Foreign investors reach for Swiss summits

Mirax managers present the project to the people of Crans Montana Keystone

The arrival of a heavyweight Russian property developer in Crans-Montana highlights once again the attractiveness of Swiss mountain resorts for foreign investors.

The company, Mirax Group, is the latest investor not to be deterred by Swiss legislation restricting property purchases by non-resident foreigners.

At the beginning of March, the Russian developer currently constructing what will become Europe’s highest building in Moscow – Federation Tower – announced a more modest project for the Crans-Montana area.

Nevertheless Aminona will be on a scale rarely seen in the Swiss Alps. Mirax will invest up to SFr400 million ($392 million) to build high-rise towers housing hundreds of luxury apartments as well as exclusive chalets and a hotel complex.

The Mirax deal is the latest, and biggest of its kind in recent months involving investors from Russian or Arab states.

Swiss bank UBS announced that it had sold Chateau Gütsch, a prime location hotel overlooking Lucerne, to the Russian company, National Reserve Corporation, for an undisclosed amount.

In Adelboden, the Pearl of Kuwait Real Estate Company, pledged SFr100 million to finance a new spa seen as key to the mid-sized resort’s survival since it will attract visitors in the normally slow spring, summer and autumn months.

But the Crans Montana deal is best compared with a resort being built from scratch on the edge of the village of Andermatt. Like Russia’s Mirax, Egypt’s Orascom Group is planning hotels in this location in the central Swiss Alps as well as residential units and private villas.

Legal conflicts

The latter puts both Mirax and Orascom in conflict with Swiss real estate law.

The legislation, known as Lex Koller, does not restrict purchases of commercial properties such as hotels but limits the amount of first or second homes that can be sold to non-resident foreigners. A first version of the law was introduced in the 1960s to prevent speculation and overheating of the housing market.

The government decided to exempt the new Andermatt resort from Lex Koller and this may have encouraged Mirax to push ahead with its project, in the hope of receiving equal treatment.

The Russian company’s investment may be a risk worth taking, since land in mountain resorts in Europe and North America is considered prime property.

Dieter Marmet of the real estate consultancy, Wüest & Partner, says demand in the global tourist industry continues to grow, driven by an expanding middle class in Asia, yet mountain resorts are in limited supply.

“The prices in top Swiss mountain resorts have risen faster than all other prices, even those around lakes Geneva and Zurich,” Marmet told swissinfo.

“Our research into developments in mountain resorts abroad, including Aspen, Kitzbühel, Chamonix and Cortina, showed exactly the same price explosion.”

Expensive land

One would think investors would be scared off by the fact that a square metre of land in the Swiss Alps can cost as much as SFr50,000, but in fact the opposite is true.

Geneva-based consultant John Moederle told the htr hotel revue newspaper in a recent edition that foreign investors could soon account for one in every four hotel purchases in the Swiss Alps – up from the current ten to 15 per cent.

Analysts say one of the reasons is that Swiss property prices have increased moderately in comparison with other parts of the world, convincing investors that there is still money to be made.

Marmet says Switzerland is also attractive because the local currency is considered undervalued and the franc offers portfolio diversification. “Ten years ago you could diversify in French francs, German marks or other currencies, but now the choice is limited so the Swiss franc is back on the map,” he explained.

The Zurich consultant added that low interest rates compared to the yields promised by property investments also made Swiss real estate attractive.

And, according to the htr hotel revue, soft factors such as political stability and the prestige of owning a piece of Switzerland also play an important role.

swissinfo, Dale Bechtel

Purchasing Swiss property

The law restricts the acquisition of property in Switzerland by foreigners, by foreign-based companies or by Swiss-based companies controlled by foreigners. As a rule, they need an authorisation from the competent cantonal authority.

This is only granted if conditions set out in federal and cantonal legislation are met. An authorisation to purchase a holiday home may be granted under certain circumstances to a person living abroad.

Property ownership in Switzerland does not entitle a foreign person to a residence permit.

Nationals of the European Union or of the European Free Trade Association zone living in Switzerland with a residence permit, other foreigners entitled to settle here and Swiss-based companies controlled by anyone with the appropriate residence or settlement status do not require an authorisation.