabbatical)?

• Am I ready to stay in the same place for at least ten years, or do I need flexibility?

• Do I have a clear vision of where I want to live in retirement?

• How much living space do I really need now and in the future?

• Do I prefer an urban or rural lifestyle?

When is renting or buying more advisable?

There is no universal answer. The right choice depends on your personal situation, goals and market context. Every life plan implies different needs, alongside external factors such as real-estate market trends and interest rates.

Buying may be advantageous if:

• You have at least 20% equity to finance the purchase.

• You wish to live long-term in one region.

• You want to build or pass on wealth.

• You want full control over construction standards, energy choices and interior design.

• You are prepared to cover maintenance and renovation costs.

• Market conditions are favorable (low interest rates, moderate prices).

• Real-estate prospects are stable or positive, suggesting long-term appreciation.

Renting may be better if:

• You do not yet have sufficient equity or prefer to keep liquidity for other projects.

• You value flexibility for professional, family or lifestyle reasons.

• You do not want the responsibilities and costs of renovations and maintenance.

• Your financial or professional situation is uncertain.

Monthly cost comparison: renting vs buying

Monthly costs vary depending on whether you rent or buy a home. For rentals, the calculation is generally based on the net rent, which is your main monthly expense. When buying, monthly costs are more complex and include mortgage interest and maintenance and renovation costs. All of these factors allow you to realistically compare the monthly cost of buying with the net rent.

Key points before buying

Equity requirements

To finance a property in Switzerland, you generally need to have at least 20% of the purchase price in equity, with banks typically financing up to 80%. Example: for a property worth CHF 1 million, you would need CHF 200,000 in equity.

Affordability

Housing costs must not exceed one third of gross income. These include mortgage interest and a provision of approximately 1% of the property price for maintenance and ancillary costs. Thus, for a property worth CHF 1 million with an 80% mortgage, you need to have a gross annual income of around CHF 150,000.

Interest rate outlook & risks

Many potential buyers focus solely on the current mortgage rate. However, other factors must be taken into account, including possible interest rate increases and personal risks (job loss, disability, divorce, death, and maintenance costs over the term of the loan).

Before buying, it is recommended to:

1. Assess financial capacity with a banking advisor.

2. Evaluate long-term risks, not only current conditions.

3. Choose a well-located property that retains value even in weak markets.

Rent or buy: how to decide?

Location of the property: In areas where real estate prices remain moderate, buying may be more advantageous than renting. On the other hand, in areas that are in high demand and already highly valued, acquisition costs are often high, which can make renting more attractive in the short or medium term.

Commitment and property value: Buying is a long-term commitment, and any resale must be anticipated. Here are some questions to ask yourself before buying a property: How long would it take to resell the property? At what price could the property be sold? How is the local real estate market likely to evolve? Is the location desirable (sunshine, quiet, proximity to transportation, services, schools, shops)?

Financial capacity: In addition to the initial investment, the buyer incurs annual costs: mortgage interest on the debt, maintenance costs, and charges.

Conclusion

Choosing between renting and buying depends on many personal, financial, and contextual factors. Ownership offers advantages such as building equity, residential stability, and potential tax benefits, but it also involves financial responsibilities and a long-term commitment. Renting, on the other hand, offers greater flexibility and limited expenses, but at the cost of not building up real estate equity. To make an informed decision, it is essential to assess your financial situation, life plans, mobility prospects, and real estate market conditions. A careful analysis of your financial capacity and risks, combined with professional advice, will help you determine the most suitable option.

Sources

raiffeisen.ch - Article 

ubs.com - Article 

hausinfo.ch - Article 

migrosbank.ch - Article 

allianz.ch - Article