by Malcolm Curtis
Swisster.ch | January 20, 2010 | 09:13
Despite the economic slowdown and a rising unemployment rate, real estate prices in Switzerland’s Lake Geneva and Zurich areas remain red hot. For evidence, look no further than the canton of Geneva, where finding a modest three bedroom apartment for less than one million francs is like searching for the proverbial needle in a haystack.
And there remains no shortage of demand for larger homes fetching many times this amount. A residential complex in the municipality of Anières, a village in Geneva on the south side of the lake, sold recently for a record 74.7 million francs, according to the Tribune de Genève newspaper.
Billionaire Dinara Kulibaeva, the daughter of the president of Kazakhstan, acquired the 7,960-square-metre estate, featuring three buildings and two underground structures for what is said to be the highest amount ever paid by an individual for a home in the canton.
Kulibaeva, a 42-year-old with a banking fortune estimated by Forbes magazine in 2007 at 2.1 billion dollars, reportedly bought the property with its views over Lake Geneva, from Russian businessman Rustam Aksenenko.
Aksenenko appears to have pocketed a handsome profit from the transaction. He bought the property on the Route d’Hermance for 19 million francs in 2005, the Tribune said.
The price may sound exceptional but it appears to reflect the continued good health of the Geneva property market, where prices have virtually doubled in the last nine years. The cost of land suitable for building homes shot up to 1,368 francs per square metre in 2008 from 483 francs in 2000, according the cantonal statistics department.
Over the same period, the price of villas rose to an average of more than 2.2 million francs from 1.1 million francs. The cost of apartments jumped to more than 6,900 francs a square foot from 3,816 francs.
Geneva and the adjacent Lake Geneva region and the economic hub of Greater Zurich remain the most expensive places in Switzerland to live, in addition to a few select resort areas such as Verbier (Valais) and St. Moritz (Graubünden).
But home prices have grown across Switzerland with little adverse impact from the financial and economic crises, said Fredy Hasenmaile, head of real estate analysis for Credit Suisse. “In 2009 we didn’t experience a crisis in the real estate market as far as residential properties go,” Hasenmaile told Swisster.
“And we’re not facing a crisis now.” Swiss residential prices are high but they are not overvalued, Hasenmaile said.
Unlike other countries, such as the US and Britain, Switzerland did not face a financial crisis and the slowdown in the economy – a drop of about 1.6 percent for 2009 – was less than in many other countries and has not seriously impacted Swiss residents. “People in Switzerland are not that worried,” Hasenmaile said.
However, after years of steady growth, Credit Suisse is expecting prices generally to stagnate this year and there could be some reductions in areas where prices have risen rapidly, he said. Rising immigration over the past few years has fed demand for housing, but “this support is fading out,” Hasenmaile said.
After hitting a record of around 100,000 in 2008, the number of foreigners moving into the country last year was expected to fall to around 70,000, but it remained at a level well above average, he said. “A lot of people thought their wouldn’t be much immigration in 2009 but it’s still more than a normal year.”
For 2010, however, Credit Suisse expects in-migration to fall than less than 50,000. Demand has been highest around Zurich and Geneva because they are the”twin engines of the Swiss economy,” Hasenmaile said.
However, an expansion of supply following the construction of hundreds of new apartment units in Zurich is expected to soften the market in and around Switzerland’s largest city, he said. Other possible areas of weakness, he said, are areas where prices have risen the fastest – around Lake Geneva – and in resorts dependent on foreigners seeking secondary homes.
But Switzerland does not appear to be headed for the kind of meltdown experienced in the US, where the property bubble burst after the subprime mortgage debacle. Hasenmaaile said Switzerland had a similar “severe” real estate crisis in the 1990s for similar reasons.
It took eight years for prices to bottom out and begin appreciating in value, he said. Thomas Geiser, a representative of De Rham Sotheby’s in Montreux, sees no weakness in the Lake Geneva market, despite the recent rise in prices. With mortgage rates at their lowest rates in memory “there is plenty of demand,” which is not being matched by supply in the Riviera region, he said.
While Geneva is known for its high prices there are also properties fetching dozens of millions of francs east of Lausanne, Geiser indicated. Demand from foreigners also remains strong, he said, although he acknowledged there has been a “pause” in the volume of buyers from Britain, where property prices tanked last year and the pound lost value.
But buyers from the UK are “gently returning,” he said.