By Tom Rendell, Marketing Director, Andermatt Swiss Alps
For many high-net-worth individuals and investors, the past 12 months have been good ones, as many of the world’s stock markets have seen significant increases in value. For example, the S&P 500 had at one point increased in value by over 30%, a significant gain particularly in the context of the COVID-19 pandemic.
However, the volatility over recent days, the FTSE 100 fell 2.3% in one day on Monday 19th July for example, has shown that these gains may not be sustainable in the long-term. Fears of the global recovery from COVID-19 taking longer than expected, the rising cases of the Delta variant and the prospect of the inflation ‘tiger’ in the words of outgoing Bank of England economist Andy Haldane are all causes for concern. In these circumstances, investors are likely to be considering alternatives, and where better than property – historically, a safe bet that has in many countries performed well during the pandemic.
But where to invest?
Not all property has achieved the same growth in prices during the pandemic, with many major cities seeing minimal growth or even a slightly decrease in demand. This in contrast to more rural, greener areas, outside of the big cities – for example, the company I work for, Andermatt Swiss Alps, has seen enquiries for property increase 95% in Q1 2021, compared to Q1 2020.
While this trend looks set to continue in many markets, the result is that investors are faced with a wide choice of where to purchase property. For me, the market that deserves a closer look is Switzerland.
Historically, Switzerland has generally been attractive to investors due to its fiscal and monetary stability, and this is equally true in 2021. The stability of the Swiss Franc, no deficit, strong GDP and realistic expectations of growth all contribute to this perception, as does the independent monetary policy of the Swiss National Bank. It is also worth touching on the non-monetary pull factors of low crime rates, great schooling and world-class healthcare.
Looking at the Swiss property market specifically, similar trends to those seen in many other European countries have been visible. Over the last 20 years, most properties in Switzerland have experienced a consistent growth in value. House prices rose over 80% between 2000-2016, before a small dip in 2017 as a result of restrictions on financing mortgages that were introduced. Since 2019 prices have continued to rise, likely influenced by record low borrowing costs, and a continued shortage of supply in some areas.
However, for those looking for significant growth in value, a focus outside Switzerland’s cities is key. Many of the major ski resorts have in the past seen values rise considerably, and for savvy investors there is certainly still value to be found, even if some markets have become dominated by a mix of wealthy international buyers and Swiss owners.
In the short-term, demand in some of these resorts has been constrained due to the strength of the Swiss Franc which makes properties more expensive to foreign investment. However, to offset this, buyers in a post-pandemic world have a different focus, with greener space, increased quality of life and cleaner air revitalising demand. Even the Lex Weber and Lex Koller (Swiss laws which limit the buying opportunities of international buyers), are unlikely to limit price growth in the long-run, and in fact are likely to make those properties available for international buyers even more desirable.
With demand for properties in resorts such as Verbier, St Moritz, Davos likely to be so competitive, even for high-net-worth investors with significant resources, it may be wise for investors to be looking at resorts where recent investments are boosting either the supply of property, or are improving a location’s infrastructure and therefore generating price rises. In particular, investors should be looking for resorts where they may be exemptions to the Lex Weber and Lex Koller laws, as without such an exemption purchasing high specification Swiss properties is particularly difficult for international buyers.
Andermatt, located about 90 minutes from Zurich, provides such an opportunity for investors, with the exemption connected to the £1.4 billion investment programme of the resort. Notable milestones of the development include major improvements to the ski infrastructure creating 180km of linked pistes between Andermatt and the neighbouring ski resorts of Sedrun and Disentis, the creation of several hundred apartments and the opening of the 5* hotel The Chedi Andermatt and 4* Radisson Blu Hotel Reussen – all designed with environmental sustainability in mind, a vital consideration for today’s environmentally conscious consumers. In addition, investments have been made in a world class 18-hole golf course and a number of Michelin starred restaurants.
The investment in the resort and surrounding areas provide the potential for significant uplift for buyers, creating value while also providing a fantastic mountain property for use all year round. In Andermatt, prices have risen by over 38% since the first Andermatt Swiss Alps real estate opened in 2012, and even so, demand is continuing to rise – more properties have been sold in 2021 already than were sold in the entirety of 2020. When coupled with the stress free managed rental programme for those looking to rent out their property, the advantages for investors should be clear.
Personally, I expect this demand for mountain properties in Switzerland to continue in the future, both in Andermatt and more widely. Already, many domestic buyers have been revaluating their lifestyle, and are looking to purchase a mountain bolt hole where they can spend long weekends or settle permanently and as international travel begins to recover, demand is only going to increase.
As the global economy begins to move out from the pandemic disruption it has experienced, I fully expect that property investment is going to continue as the investment of choice for many. Looking at Switzerland, and in particular at Andermatt, could be a wise decision, both due to some of the amazing properties on offer and also due to the returns possible in this stable European market.