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KENSINGTON FINEST PROPERTIES INTERNATIONAL

Desirable addresses

Switzerland attracts real estate buyers not only with its alpine chalets and lakeside villas, but also with a stable investment climate. But in view of the high price level, you have to be able to afford the country.

By Gerald Paschen

© Switzerland Tourism / Mattias Nutt

Elegant lakeside locations, fashionable ski resorts and economic centres such as Zurich or Geneva – Swiss addresses are renowned. As primary and secondary residences, they are not only a good capital investment, but also offer quality of life. In addition to the attractions of the vertical landscape, security plays a particularly important role. A wide range of luxury and holiday properties are available, but the prices need to be taken into account – the cost of real estate here is usually significantly more than comparable objects in neighbouring countries.

However, the trends on the residential property market are not homogeneous, even in Switzerland: According to analyses by the bank UBS, prices on the national market for owner-occupied homes (condominiums and single-family homes) have been rising since 2008. For example, larger condominiums of over 90 square meters have risen by 12 percent since 2012. By contrast, prices for apartment buildings, which have risen by an impressive 80 percent since 2005, have been stagnating for three years. Nevertheless, construction is continuing at a high pace – around 50,000 residential units were completed in 2018. There is now a surplus on the rental housing market in Switzerland, so rents are no longer rising. Only in the large cities such as Zurich, Basel, Bern and Lucerne is demand continuing to exceed supply.

Worth living cities: Lucerne, the social and cultural centre of Central Switzerland, is an attraction for tourists. It offers magnificent residential locations on Lake Lucerne and proximity to the Alps.

A special market is that of luxury real estate, which already reached dizzying price levels in 2011. Subsequently, there was a significant price correction of around a quarter by 2015. Since 2015, median prices and the number of transactions have risen again. The purchase of real estate was limited by the Second Home Initiative, decided in 2012. It forces municipalities to release only a maximum of 20 percent of living space for the use of holiday properties. This primarily affects the tourist areas in the mountain regions, especially in the canton of Graubünden. The impending restrictions, however, meant that, in the interim, many new holiday homes were quickly built in the holiday destinations in question until this law came into force in January 2016. In the luxury segment in particular, the range of offers greatly expanded, stabilizing prices. After years, the implementation of the Second Home Initiative has brought legal certainty back to holiday areas.

In addition, the so-called “Lex Koller” has made access to the Swiss real estate market more difficult for foreigners since the 1980s (See the article on the

page 108). However, there are some holiday properties in certain cantons that are exempt from the Lex Koller. The following cantons have such holiday apartment quotas: Appenzell Ausserrhoden, Bern, Fribourg, Glarus, Grisons, Jura, Lucerne, Neuchâtel, Nidwalden, Obwalden, St. Gallen, Schaffhausen (only for apartments in aparthotels), Schwyz, Ticino, Uri, Vaud and Valais.

A lack of investment alternatives on the financial markets is currently pushing Swiss real estate business forwards. At present, it cannot be assumed that interest rates will rise quickly and in the short term. The fear of a real estate bubble, bypassed in 2017, has also proved unfounded so far. According to the bank UBS, which regularly provides analyses, the risk of a bubble has fallen significantly in view of the good economic situation in 2018. Switzerland’s GDP rose by 2.6 percent in 2018. Real growth of 1.6 percent is expected for 2019. Another argument in favour of a healthy real estate market is that Swiss income has so far grown even faster than mortgage debt and the employment rate is high. National players clearly dominate the Swiss real estate market, while the importance of foreign investors is particularly evident in the luxury real estate segment. According to the UBS forecast for 2019, single-family homes in Switzerland will become 1 percent more expensive, while condominium prices are expected to fall slightly. At the current exchange rate of the Swiss franc (1 CHF = 0.89 €/April 2019), foreign demand on the secondary housing market should also remain stable. In addition, condominiums will continue to be purchased on a large scale for investment purposes (buy-to-let).

Southern flair on Lake Maggiore: Locarno and Ascona in the canton of Thessin have been real hot sports for buyers of luxury real estate for decades.

The focus of national and international buyers of high-quality real estate is primarily on three areas: the economic centres in the Mittelland between Lake Constance and Lake Geneva, the winter sports destinations in the mountain regions and Ticino.

