You’re sitting on 500,000 francs. Your parents’ house sold, the money cleared, and now you’re staring at a number that represents decades of their labor. The studio you own suits you fine, no plans to move. But this capital? It needs to work. The bank pitches a shiny new rental property. Your gut says to park it in ETFs. Then comes the kicker: Switzerland just voted to abolish the Eigenmietwert, and nobody seems sure what actually happens after 2028.
This isn’t a simple asset allocation question. It’s a bet on whether Swiss policy will make real estate investors feel brilliant or trapped.
The Eigenmietwert Abolition: A Tax Revolution Disguised as Relief
Let’s cut through the political rhetoric. The September 2025 vote to scrap the Eigenmietwert passed with 57.7% approval, promising homeowners relief from taxing fictional rental income. What got less airtime? The simultaneous elimination of virtually all property-related tax deductions. Starting (most likely) January 1, 2028, the Swiss tax code performs a neat magic trick: your tax burden might drop, but your ability to offset property expenses vanishes entirely.
The Federal Council’s own implementation documents lay this out starkly. Under current law, you deduct maintenance costs, mortgage interest, energy upgrades, and even demolition expenses from your Eigenmietwert. After 2028? Those deductions disappear for owner-occupied properties. The only exceptions, denkmalpflegerische Arbeiten (heritage conservation) and some energy measures at cantonal discretion, are narrow enough to be irrelevant for most investors.
This creates a perverse incentive: rush to complete renovations before 2027 ends, or pay for them with fully taxed income forever after. Handwerker firms are already warning about capacity crunches as homeowners scramble to lock in deductible status. For a potential real estate investor, this means your pro forma calculations must account for a future where every roof repair and bathroom upgrade hits your after-tax income directly.
The Return Profile: When 3% Meets 0%
Historical data shows Swiss real estate and stocks have delivered roughly equivalent total returns over long periods, around 3% annual appreciation for property, plus rental yield, versus market returns for equities. But this average masks brutal dispersion. Your specific property might outperform in a hot Zurich submarket or lag in a stagnant rural commune. That ETF tracking the SMI? It’s the market, no surprises.
The tax treatment diverges sharply. Swiss stocks generate dividends taxed as income, but capital gains remain famously tax-free for private investors. Real estate? Rental income faces full income tax rates. Worse, the Grundstückgewinnsteuer (property gains tax) claws back 30-60% of your appreciation upon sale, with rates varying wildly by canton and holding period. One investor who sold a rental after 11 years noted it barely beat market returns after taxes and “was a huge amount of hassle.”
The Pillar 2 Leverage Trap
A common pitch: pledge your pension fund (2. Säule) to reduce the down payment, keeping more capital invested. This works, until it doesn’t. Pension funds currently offer miserable returns, sometimes below 1%, so using them as leverage seems smart. But you’re concentrating risk: your retirement savings and your rental property now move in lockstep. If the property needs major repairs and the market dips, you’re trapped between illiquid real estate and a depleted pension pot.
The math only works if you aggressively amortize the mortgage and the property appreciates steadily. Post-2028, with no tax relief on interest, that leverage becomes more expensive in real terms.
Why the S&P 500 Skepticism Misses the Point
Many Swiss investors express unease about “never-ending growth” in US markets. Fair, valuations look stretched, geopolitical risks loom. But this conflates two decisions: asset class and geography. A Swiss investor can build a globally diversified portfolio hedged to CHF, or tilt toward Swiss dividend aristocrats. The question isn’t “US stocks or Swiss property?” It’s “liquid, diversified global assets or one illocal building?”
Swiss stocks offer a unique advantage: the 0% capital gains tax applies equally to domestic and foreign holdings for private investors. Your global ETF gains? Tax-free. Your single rental’s appreciation? Subject to Grundstückgewinnsteuer. The risk-adjusted return profile isn’t close.
The Quantitative Framework You Actually Need
One commenter cut through the noise: “This should be a quantitative decision, and I don’t see a single number mentioned.” They’re right. Build a spreadsheet with:
- Real Estate: Purchase price, Nebenkosten (5% notary/transfer taxes), mortgage rate, expected gross yield (typically 3-4% in Swiss cities), maintenance (1% of value annually), vacancy (5% of rent), property management (if you value your sanity), and your marginal tax rate on rental income. Include Grundstückgewinnsteuer at your canton’s rate for your planned holding period.
- Stocks: Expected return (7-8% nominal for global equities), dividend yield (2-3%), tax on dividends, and 0% capital gains tax. Factor in TER and currency hedging costs.
Run this for 10, 15, and 20 years. The property likely wins only if you capture significant leverage benefits or the specific location booms. Most scenarios show stocks ahead after taxes and hassle.
The 2028 Timing Conundrum
If you’re set on real estate, the clock is ticking. Completing renovations before end-2027 lets you deduct costs under current rules. Waiting means paying with post-tax francs forever. But rushing into a purchase to beat this deadline is dangerous. The market knows this, sellers price in the rush, and you might overpay for a property that makes sense only under the old tax regime.
Conversely, post-2028, the rental market might shift. If homeowners find properties more expensive to maintain, some may sell, increasing rental supply. Or the opposite: fewer new rentals get built, tightening supply. Nobody knows, which is precisely the problem.
The Decision Matrix
Choose real estate if: You have specific market expertise, can self-manage, value illiquidity as a forced savings tool, and believe the specific property will outperform due to location or development potential. Also if you’re in a high tax bracket now and can maximize deductions before 2028.
Choose stocks if: You value liquidity, want global diversification, prefer tax efficiency, and have better uses for your time than unclogging drains. This is the default for most.
The hybrid approach: Use 400k for a diversified stock portfolio, keep 100k liquid for a future property purchase when you find a genuine bargain. Or buy a small property now, deduct renovations before 2028, but keep the majority in equities.
The Bottom Line
Switzerland’s 2028 tax reform doesn’t make real estate investing impossible, it just removes the artificial subsidies that made marginal deals look attractive. The Eigenmietwert system was a complex, unfair mess, but it did offset some ownership costs. Without it, real estate must stand entirely on its own economic merits.
For your 500k CHF, the evidence tilts heavily toward stocks unless you have a compelling, specific property opportunity. The policy uncertainty cuts both ways: it creates risk for real estate but also opportunity if you can navigate the transition intelligently. Most investors won’t. They’ll rush to buy before 2028, overpay, and discover a decade later that their “safe” investment underperformed a boring ETF portfolio after taxes and hassle.
The real question isn’t where to put the money. It’s whether you’re investing for returns or for the psychological comfort of bricks and mortar. In Switzerland’s new tax reality, you can’t afford to pay a premium for comfort.
