Half of Swiss homebuyers raid pension pot for funding

Buying a house? One in two Swiss people empty their second pillar Keystone-SDA

As property prices continue to rise while people's purchasing power stagnates, more and more people are resorting to second pillar pension assets to buy their homes.

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This can lead to problems in old age, an analysis by Moneypark shows.

+ Houses for sale in Switzerland? Yes, but you can’t afford it

According to calculations made by the mortgage advisory and brokerage company on the basis of 7,500 transactions, 48% of buyers use pension fund funds to realise their dream of home ownership. On average almost 70% of the second pillar is invested in the purchase.

The average withdrawal from the pension fund is around CHF115,000, a move that creates a pension gap of around CHF500 per month (calculated with an average conversion rate of 5.3%). Considering that the average age of buyers is 44, there are about 20 years left to close the gap. “If you don’t do this, you risk having to sell your house in old age because you are no longer able to afford it,” warns Lukas Vogt, CEO of MoneyPark.

This is all the more true considering that the rule according to which the mandatory amortisation of the mortgage to two-thirds of the property value should ensure sustainability in old age “has not been valid for some time”, according to the study’s authors.

According to Moneypark, due to falling rents and rising real estate prices, owners at the age of 65 should rather have a sustainability of about 50%. They are therefore forced to reduce their mortgage to about half of the original purchase price.

“This gap should be closed before retirement and additional saving efforts should be made so that the withdrawal does not turn into a boomerang,” the experts advise. MoneyPark recommends an aggressive savings strategy: put the maximum into the third pillar and invest the tax savings in free assets. As a rule of thumb, 2-2.5% of the house purchase price should be saved annually to ensure the long-term sustainability of the real estate investment.

The need for the second pillar is the result of a rapidly growing real estate market: prices have risen by 20% in the last five years, while purchasing power has remained stagnant.

A typical example: an average single-family home in Switzerland now costs around CHF1.35 million, thus requiring at least CHF270,000 in equity capital and a household income of CHF240,000, well above the median income of families with children, which stands at around CHF160,000.

Translated from Italian by DeepL/mga

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