With the pound falling against the Swiss franc in the five years to the end of October, and after a period of decline, the Swiss housing market has seen a rise in prices. Particularly, major cities such as Geneva are now more expensive than other European cities. With some of the priciest homes located along Lake Geneva’s south bank in Cologny and Collonge-Bellerive overseeing the lake and magnificent gardens, it is not hard to see why such properties could fetch high amounts.
For many expats, renting a property is more affordable, and 60 percent of residents rent their properties. However, if you can afford to buy a property in Switzerland, certain rules and regulations might change due to Brexit. While there won’t be any changes if you have already bought your home before Brexit, after Brexit, you will be considered a “person abroad” and you will be subject to the restrictions of Lex Koller.
Here, we will have a quick look at the Swiss property market and then the rules regarding buying property.
The Swiss market
Before 2017, house prices increased by 80.5 percent, forcing the Swiss National Bank to adopt stricter lending criteria and abandon its cap against the euro in order to limit investor demand. In 2017, purchase prices fell by 0.75 percent, while in the second half of 2017, according to Swiss National Bank data, the average asking price per square metre was CHF 11,800 (€10,100) in Zurich, CHF 11,530 (€9,865) in Geneva, and CHF 9,260 (€7,920) in Lausanne.
According to the Financial Times, prices have now risen again due to falling mortgage rates and a shortage of supply, while “imminent corporate tax reforms” are particularly increasing Geneva’s appeal. Alex Koch de Gooreynd, who specialises in the Swiss, Austrian and Portuguese market at Knight Frank, explains that demand from overseas buyers was reduced due to the strong franc, the fall in the pound and euro. An average €23,400 per sq m prime property is, for example, higher than its equivalent of €19,400 in Paris and €13,500 in Frankfurt.
In Collonge-Bellerive, a four-bedroom villa can go for CHF 4.3m (£3.38m) and in Anières a four-bedroom house can go for CHF 3.29m (£2.58m). In Chêne-Bougeries a two-bedroom duplex is CHF 1.595m (£1,25m). With 169 sales this year for properties over €3.6m (£3m), it is obvious that only millionaires can afford a three-bedroom apartment or a four and five-bedroom house.
But, if you cannot afford to buy, renting is a an alternative, with a two-bedroom apartment near Lake Geneva priced at CHF 2,200 (€1,997) per month.
Brits’ residence rights have been secured by the Agreement on Acquired Citizens’ Rights (AACR) signed by Switzerland and the UK on 25 February 2019 (new FMOPA). Among other things, the agreement also covers the purchase of real estate by UK citizens in Switzerland and vice versa. The new FMOPA agreement will come into force after the end of the transition period agreed between the EU and the UK. If the UK leaves the EU without a deal, the AACR shall apply immediately after the UK leaves the EU.
Lex Koller is the law which limits ownership by foreigners and distinguishes between Swiss residents and non-Swiss residents. The law allocates 1500 permits for non-Swiss residents annually to buy holiday homes not exceeding 200m2 in tourist locations and mountain resorts. However, even those non-EU/EFTA citizens who have a Swiss residency permit are covered by Lex Koller’s restrictions as it applies to their main residence.
According to Lex Koller, “persons abroad” are classified all citizens from the EU and the European Free Trade Association (EFTA) who have no legal or actual Swiss residence and citizens of other states with no permanent Swiss residence permit. They are subject to restrictions and, in some cases, may need to acquire Swiss residential property.
Currently, since the UK is still part of the EU, UK citizens are not classified as persons abroad if they have a legal or actual Swiss residence. After Brexit, UK citizens with a legal or actual Swiss residence will need to acquire a permanent Swiss residence permit. However, some of these may not apply with the new FMOPA, as UK citizens will be able to safeguard the rights acquired under the FMOPA.
So, if they already purchased property, this will be respected after Brexit. If at the time of Brexit, UK citizens have already a legal or actual Swiss residence in order to buy Swiss residential property, they won’t require a permanent resident permit.
UK citizens will be able to retain their status as cross-border commuters in Switzerland after Brexit if they purchase Swiss residential property, as a secondary home.
However, after Brexit all those who have no prior Swiss residential property, or legal or actual Swiss residence, and do not qualify as cross-border commuters will be subject to the restrictions of Lex Koller.
Not only does Switzerland have strict rules about purchasing property, but also the process of purchasing a home can be lengthy, lasting more than three months. When you finally decide on your property, keep in mind that you will also need to pay 5% of the purchase price for the notary’s fees (0.2-1 percent) and charges, including a 3 percent property transfer tax and around 1-1.5 percent for registering the deed with the land registry office.
This is why it will be good to plan ahead and get in touch with an expert foreign exchange firm such as Universal Partners FX. UPFX’s specialist currency brokers will make sure that your money is safe by providing you with a range of hedging strategies against the volatility of the currency market.