Swiss property investment: small contributions, significant returns amid market risks

Keystone / Christian Beutler

With 58% of its population renting, Switzerland has one of the lowest home ownership rates in the world. Property in the country is scarce and expensive. However, it is possible to invest in the sector with relatively small sums and achieve surprising returns, though not without risks.

For instance, Raizers, a property crowdlending platform founded in Switzerland ten years ago and now operating in seven European countries, offers an entry fee of CHF1,000 ($1,182) with an average rate of return of 10% over a 24-month period.

The concept, explains Maxime Pallain, co-founder of Raizers, on Monday’s Basik programme, is to “enable property developers to borrow money from thousands of private individuals and investment professionals, purchase a property, renovate it, sell it, make a profit, and then repay the investors.”

“We raise more than CHF100 million a year on around 100 deals, with almost 50,000 people registered on our platform,” adds Pallain.

Co-ownership of property

Foxstone, another platform, offers an alternative to crowdlending, allowing investors to contribute CHF25,000 to become co-owners of a building. These buildings generate an average return of 6%. In six years, Foxstone has raised over CHF250 million from 22,000 investors to finance more than 60 properties.

“This rate of return is possible because we are highly selective in our acquisition process,” says David El-Eini, co-founder of the Geneva-based company. “We receive around 400 properties a year but only offer around ten opportunities on the platform — less than a 3% conversion rate.”

Returns and tenants’ concerns

Yields of 6% or more have raised concerns with the Tenants’ Association. “An abusive return exceeds 3.75% interest on the money the landlord has invested, and we are often well above these authorised returns,” says Christian Dandrès, a lawyer with Tenant’s Association Asloca Geneva.

He attributes this discrepancy to a flawed monitoring system. “The law only applies if the tenant contests it. Since there is a housing shortage and it can take at least six months to find a flat, tenants are reluctant to go to court over rent disputes. This results in returns two to three times higher than what the law allows,” says Dandrès.

Small or large landlords, crowdlending platforms, or big investment funds — all follow the same market-driven logic when it comes to Swiss property.

“It’s the same with crowdfunding as it is with major structures like UBS, Swiss Life, Credit Suisse, and Allianz,” says Dandrès. “The returns are similar, but with large property funds, it is more diffuse and difficult to trace, and it’s not clear if there are any foreign investments involved.”