It is fair to say that Switzerland has been and continues to be a magnet for high net worth individuals. This is an area of the world which remains neutral in global conflicts and is relatively stable when it comes to politics and the economy. As a consequence, it will be no surprise to learn that demand for property in Switzerland is still extremely high and prices buoyant.
The attractions of Switzerland
Sometimes it is difficult to identify a number of attractions for individual countries but with Switzerland there are many. From the employment opportunities to education, life expectancy to cultural diversity and then we have the all-important family friendly culture. So, whether looking for a holiday home or a place to move to in retirement, it is fair to say that Switzerland has a lot to offer.
Switzerland property market
While it would be unfair to suggest that any country around the world escaped the consequences of the 2008/9 US mortgage crisis, the impact in Switzerland was relatively short lived. Official data shows that between 2000 and 2016 there was a healthy improvement in property prices. Owner occupied dwellings increased by 80.5%, single family homes by 58% and rental apartments by 49.2%. When you compare the volatility of places such as London over this period, it is safe to say that many international investors see the Switzerland property market as relatively stable.
In a similar fashion to property in Switzerland, the currency has in recent times been seen as something of a safe haven. Unfortunately, this has put the Switzerland authorities in a very difficult predicament. They have been forced to reduce interest rates to lessen the attractions of the Swiss currency which has unfortunately fed ongoing and growing demand for property – funded by relatively cheap finance. So, while the authorities were forced to “prick the currency bubble” this has given them little leeway with regards to controlling property prices.
As we touched on above, Switzerland has an extremely diverse culture and population, with migrants accounting for almost 25% of the overall population. There are now local and national restrictions on the amount of property which can be acquired by foreign investors. Those looking to move to Switzerland on a full-time basis, and seeking citizenship, will need to qualify via 12 years of permanent, legal, noted residency. This has to a certain extent allowed the authorities to control demand for property but we have seen a huge increase in the size of the Switzerland mortgage market.
As recently as 1990, the Switzerland mortgage market accounted for just 60% of GDP but by the end of 2018 this figure had risen to 147%. Therefore, it is important that the authorities manage both the currency and property challenges on a short, medium and long-term basis. Historically Switzerland has remained relatively unscathed as a consequence of global issues such as the US mortgage crisis but the huge increase in the mortgage market has created a challenge.
Switzerland has always attracted more than its fair share of high net worth individuals and this trend seems deeply ingrained in the country’s character. Often seen as a safe haven, and remaining neutral in global conflicts, this historic popularity has grown even more in recent times. Whether looking towards ski chalets or traditional homes, there is significant pent-up demand. While recent growth rates have weakened slightly, property prices are still expected to remain relatively strong in the short term. It will be interesting to see whether the Switzerland authorities, and the local cantons, introduce more restrictions in the short term to limit foreign investment in Switzerland property. The problem is that once these restrictions are lifted there appears to be a growing tide of international funding waiting to come ashore.