Switzerland - The Next Investment Destination

It may be a new year, but fear and uncertainties persist in the global real estate market, largely due to Brexit and Trump. Though both the UK and US market forecasters predict business as usual – the US dollar remains strong and investment continues to flow into the UK – there are concerns for the long term. Which is why Switzerland, though it’s never really gone away, has recently been making a move to the top of the list for property investors.

Investment History

For decades, Switzerland has carried a reputation as a prime location for wealth management and asset protection – for better and for worse. “Switzerland, historically, is a safe haven asset in its own right. With Brexit and with Mr Trump, the Swiss Franc has appreciated, gold goes up and people want to buy houses in Switzerland. There’s a capital flight to safety there whenever there is economic uncertainty,” begins Giles Gale, of Mark Warner Property, citing the same pattern that followed the 2008 GFC and the resulting credit crisis, and currently the anxiety stemming from looming French and German elections.

“We could be looking at the slow break-up of the EU, and Switzerland will only benefit from that – in its currency, its property market, and other investment. It’s not a cheap place to invest, but historically it’s very stable.”

It hasn’t all been smooth sailing. Switzerland also bears the stigma of being a safe haven for Nazi gold and a magnet for unethical banking practices that favour the ultra-rich: HSBC’s elite private banking tax evasion scandal; Abu Dhabi’s Falcon private bank laundering $4 billion through Swiss accounts; and bribery claims involving Petrobras are just a few issues the Swiss are addressing now.

But the industry has subjected itself to modern transparency standards, thanks in large part to former finance minister Eveline Widmer-Schlumpf putting an end to Swiss banking’s notorious secrecy in 2010.

“Switzerland has had to adapt since the financial crisis, like any bank. The country now has an open-book policy with all the financial regulators around the world. It’s still very tax-advantageous if you want to be resident, but don’t expect to have a [Nick Leeson] Barings-style, triple-eight account where you can hide a load of cash. That doesn’t exist anymore,” Gale says.

Switzerland’s compliance, strong franc, financing rates hovering around 1.5% up to 70%, low cost of entry and favourable tax laws are generating attention, particularly in ski properties – whose dwindling supply will add value soon.

The 2015 Lex Weber referendum put a 20% limit on the amount of ski property overseas buyers can own in any given town as a way to protect its historic villages. The short version is that unless an entirely new town is created, there is no ski stock left.

“Most of the key second home destinations, the areas that appeal to foreign buyers, already exceed this 20% limit. So anything offered now that was given planning permission prior to the referendum is the end of it. When these are gone, that’s it. Now, you’ll have to wait for one of the existing foreign-owned properties to be sold. Supply is going to be constrained,” Gale states.

Alpine Appeal

Which is what makes Chalets d’Adelaide, two hours from Geneva, a hot property. Located in the 15th century “chocolate box” town of Grimentz, 1,500 metres above sea level, the apartments and chalets provide a contemporary, year-round vacation destination and investment just a little bit off the beaten path.

“It’s a very traditional Swiss village, and kind of the antithesis of the ‘bling’ of Zermatt, and appeals much more to people who are looking for the authentic Swiss experience,” Gale theorises.

“You don’t come here for 20-franc après-ski gin and tonics … it’s not for everybody, and if you’re after that thumping nightlife it’s not going to be the place for you. But if you’re a keen skier and you like mountaineering and biking it holds a lot of charm. You come for great skiing, a mountain experience and good fondue. And half price property.”

Ski properties, unlike their summery counterparts in golf or beach resorts, lend themselves to all-season use. Alpine summer vacationing is on the rise, particularly among Asian and Middle Eastern travellers escaping blistering heat and/or humidity, and golfing and the renowned Lake Geneva (among other attractions) are within two hours of Grimentz.

“People no longer want a ski home in a purpose-built concrete monstrosity at 2,000 metres. They want to be in a resort that has life throughout the year … [For clients] skiing was often originally the motive, but three or four years later they’re surprised by how much time they spend there in the summer,” Gale says.

Additionally, Chalets d’Adelaide offers some of the best investment value in Switzerland, with prime ski property priced at CHF10,000 per square metre (HK$7,100 per square foot) – half of the prices at nearby Nendaz and one-third of those at the more high-profile Zermatt or Verbier. Ski home values appreciated 4.6% in 2015.

Starting at CHF935,000 (HK$7.3 million) for apartments and CHF1.5 million (HK$11 million) for chalets, Chalets d’Adelaide homes can range up to 4,300 customised square feet, constructed from reclaimed traditional woods and built with help from local craftsman. As the groundwork is complete, chalets can be finished in as little as eight months.

“We have seen enquiries for property in the area up by over 100% [in 2016]. The investment conditions are becoming increasingly attractive. When it comes to the Hong Kong market, we note growing appetite from savvy investors,” Gale says.

“It’s tax advantageous, it’s low cost of entry, there are many benefits of ownership if you want to base yourself there. For certain buyers it can be a smart financial option and not just a lifestyle choice.”

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