SWISS Insight
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RESIDENTIAL RESEARCH SWISS insight Key findings Mar 2013 Switzerland remains one of Europe’s most stable and prosperous economies, an important ‘safe-haven’ for wealthy investors. Although new laws and Prime prices in Geneva and Zurich fell marginally in 2012, by 6% and taxes introduced some uncertainty to the market in 2012, luxury sales 2.5% respectively volumes have held firm, driven in part by stronger demand from Euro-based buyers. Kate Everett-Allen assesses current market conditions: Enquiries from French and Spanish HNWIs have increased since late 2012 The Swiss economy recovered strongly in of between 10% and 15% as vendors have become Mainstream property prices in 2010-11 having proved better insulated from the more realistic, conscious that the pre-crisis highs Switzerland rose by 3.9% in 2012, ravages of the financial crisis than its European have waned. neighbours but it could face testing times in 2013 while prices fell by 2.1% across 2012 provided mixed fortunes for the luxury as Switzerland’s key export market – the EU – the Eurozone property market. Despite rising sales volumes still grapples with recession. This diverging trend prime prices in Geneva and Zurich fell marginally, Zurich has seen luxury sales volumes is expected to continue with Swiss GDP growth by 6% and 2.5% respectively due in part to stricter rise due to an increase in stock estimated to reach 1.2% in 2013 compared to lending policy and a new set of laws and taxes levels, rather than a step-change in -0.3% for the Eurozone. which introduced a measure of uncertainty. A lack market sentiment In 2011 the rapid appreciation of the Swiss franc of clarity surrounding Lex Weber’s introduction Geneva has seen prime prices soften led the Swiss National Bank (SNB) to adopt an (a 20% cap on second homes, (see margin)), from their pre-crisis high and vendors exchange-rate floor of CHF 1.20:€1. Prior to the tightening of banking rules in relation to are adopting a more realistic attitude this move, not only were exports suffering but undeclared assets (the Rubik Accords) and the to pricing some residential property buyers considered proposal to change federal rules on lump sum that the franc’s strength negated the tax savings taxation led some buyers to adopt a “wait and of relocating to Switzerland, many instead opted see” approach. to rent. The outlook for prime prices in Switzerland looks Mainstream Swiss house prices have risen by positive. Demand looks set to remain strong 30% since the start of 2007, outperforming all of and supply tight. According to the Knight Frank the other main European markets (figure 1). High Wealth Report Switzerland is forecast to see a At a glance immigration (c.65,000 pa), limited new supply 27% rise in its HNWI population between 2012 Lex Koller-Friedrich and historically low interest rates have pushed and 2022 and strict planning regulations along prices higher. Concerns of a price bubble in the with Lex Weber will curtail new development. What is it? Restricts the ownership of mainstream housing market have increased but Add to this Switzerland’s benign stance on tax, Swiss homes by non-residents to certain the government has introduced new measures to its high political stability and its laws protecting holiday zones tighten lending. When was it introduced? 1961 (formalised banking secrecy (albeit their stringency is 1983) Swiss luxury housing markets by comparison being tested by international pressure) and have followed two different courses since 2007. Switzerland’s ranking among the world’s wealthy Who does it affect? All non-residents The lack of available property in most of the looks assured. As a global financial centre with Where does it apply? Across all of country’s principal German-speaking cities in exemplary schools, offering a safe environment Switzerland but with exceptions in holiday the north and central regions (such as Zurich, and with the Alpine resorts on its doorstep many zones where non-residents can purchase Zug and Schwyz) has kept prices largely static consider it the prime location to bring up a family a home with a maximum of 200 sq m of while the French-speaking cantons in the east which explains Zurich and Geneva’s high ranking official internal living space (including Geneva and Vaud) have seen price falls in the latest Wealth Report’s Global Cities Survey. Lex Weber Figure 1 Figure 2 What is it? A cap on secondary home Mainstream house prices, selected Prime price performance in key ownership at 20% per commune countries European cities Indexed, 100 = Q1 2007 Annual % change, 2012 When was it introduced? 