The Geneva Property Market – Should I buy in 2015?
The Geneva Property Market – Should I buy in 2015 with the Strong Franc?
What does the recent removal of the cap from CHF to Euro mean for the property market? Already the market slowed considerably last year and there is heightened pressure on the Geneva market; Foreign buyers coming in to Switzerland will feel the country much more expensive and existing multi nationals will also feel the pressure on their balance sheet. Exports will suffer. For the next year we think there will be a continued slow down before pricing normalises and the economy starts to recover.
A Credit Agricole study last year highlighted that from 2007 to 2012 there were considerable property price rises in Geneva with apartment prices having risen 35% and house prices 20%.
However, the market since the end of 2013 slowed down considerably in Geneva and the French border areas. Transaction levels are low and there are a scarcity of buyers meaning that properties are remaining on the market longer.
There are several different factors that have a defining influence on the local market, most notably the economic climate and supply and demand. Although the Geneva market is very segmented and has very different levels of demand, these factors are prevailing across the whole market;
Economic confidence is a key factor. Whilst Western Switzerland has previously been fairly insulated from the global economic crisis, the last year has changed that. There is now significant pressure on the local Swiss economy – a strong franc, a weakening labour market, pressure on banking and financial services, the tightening of residency laws and a lack of new companies relocating to Geneva. After the shockwaves of the Merck Serono closure, UN cutbacks and P & G headcount reductions, the local economy has taken a knock in confidence. Many multinational companies are looking to downsize or share premises and the percentage of office space available is increasing. We have received many demands for international clients looking to assign or sublet their leases as the strong Franc and high wages mean that their Geneva office is often the most expensive one on their balance sheet.
The residential letting market has also weakened – it was very difficult a few years ago to find good quality apartments and houses available but now the demand has eased off. One of our clients recently negotiated almost a 50% discount off a long term letting on a lakeside apartment in Geneva.
Supply and Demand
However, it’s not all doom and gloom. The market is very small, (over 85% of people rent) and despite weakening, demand far outweighs supply for good quality, well priced assets, particularly those which are around the 2 million CHF level. Investment appetite is prompted by the secure, stable nature of the Swiss economy during times of crisis and the continuing uncertainty of the Eurozone.
Well priced properties are still being sold, particularly where there is scope for upgrade and development and in attractive areas where there are good schools and transport links. A house for around 2.1 million CHF recently sold within days in Veyrier due to its upgrade potential. Due to planning restrictions and the small market, developers are still scrambling to find development property to renovate and well priced land to build on.
In the French border there is strong appetite for investment property where yields are around 4% and there is good capital growth. Many Middle Eastern clients are still investing in Pays de Gex, and in the French border next to Hermance. New properties requiring little maintenance are well priced and can be bought off plan.
A substantial disparity in price remains between French border areas and Geneva outskirts; 850,000 – 1.2 million Euros would buy a small family house in neighbouring Ferney, Prevessin and Ornex. These areas are well reachable from Geneva and only 15/20 minutes from the International Quarter and have excellent transport links and open space. However, you would have to at least double or triple that budget to buy something comparable on the Swiss side.
Should I buy in 2014/15?
Low interest rates with loans available under 2% that can be fixed for 10 years or longer make buying an attractive proposition. The market is quiet so prices can be negotiated. The outlook looks subdued with little activity so for medium/longer term hold buying can still be attractive. Due to residency restrictions, tighter lending and the lack of supply, the market has been relatively stable. The Swiss also see property as a more long term asset class and property is held and passed on to family members.
One of the major factors which has stagnated the market is that there is often a disparity between what owner’s think a property is worth and what buyers are prepared to pay (and what the bank’s value it at).
Our advice is to wait and look for interesting assets where the owner is under pressure to sell or take your time waiting for the right asset to come up and negotiate. The last quarter of 2013 and 2014 look like there will be little change and we expect prices to be stable and may even decrease by around 10% with further discounts being able to be negotiated. It is now a “buyers market”.
The banks in Switzerland and France offer very different rates depending on your status, employment, income and requirements. Prepare your dossier in full and be clear about your requirements. It is advisable to speak to a number of different banks and lenders to compare rates in the market. An independent adviser can help with this. Most banks are now looking for at least a 20% deposit plus 5% for purchase costs. Many bank valuations are very conservative and coming in lower than market price meaning banks will lend less.
What is the advantage of buying “off market”?
Buying “off market” is the process buying a property before it comes to market and advertised by agencies. Many of the high value exclusive properties in central Geneva and around the lake are bought off market. From the seller’s point of view, this is preferable as the sale is confidential and discrete and he can meet the buyer and do direct business without agents being involved (and his friends and neighbours don’t need to know he is selling his property). From the buyer’s point of view, he can obtain a property confidentially and without the problems of competing with other buyers.
By Simon Swycher, Hg Real Estate © 2015
Simon Swycher qualified as a UK real estate lawyer in 1996 and has been in the Geneva area since 2005. Hg Real Estate is an independent real estate consultancy established in 2006 advising clients on real estate investments including property search, financing, legal issues, development, asset management and structuring.
If you are looking to buy, finance or develop property in Geneva, la Cote or the mountains, you can contact Simon for independent advice at Hg Real Estate;
+41 7936 88773