Real estate is a very graceful and safe way to invest and every investor has in his portfolio several flats, plots, premises… In this paper I pose the question – which property markets to consider given the market potential and returns in previous years? Property prices in the EU have increased 86% on average over the last 20 years. During this time, property price growth in Switzerland has been well over 100%, and in some areas even 200%. I am writing about the ins and outs of investing in property in Switzerland right here.
Why Switzerland?
Switzerland has always been synonymous with safety, asset protection and prestige. Moreover, it has always been associated with luxury, which today is not only provided by beautiful Alpine views, friendly climate, but also clean air appreciated by many.
At the core of the condition of the Swiss economy is its history and geographical location. However, it should not be forgotten that it is the political system, or more precisely direct democracy, that currently has the greatest influence on the country’s economic as well as ecological standing.
Moving on to investments, Switzerland, with its banking system, is seen as the number one place to invest your assets. At this point, I would like to draw your attention to this country as a potential place for real estate investment.
Why are property prices rising in Switzerland?
The rise in property prices in Switzerland is part of a worldwide trend that has been ongoing continually for several decades, but the country is outperforming the EU average and there are several reasons behind this more than just the economic prosperity.
Legal regulations in Switzerland are aimed at preventing speculation on the local real estate market and radical price increases, which is why, for example: foreigners can only purchase certain properties with limited size. Despite this, however, we are still observing an increase in interest in property investments in relation to their supply (supply that is limited also due to the limited area of the territory of the country).
In 2021 alone, property prices in Switzerland have risen 7.2%. In the last 20 years, prices in Switzerland have gone up by 100%, in Zurich by 160%, and in the most attractive locations (e.g. lake view) by more than 200%.
Where to buy real estate?
The main strength of the Swiss real estate market lies in the constantly growing demand for houses, which translates into rising land prices in Switzerland. In Winterthur, for example: the median price of one square metre of a building plot has risen from 110 francs in 1974 to 697 francs in 2018. In Rüschlikon, one of Switzerland’s most desirable towns, the median price has risen from 281 francs per square metre in 1974 to 2600 francs in 2019 – that is a price increase of 825% (that is over 18% per year!).
A hedge against inflation
Continuous investor demand for property in Switzerland keeps prices rising. In addition, the position of the Swiss franc against other currencies protects such an investment against inflation.
Despite the rising prices, demand for rental properties is also increasing, especially in locations such as Geneva, Zurich and Basel. Although the rental yields will not be as high as in other countries, the stable growth in demand for homes in Switzerland and the stability of the Swiss franc may make the purchase of real estate in Switzerland be a good decision after all.
How to earn twice when buying property?
Investors buying a house in Switzerland repeatedly make the decision whether they should finance the purchase from their spare funds, from their business or maybe take a loan for this purpose.
And here lies the issue of diversification of the investment portfolio. Additionally, cooperation with financial institutions allows for the use of various financial engineering solutions, which can serve to increase the profits from the funds we invest. If we have free money we can first build a well-thought-out portfolio of financial investments and then take a loan against it, for example: at 1%. Sounds interesting! If we already have such a portfolio in the bank, we can ask for such a loan (against the collateral of our portfolio) and use the funds to buy a property. In this way the same funds work for us twice. Many banks offer such credit loans, e.g. banks in Switzerland or Luxembourg.
A house in Switzerland, unlike similar investments in other countries, can be treated both as an investment per se, but it can also be combined with a lifestyle. If you are currently looking for your own place on earth and are planning a change of residence, you might consider the Canton of Tichino, which lies among hills and lakes south of the Alps, where Italian culture is keenly felt and property prices are still affordable.