The most exclusive locations in the Mittelland region are characterised by their proximity to the two largest Swiss cities and preferred lakeside locations. In the Zurich area, there is a concentration of traditional primary residential communities, while in Geneva and on Lake Geneva, an above-average number of foreigners have invested in luxury real estate. With more than 12,000 residential units, the high-end market on Lake Zurich is around twice as large as that on Lake Geneva. In terms of top prices, however, the Lake Geneva region is in the lead – the offer prices of top properties often reach 9 to 19 million Swiss francs.

Zurich, the largest city in Switzerland with 409,000 inhabitants, remains the most expensive city with a median price of CHF 13,000 (€ 11,570) per square metre (Real Estate Report 2018 from ETH Zurich/comparis.ch). This is followed by the lake communities at Lake Horgen (11,750 Swiss francs) and Meilen (11,250 Swiss francs). In the comparison of medium-sized houses (5 to 6.5 rooms), the district of Meilen leads with an offer price of 2.5 million francs. On Lake Geneva, in the district of Nyon (canton of Vaud), the median price is CHF 2 million. In the districts of Horgen, Lucerne, Zurich and the canton of Geneva, the median price for a medium-sized house is also more than CHF 1.5 million.

Thanks to very low income taxes, the Canton of Zug is attractive for national and foreign customers. Prime locations can be found on the Zugerberg, on the west side of Lake Zug and on Lake Ägeri. Villas worth less than four million Swiss francs are rare in these locations. The coveted locations on Lake Constance, for example in the municipalities of Gottlieben, Tägerwilen or Bottighofen, are also above the Swiss average.

Popular lakeside locations: Lake Constance not only offers magnificent views, as here at the Steckborn Castle, but also attractive properties with above-average prices.

The mountain regions are the tourist flagship of the Swiss Confederation. Around two thirds of holiday residences in the entire Alpine region are in Switzerland. If only the most expensive residential location is good enough for you, then the Suvretta villa district in Sankt Moritz is the place to be. The billionaire hill has been a winter refuge for the rich and powerful since the 1960s. You can’t get a chalet worth less than 25 million euros here. The high-class market is not particularly transparent, top objects are often sold privately. In addition to Suvretta, the top locations on the Via Tinus, Via Brattas or Via Serlas in St. Moritz remain stable in value. Only the town of Gstaad in the Bernese Oberland, where the Oberbort and the car-free promenade of the chalet village are particularly popular, can keep up with such prices. So, it’s no wonder that St. Moritz and Gstaad take first place in the ranking of the

top holiday apartment markets in the entire Alpine region compiled by the bank UBS(Alpine Property Focus 2018) – ahead of the French Courchevel and St. Anton and Kitzbühel in Austria. A good quality holiday apartment in St. Moritz costs CHF 15,400 per square metre. This means a price increase of seven percent from 2017 to 2018. For Gstaad, a price of CHF 14,500 was calculated for such properties. UBS analysts found a total of 24 Alpine towns with square metre prices of over CHF 8,000. Of these, 15 are in Switzerland. In addition to St. Moritz and Gstaad, the Valais towns of Verbier, Zermatt and Crans-Montana are true luxury markets with open-ended prices. Lenzerheide, the Jungfrau region, Flims/Laax and Davos/Klosters are also over CHF 10,000 per square metre. Andermatt in the canton of Uri remains just under this price. In this village, a major tourist project with residential projects, hotels, restaurants and ski slopes has been under construction for a few years now. It should be interesting for foreign investors that this project is exempt from the Lex Koller.

A snowy Alpine idyll in the Engadine: it is primarily the mountain regions that attract tourists and buyers of holiday properties to Switzerland. In the Engadine, the sophisticated winter sports resort of St. Moritz is a popular meeting place for the rich and famous.

Ticino has been popular with foreign buyers for decades. The focus of luxury investments is on the Mediterranean ambience on Lake Maggiore and Lake Lugano. Lakeside properties near Ascona usually cost 3 to 8 million francs. The most select properties achieve even higher prices here and near Lugano.
However, the Italian-speaking part of Switzerland shows that entering the property market does not have to cost so much. The districts of Vallemaggia and Leventina are the lowest price zones in the Swiss Confederation, with median prices for medium-sized single-family houses of around 350,000 francs and 400,000 francs respectively.

It remains to be noted that Switzerland offers a large selection of interesting residences in the luxury segment and good capital investments in the real estate sector at stable prices. At least in the short and medium term, no major downward trends in prices are to be expected.

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