Renting or buying – which option is best for you?

Choosing the right option depends on three factors: your personal needs, your financial situation and current market conditions.

Personal needs

Home ownership is great if you're ready to settle down. This lifestyle is ideal for people who wish to commit to one place permanently - for example, because they want to start a family. It also means making a long-term financial commitment.

If you'd prefer to remain flexible in your professional or private life, you may be better off renting an apartment. This will allow you to relocate quickly and easily. It also means the money not tied up in a property will be available for other things, such as leisure pursuits or retirement provision.

Financial situation

Your available budget is a key factor in deciding whether buying a home is a viable option or whether renting would be preferable. Generally, you need to make a downpayment of at least 20% of the property price.

Equally important is being able to cover home ownership costs over an extended period of time, which is known as affordability. Put simply, this means that interest, repayments, maintenance and ancillary costs combined may not amount to more than one third of your regular income.

Maintenance and ancillary costs include charges for water, sewage, waste disposal, electricity and heating, as well as insurance and maintenance expenses. You should factor in around 1% of the property value each year for these costs.

Current market conditions

Particularly in cities such as Zurich and Geneva, property prices are currently so high that home ownership is simply unaffordable for many people. There may be cheaper alternatives in more rural areas, but even prices here are rising in locations with good transport links.

It is also important to consider the development of mortgage interest rates. Their level is closely linked to the key interest rates set by the Swiss National Bank (SNB). If the SNB lowers interest rates, banks can borrow money at lower costs, enabling them to offer more favourable mortgage deals. With the key interest rate standing at 0.25%, that's the case at the moment. This is an attractive environment for buying residential property provided affordability is guaranteed.

By contrast, rising key interest rates push mortgage rates up. That means higher monthly costs for homeowners. That's why it is advisable to take out a long-term, fixed-rate mortgage during periods of low interest rates. This secures a favourable interest rate for the entire term.

Marcel Müller is a customer advisor at Migros Bank and a mortgage expert.