SWISS HOUSE PRICES RISING

Switzerland's housing market is one of the few in the world to have benefited from the economic turmoil of the past two years. While property prices in many countries have crashed, in Switzerland they have moved steadily upwards.

Andrew Hawkins, head of international at estate agency Chesterton Humberts, said an influx of rich foreign buyers, lured by the country's low taxes and stable governance, had supported Swiss property prices. Many Swiss had also repatriated their overseas wealth to buy Swiss property, he added.

"Switzerland is one of the few countries where property prices have risen in the past year, with an average increase of 4 per cent, according to the Swiss National Bank," Hawkins said. "With recent economic difficulties and proposed fiscal legislation change in many countries, Switzerland once more is seen as a real port in a storm."

Income tax rates vary between Switzerland's 26 cantons, but are usually below 30 per cent, according to website Switzerland.isyours.com. Most people don't have to pay capital gains tax and few cantons levy inheritance tax.

Multimillion-Swiss franc homes are most in demand. According to a survey by Wealth Bulletin, Via Suvretta, in the Swiss ski resort of St Moritz, was the only street on its list of The Top Ten Most Expensive Streets of the World where prices rose in the 12 months to July this year. They increased by 18 per cent to an average of US$45,000 per square metre. Via Suvretta is sixth on the list.

Many foreign buyers were former London-based finance workers, said Sergio Martinez, general manager of estate agency Aylesford International's Geneva office. Britain's £30,000 levy on non-domiciled foreigners and increased taxes for high earners were driving them to Switzerland.

"We have had 1,500 people move from the UK to Switzerland over the past year, including Greeks, Canadians and other nationalities as well as Britons," he said.

Most foreigners were taking up residence in or around Zurich, which is Switzerland's financial centre, Geneva and Montreux, Martinez said.

At some developments most buyers are foreign. Seven out of nine apartment owners at Schooren, a scheme built by Swiss developer Peach on the shores of Lake Zurich, are non-Swiss.

Hedge funds are moving into Zurich and its environs from Britain, Germany and other locations, because of Switzerland's low taxes.

According to Jeremy Rollason, managing director of estate agency Savills Alpine Homes, one-fifth of Switzerland's 7.59 million population are non-Swiss nationals taking advantage of its low personal taxes or working in associated businesses such as banking and hedge fund management.

Finance sector expansion is helping Switzerland's economy. Economists at UBS bank forecast Switzerland will emerge from recession during the fourth quarter and that its economy will grow by 1.7 per cent next year.

Thomas Wolfensberger, partner at Peach, said prospects for the Swiss housing market were rosy.

"The general market is a lot more stable," he said, "We don't have the problems of Spain, the US or the UK. We had no bubble. We assume that it [property prices] will continue with a slight increase each year."

Hawkins said new measures next year to allow each canton to set its own property ownership laws, instead of the federal government, would speed up the home-buying process, making Switzerland more attractive to foreign buyers.

The government is keeping a lid on the number of homes foreigners can buy in some tourist areas so that they don't become ghost towns for parts of the year. "In Verbier, they stopped foreigners from buying there because too many holiday homes were left empty for so much of the year. They would use them for two weeks and then leave," Martinez said.

At Villeneuve, 10 kilometres from Montreux, Aylesford is marketing a four-bedroom house that can be bought by foreigners for 2.75 million Swiss francs. The house is 200 square metres in size, with a 1,000-square-metre garden, swimming pool and garage.

On the shores of Lake Zurich, Peach is building Peninsula Beach House, which has 15 apartments in a four-storey block at prices starting from 2.35 million Swiss francs for a one-bedroom home. Residents have access to a communal spa, swimming pool, squash court and a 3,000-square-metre lakeside garden.

In the ski resort of Nendaz, Savills Alpine Homes is marketing 40 leaseback holiday homes at the Pracondu II community, with prices starting at 237,000 Swiss francs. Three leaseback packages are offered by property management company Alpvision, including a "skier" option that provides the owner with a 4.1 per cent gross return guaranteed for 15 years and six weeks use of the property each year.


SWITZERLAND HOME BUYERS GUIDE

Restrictions on second-home ownership in Switzerland are tight. In some of the 26 cantons, foreigners cannot buy or invest in holiday homes. In others, they can buy only certain types of property.

In Geneva, where restrictions are tightest, foreigners can only buy a home if they work in the city.

Non-resident, non-Swiss people could buy property most easily in tourist zones that had their own special rules on home ownership, said Sergio Martinez, general manager of Aylesford International's Geneva office.

Even so, restrictions still apply in these tourist zones, which are largely mountain ski resorts or lakeside destinations such as Montreux. A foreigner cannot own a property of more than 200 square metres on a plot bigger than 1,000 square metres.

Normally, foreigners must live in a property for at least six months, sometimes a year, before they could let it out to tenants, Martinez added.

Properties with the least restrictions are leaseback. These are usually chalets and apartments in ski resorts that a purchaser buys from a developer and leases to a property management company in return for a guaranteed rate of return over a set number of years.

The owner is allowed to stay at a leaseback property for an agreed number of weeks each year. The property management company lets it out for the remainder of the 12 months. Net rates of return for investors at new leaseback schemes are less than 3 per cent usually.

The federal government sets a quota each year for the number of wealthy, non-working foreigners allowed to buy homes in Switzerland and who will make it their primary residence.

European Union nationals can get a permit relatively easily, but it is more difficult for non-EU nationals.