The best areas for capital growth and dual season is in East Switzerland where the recreational property market still offers real potential for further growth.
Switzerland, land of chocolate and cheese, Alpine ski chalets and some of the world’s most trusted banking establishments.
Phil Agius, Managing Director of Pure International, a sales and marketing company specialising in homes in unique environments, explains how the country has carved out a niche as a stable financial haven and how this has ensured the country has become a desirable investment destination.
Nestled between France, Germany, Austria and Italy lies Switzerland, a sanctuary of stability and calm and a destination that remains a sound and secure market for property investors.
Continued demand
When it comes to its property landscape, foresight and a great deal of prudence has resulted in a tightly-regulated and controlled market and this has helped ensure stable, long-term returns for investors in Swiss property.
One of the important factors in making the Swiss real estate market such a prudent investment is the Lex Koller law. This piece of legislation, formerly the ‘Lex Freidrich law’ introduced in 1985, protects the market from excessive speculation by restricting the number of permits for foreign nationals investing in real estate each year to around 1,200.
This means that demand consistently surpasses supply, and this helps keep tight restrictions in the markets in place so that overseas buyers can invest.
Most real estate markets that are now struggling have a surplus of supply speculatively built in anticipation of demand, in combination with rising unemployment and spiraling costs of living. Switzerland has neither of these problems.
It offers welcome respite in these troubled times, buoyed up by its economic stability, low inflation and low costs of borrowing, as well as its political stability and neutrality.
In fact, the country manages a staggering 30% of the world’s wealth, and its rising employment and GDP growth is predicted to outperform the rest of Europe by at least 1.4% in 2008.
Right at the heart of Western Europe, Switzerland boasts excellent transport links with direct flights to most major destinations around the globe and is easily reached by rail from Milan, Paris, Frankfurt, and Munich.
With direct daily flights to Zurich being offered by both Emirates and Etihad airlines the location is more accessible than it has ever been for UAE residents.
Buy-to-let
If your skiing and boarding skills are up to scratch and you long for real slopes after lessons at Ski Dubai then an Alpine hideaway is now a realistic option. The cost of real estate in the country’s mountain resorts is lower than in the French Alps in like-for-like resorts, and the cost of purchasing is significantly lower too (typically 2-5% in Switzerland and 25% in France).
Switzerland attracts visitors year-round, whether for skiing in the winter or hiking in the summer. Chalets and apartments in resorts are therefore always sought after by holidaymakers from all around the globe.
This means that for investors looking to rent out properties in the busy winter and summer seasons, strong yet stable returns can be expected.
In fact, the Swiss statistics office recorded a rise of 54% in overnight stays between 2001 and 2006. Verbier used to attract British and Swedish investors in particular, before the market became saturated.
It can now take anything up to six years to gain legal title to a property there. In addition, buying chalets in certain areas like Canton Valais is now practically impossible.
Flexibility
As a result there now appears to be a greater interest in apartments as not only are they available to buy, but they are also easier to maintain. Owners can simply lock them up and leave when they leave for the season, making it a hassle-free experience.
The best areas for capital growth and dual season is in East Switzerland where the recreational property market still offers real potential for further growth and is within easy reach for the sizable consumer market in southern Germany.
The real hotspots for investment offer good skiing, amenities, proximity to an airport and summer activities to make it a viable rental market all year.
The up-and-coming hotspots to look to out for now in eastern Switzerland are in areas such as Flims, Laax, Davos – home to the annual World Economic Forum where the world’s movers and shakers, well, move and shake for a week each January, and Lenzerheide.
Canny investors may even look to the Indian film studios to help boost rental incomes. In the 1980s, violence in Kashmir – a preferred Bollywood location, led to studios seeking alternative sites for shoots.
Switzerland’s snowcapped mountains and luscious meadows saw it become the perfect stand-in, and it remains a sought-after location for India’s movie-makers.
Buying to live and buying to let gives owners the flexibility to use the property as a second home or for holiday lettings, giving them continuous rental income.
Under Swiss law, an owner or its family can occupy the property for up to six months every year, with a maximum stay of three months on a visit.
If the owner wishes to stay for a longer period of time, then a permit needs to be applied for. Since 2002, a bilateral agreement between Switzerland and the European Union has given citizens from any of the EU countries several more flexible options to live in Switzerland.
Investments are available to those on a range of budgets. Properties range from fully-furnished two-bedroom ski-in, ski-out apartments at the snow-boarding and free-skier wonderland that is Rocks Resort in Laax, 90 minutes from Zurich, with prices from US$435,590, to uber-luxurious eight-bedroom Shangri-La chalets priced at US$6.9m.
It is usually recommended that buyers take out an overseas mortgage in Switzerland.
The standard loan granted by Swiss banks for purchasers is usually around two thirds of the sales price, including parking spaces. However, even in today’s market it is possible to be granted up to 80% loan-to-value.
Total taxes in Switzerland are minimal in relation to purchase prices, varying from 0.8% to 1.3% of the purchase price per annum depending on how the property is financed.
There are three levels of taxes: federal tax, cantonal tax, and communal tax and in addition any non-Swiss residents will also be liable for income tax, wealth tax and property tax.
For any foreign nationals wanting to invest in Swiss real estate it would be wise to be aware of the restrictions in place. Investors are only allowed to buy one property with a size limit of no more than 200 sq m. There are usually resale restrictions of five years, but it varies between regions.
However, prospective investors should keep in mind that these restrictions exist to protect the market and make real estate in the country a sound investment.
Courtesy of Pure International.
Follow us on
