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Education named as a key driver in the Swiss property market

Education is a key demand driver for people buying property in Switzerland where the market is split between resident and non-resident buyers.

Switzerland has the best education system in the world according to the World Economic and this is helping to boost the market in a country where the Swiss Franc remains a go-to safe haven currency

With interest rates in Switzerland in negative territory since 2014, property is attracting interest from investors looking for a tangible asset that is capable of delivering a stronger return, according to the latest analysis from international real estate firm Knight Frank.

It reveals that residents that work in Geneva are showing a greater willingness to commute to the city from areas in the canton of Vaud such as La Cote and even Lausanne where property prices and municipal taxes are lower.

Alex Koch de Gooreynd, head of Switzerland desk at Knight Frank, explained that resident buyers tend to have larger budgets and interest within recent months is strongest within the CHF2 million to CHF8 million price bracket.

The analysis also suggests that the super prime market has become polarised. From CHF20 million to CHF40 million vendors face strong competition making pricing and a property’s condition critical while above this demand remains stable.

Although the Swiss Franc dipped against key currencies in the last year it remains strong by historic standards. ‘While this can influence buyer sentiment in all Swiss markets, buyers in the lakes tend to focus more on the long term gain and lifestyle benefits, said Gooreynd.

‘Here, a property boasts year round appeal, offering summer by the lake whilst some of the top Alpine resorts sit within an hour’s drive. Non-residents are largely confined to ski resorts as well as the immediate areas surrounding Montreux, Lugano, Interlaken and Lucerne,’ he added.

Where non-residents can purchase a home, they can only buy a single property where the official living space does not exceed 200 square metres. However, buyers still need to be aware of the Lex Weber law which places a 20% cap on second homes in key communes, the report points out.

In contrast, Swiss residents face less restrictions on where or what they can purchase, although non-European passport holders are restricted to one primary residence
Resident buyers tend to have larger budgets and usually have a clearly defined search area.

The report explains that demand in recent months is strongest within the CHF2 million and CHF8 million price bracket. Previously, the upper end of the price bracket would have extended to CHF10 million but this has reduced slightly, partly because of the more stringent assessment of lump sum taxation, which came into force on 01 January 2016.

The budgets of non-resident buyers are significantly lower at around CHF1 million to CHF4 million, it also points out. Most make their first acquisition at this price but then increase their investment having familiarised themselves with an area.