Is there an episode from your consulting activities that you'll never forget, Ms. Gallati?
Manuela Gallati: One case touched me deeply: It was a young family with a child, and they were interested in a single-family home. They came to UBS to get a second quote. They had no savings and wanted to withdraw the deposit they needed from the husband's pension fund. That would have been too risky for a young family - and also a violation of the credit regulations. So I had to discourage them from buying the house.
How did the story end?
I was able to show the family how they could take concrete steps towards affording their own home by saving with pillars 3a and 3b. Today, a few years later, their dream is within reach. I'm looking out for a suitable property for them, and taking advantage of our good contacts with regional real estate agents. My advice even moved the family to make UBS their bank.
Do people often have insufficient equity?
About 10 percent of cases are people who just come into a bank branch - with almost no prior knowledge or savings. I explain to them in detail what factors are crucial for a mortgage. In addition, I calculate the price range of the home they can afford. Then I show how they can realize their dream within just a few years through targeted saving. But the opposite scenario happens too: some customers come in doubting they can afford a home. Their joy is even greater when I explain to them how it can be done.
Who is the typical home buyer?
People between 40 and 50 rarely come to me. There are two main groups: young couples who have started a family, and people who have raised their children and now have different needs. Often, they want an apartment in a better location instead of a big house.
What can one expect from a financial consultation? And how should one prepare for it?
To consult customers professionally, we need to meet in person. This is very important. Every customer should know that we are their partner for all questions: from financing and investments to financial and retirement planning. In order to assess their financial options when buying a property, we also need a copy of their tax return, or documents with information on assets and income. Then we examine the financing options in detail, and create a tailored solution for them. This also covers information on buying a home.
Why is it important to seek assistance early on?
It's often difficult when a customer already has their heart set on a particular home and has fallen in love with it. It's better to discuss in advance what purchase price would be viable over the long term. Many people make the mistake of short-term budgeting, only taking into account the current low interest rates. In the long term, however, there will be additional costs, expenses for amortization, and future renovation work. In addition, you should be able to afford an interest rate of five percent on the mortgage - which is roughly the historical average level.
At what stage do you talk specifically about financing?
We discuss interest rates and the maturity structure of mortgages at the latest in a second conversation. We value a holistic approach, so we take into consideration the maturity of life insurance policies and point out options for direct or indirect repayment of the mortgage.
Aspects such as capital gains tax, property transfer and mortgage notes sound complex. How can these stumbling blocks be circumvented?
We help customers with all aspects. Many people feel better if we have a look at the home ourselves. Or, once the time has arrived, we accompany customers to the notary to have the contract of sale notarized. Of course we provide information on details such as capital gains tax, mortgage notes, or the payment note from the bank, which is a prerequisite for the transfer of ownership.
Catching up in the middle range
The inflation-adjusted bid prices for single-family homes rose 2.2 percent in the first half of the year. This is over 5.5 percent above last year, and is significantly above the long-term average. Regional growth rates reveal interesting insights. At -0.4 percent in real terms, the former leader Lake Geneva, where bid prices have doubled since 2000, posted the first slightly negative figures in a long time. But since the poorest performer, Northwestern Switzerland, also posted negative results, the nationwide price difference did not decrease. In the middle range, Southern Switzerland (with inflation-adjusted growth of 5.6 percent since the start of 2013), Central Switzerland (4.7 percent), and Western Switzerland (3.9 percent) enjoyed above-average growth. Eastern Switzerland by contrast is growing more slowly - in the last half of the year growth was a mere 0.9 percent when adjusted for inflation.
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Home ownership expert
Manuela Gallati (28) is a UBS client advisor in Glarus.