Switzerland has seen sustained levels of residential listing market growth between 2008 and 2013 with house prices up 28%, the opposite of what has happened in many other European markets.
Economic expansion, low interest rates, growth in real wages and immigration of wealthy individuals have all supported housing demand. The strengthening Swiss franc also raised their price in comparison to other currencies, according to a new analysis from international real estate firm Savills.
However, price growth is now slowing, amid government efforts to cool the market by introducing stricter lending requirements. ‘The decoupling of the Swiss franc with the euro has seen its value appreciate and make Swiss exports more expensive, slowing the economy in general. Foreign buyers with Swiss franc denominated mortgages have been especially hit,’ said Yolande Barnes, director of world research at Savills.
The report points out that Switzerland has one of the world’s strictest citizenship systems. Qualification requires 12 years of permanent, legal and notated residency, fluency in one of the official languages and integration into Swiss culture and community.
On top of this Switzerland introduced new quotas for European Union citizens in 2013. Foreign buyers are also heavily restricted on residential listing purchase with just 1,500 permits released a year, although the rules vary significantly by Canton.
In Geneva the emphasis is on the rental market with some 80% of the population of the city doing so and the rental market is strongly pro-tenant, the report explains. ‘Geneva is an expensive city in which to live and there is especially strong demand for city centre apartments which are in short supply,’ said Barnes.
Demand is fuelled in part by employees of the finance and business services sector on generous relocation packages, the report shows. Property prices in Geneva have grown 55% since 2006, compared to 27% across Switzerland.
‘These rates of growth are echoed in the rental market. High prices have put listing purchase and even rent out of reach of many locals in Geneva, which counts itself alongside Zurich and Zug as one of the most expensive locations in the country. Each day 90,000 workers commute from neighbouring France to the city, a number that has doubled over the last decade,’ Barnes explained.
‘For those who can afford it and, non-nationals who can obtain a permit to purchase, Geneva offers attractive listing in a safe, secure environment. The most desirable listing enjoys lake or mountain views,’ she added.
The report also looks at what is happening to listing prices in the Swiss Alps which attract second home buyers from across the globe. The Swiss Alpine resorts of Gstaad, St Moritz, Zermatt and Verbier are among the world’s most exclusive, and expensive, with ultra-prime prices ranging from €20,000 to €30,000 per square meter.
The report explains how these resorts have diversified beyond skiing to cater to many of the other demands of the super-rich. Designer shopping, Michelin starred restaurants and polo are all part of the offer. These ultra-prime resorts proved relatively resilient during the global economic crisis. Transaction levels slowed, but values were supported by restricted supply and the absence of forced sales.
In the prime markets, holiday home buying peaked in the 2007/2008 season, and fell away significantly during the recessionary years. Discretionary second home buyers, reliant on mortgage finance withdrew from the market after the credit crunch. Following a period of stabilisation, prices are now on the rise again although buyers continue to expect a discount, particularly for second hand listings.
Barnes explained that the analysis of sales data suggests more sales are now taking place at lower price points. The resilience of the ultra-prime markets has started to ripple down the market ladder. The average purchase price of prime listing transacted across core Alpine resorts was €1.5 million in 2011, when only the very best listings were transacting. By 2014, this had fallen to just under €1 million, with British buyers, in particular, purchasing again at lower levels.
The markets are also seeing an expansion in the breadth of buyers they attract. Prior to the global recession, British buyers dominated the market, accounting for the vast majority of foreign buyers in many Swiss resorts. Today, a much wider variety of buyers are present. These include a wide range of European buyers, particularly those from northern Europe and the Nordics, as well as those from further afield.
The premier Swiss ski resorts have been among the first to attract Chinese skiers outside of their homeland. Chinese skiers numbered just 10,000 in 1996, and now exceed five million. Switzerland is now second only to Japan as a recipient of these high spending ski tourists.
The report points out that the Chinese have yet to make Alpine home purchases in any volume, but other Asian buyers are increasingly active in Switzerland, notably those from Malaysia, Singapore and Hong Kong.
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Source: Property News Spain