Helena Izotova
Real estate news, Switzerland. A popular investors’ saying claims, “Switzerland is not the country, where capitals are earned, in Switzerland the income received in other parts of the globe is stored and protected from every ill, maintaining it and thoughtfully enriching”. Swiss banks, as a quiet harbour for storing investments, are known to every person; therefore, bullish trend of Swiss frank, which continues to grow every year due to the inflow of foreign capital into Swiss banks, is no surprise. However... for any investor it is important not only to follow the well-established trend, but also to see new tendencies in the framework of this trend. What investors from around the globe pay little attention to while working with Switzerland is what new investment opportunities can open for potential investors.
New trend: what investors from around the globe pay little attention to while working with Switzerland?
In addition to bank investments Switzerland is also interesting by investments in the sphere of real estate, which every year shows steady growth due to:
• non-stop inflow of foreign capital;
• development of tourist business;
• favourable not only political and natural and climactic, but also investment climate in the state;
• opening of new offices, sprouting like mushrooms after the summer rains, joint ventures (AG), including the ones that issue stocks to the bearer.
One cannot deny that there is no surprise that the number of offices, as well as the number of hotels, private apartments, comfortable chalets (Swiss style summer cottages) in this Alpine state increases yearly. This means that prices of all types of real estate in Switzerland grow steady and orderly.
How Swiss banks’ mortgage helps to gain high income from real estate
The growth of prices on Swiss real estate is happening together with another important tendency – low mortgage interest of Swiss banks, creating in such way a unique situation for investors:
• purchasing real estate in Switzerland is an opportunity to maintain and protect one’s capital;
• growth of prices on Swiss real estate runs ahead the mortgage rate in the country.
At what minimal rates Swiss banks disburse loans for mortgage:
LIBOR rate – the rate, at which the world’s largest banks are ready to disburse loans to other large banks at London bank-to-bank stock exchange.
Floating interest rate – rate for loans, the size of which is occasionally reconsidered in agreed time spans (interest periods). When floating interest rate is used, interest risk is born by the borrower. Floating interest rates are usually used in the conditions of quick pace of inflation, rapid growth and violent fluctuations of loan interest level, and at international bond market.
As observed from the table, the most profitable fixed interest rate for 1-year loan suggests AXA Winterthur bank, namely, 1.25% per annum.
Bank Coop AG suggests the most profitable floating interest rate, namely, up to 2.625% per annum. Macro-focused forex analyst covering major central banks, global risk appetite, and multi-asset context.
Taking into consideration the question of investing into commercial real estate, Switzerland is one of the most attractive countries:
• interest to Swiss real estate. Commercial real estate in Switzerland is first of all interesting as a reliable way of capitalizing means (the country’s inflation amounts to about 1-2%, while clear income from property lease amounts to 5-8% of invested capital);
• related payments. In this case all concerns on servicing, reconciliation with tenants, account control, and tax payments are undertaken by a management company, whose fees usually amount to about 6-8% of income from rental payment;
• country’s mortgage. As a rule, purchasing commercial real estate in Switzerland is realized by means of mortgage lending (including the ones with foreign investors!).
Ways of gaining income. One of the most widely spread ones is rental payments. Income in this sphere may reach 10%, even if to hire a management company, which will undertake all logistical issues with tenants, taxes and fees. The cost of services provided by such company amounts to about 7% of income received from lease.
What opportunities does Switzerland open for foreign investors?
As explained by experts of Real Estate Department of forex Academy and Masterforex-V Exchange Trade, Swiss commercial real estate is very attractive for increasing the volume of personal means, for inflation in the country amounts to less than 1%. The growth of Swiss real estate price for the last four decades amounts to 3-4% yearly:
• business in Switzerland. In Switzerland investors are welcome in all spheres of economy. The doors are opened for foreigners to establish local companies. However, the founders’ membership is to comprise the country’s resident, no matter whether it is a physical or a legal body; the head of the company can only be a Swiss subject. The most frequently registered are Joint Ventures, as they obtain certain incentives in financing and concluding contracts. The sum of statute capital is to be not less than 100,000 Swiss franks. The number of Joint Venture’s members is to be not less than three. Audit is to be held on a yearly basis. Its allowance will amount to 10,000-20,000 Swiss franks yearly;
• real estate prices. If to take into consideration the constant growth of prices of Swiss real estate, it can be stated that investing personal means in commercial or residential real estate can be a rather successful investment of capital. According to the results of the first half of 2011, the cost of apartment in Switzerland has averagely increased by 5%. One has to understand that purchasing real estate in a foreign country is much harder than purchasing apartment in a native country. It is conditioned by a number of reasons and factors, among which the following can be mentioned:
- specifics and peculiarities of approaching the state’s non-residents by the government;
- peculiarities of the state’s real estate market composition;
• bank’s decision-making. As a rule, a bank examines the documents and makes a decision on financing the transaction for 2-3 weeks, after this it gives a response. It is important to admit that Swiss banks practice individual approach to every client. Special departments are created in banks for working with foreign clients. If a client has already been credited in a certain bank and has positive credit history, the decision is made rather quickly. As soon as the decision on financing is made, the parties conclude a sale contract, which is registered by an independent notary;
• the law limiting land acquisition by foreigners-non-residents. This law extends to solely residential real estate. A foreigner has a right to purchase not more than 200 sq. m of housing or not more than 1,000 sq. m of land area. Restrictions also concern the terms of resale: not earlier than 5 or 10 years in order to avoid speculation at the market. However, in such a case restrictions may occur; for example, if the owner proves that his health has worsened or that he is having a tough financial condition, and that this fact has occurred after the real estate was purchased;
• quotas on real estate acquisition. Every year about 1500 permission quotas, which enable foreigners to buy residential real estate, are issued in Switzerland. These quotas are mostly distributed to cantons, living exclusively by means of tourism. As a rule, the biggest number of permissions per year is obtained by cantons of so-called “French Switzerland” (Valais, Vaud), “German Switzerland” (Graubunden), and a part of “Italian Switzerland” (Ticino). Geneva and Zurich are not in the list
Helena Izotova