1 January 2013 140 Who does it affect? Residents and London non-residents 130 Where does it apply? Whole country, but Monaco 7 120 largest impact in the Vaud Riviera, Lugano Moscow 110 and Alpine resorts Zurich 100 Rubik Accords Vienna 90 What is it?: An agreement between Paris 80 Switzerland and certain countries to Indexed 100 = Q1 200 Geneva legalise undeclared assets while keeping 70 Madrid the Swiss bank account holder’s anonymity 60 Which countries are affected? Agreements Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Kiev 2007 2008 2009 2010 2011 2012 ratified with UK and Austria but is an on- Rome going process Switzerland UK France -20 -15 -10 -5 0 510 15 20 Who does it affect? UK and Austrian Germany Spain Italy residents with Swiss accounts Source: Knight Frank Residential Research, Wüest & Partner Source: Knight Frank Residential Research RESIDENTIAL RESEARCH SWISS insight ITALIAN LAKES Prime market snapshot SH BS TG ZH BL AG JU 2 ZURICH AR SO AI Zug SG ZG LU SZ Neuchatel GL NW BE OW Davos Swiss UR VD Riveria Bern GR FR Andermatt Lausanne Gstaad St Moritz Nyon Lake Geneva Montreux TI Villars Crans Montana GEE 1 VS GENEVA Verbier Lake Zermatt LLugano 3 LUGANO 1. Geneva 2. Zurich 3. Lugano 2012 provided an improving set of fundamentals The performance of Zurich’s prime market is Lugano has long been favoured by northern for the Geneva housing market. The number of strongly linked to its financial services sector European buyers because of its Mediterranean homes sold above CHF 10m rose significantly which accounts for 40% of the city’s economy. climate and its accessibility via nearby Milan from around 15 to 35 year-on-year as the sense Most of the city’s prime markets saw prices airport. Located close to the Italian border in the of concern amongst buyers following the Swiss soften in 2012, albeit by 2%-3%. Sales volumes Canton of Ticino, Lugano is Switzerland’s third National Bank’s currency cap in September 2011 were healthy in 2012 due primarily to the largest financial centre. started to dissipate. improved availability of stock rather than a In recent years the area has become a target for Activity was markedly higher in the second half marked upturn in buyer sentiment. a number of British buyers looking to relocate as of 2012 as buyers, many interested in city centre Detached family homes on Zurich’s Gold Coast well as more traditional buyers from Russia, Italy, homes as well as high-end properties in the Vaud bucked the trend and saw price growth of Germany, Northern Europe and from other parts canton, looked to secure their property prior to around 5% in 2012 due to the lack of inventory. of Switzerland. Most are attracted to the Italian international taxation pressure commencing. Homes throughout the Gold Coast from lifestyle, excellent schools (most enjoy shorter Prime prices dipped by around 6% in 2012, Zollikon all the way to Stäfa are attracting the waiting lists than elsewhere in Switzerland), the vendors are being more realistic on price, strongest demand. safe environment and Swiss efficiency. conscious that the prices have fallen 10%-15% The vacancy rate for the City now stands at The CHF 4m to CHF 7m price bracket currently from their pre-crisis highs. 0.6%, with new development now almost- generates the strongest interest among incoming That said, the best properties in prime locations exclusively on the periphery in the Glatt Valley. permanent residents. Activity in Lugano’s second have retained their value. Areas such as Cologny, homes market is focused between CHF 1m and The average price of a typical prime property is CHF 3.5m, this is because although foreigners Collonge, Bellerive, Geneva’s Old Town and around CHF 22,000 per sq m. Champel are in the greatest demand. are allowed to purchase second homes in the The number of foreign nationals in the City of region, they can only acquire homes with up to Aside from existing international buyers already Zurich rose by 14.7% in the decade to 2011 a maximum of 200 sq m of official living space, resident in Switzerland, purchasers based in and now constitutes 31% of the population. above this size they would need to become a France, Spain and the UK are currently the most German, Italian and British-born residents are Swiss resident. active in the market. most evident. The areas around Morcote, Castagnola and Concerns surrounding the upcoming vote in 2015 The abolition of the lump sum form of taxation Paradiso remain the most sought-after. on the future of lump sum taxation have slowed in Zurich in 2009 has not damaged the market the market in the CHF 3m-CHF 8m price range. Like the other core Swiss markets, prices in and as much as was originally feared which is around Lugano softened in 2012 by around 3%- However, buyers are swiftly realising that now is reassuring ahead of the national vote in 2015.