Geneva's once red-hot property market has started to lose a bit of its allure as the Swiss banking sector, along with other factors, curbs price movements.

Osmond Plummer, who has written for WealthBriefing down the years from his home and workplace in Geneva, looks at the city's property market and wonders whether signs of a slowdown in that market have wider implications.

Is Geneva
losing some of its allure?

Expatriates sometimes refer to Geneva as a gilded cage – it is a small city with an
international feel, nesting between the Alps and the Jura mountains with a
gleaming blue lake and views of Mont Blanc
from the right places. People move to the city, get hooked on the lifestyle and
then do not want to leave.

Bloomberg
recently published a story on the woes of the ultra-luxury residential market
in the lake-side canton where wealthy foreigners have historically been able to
cut a deal with the tax authorities and negotiate a flat rate tax so long as
they do not generate any revenue in Switzerland. The lake-side luxury villas
are peopled by Formula One drivers and other wealthy individuals of greater or
lesser repute. However, the ground appears to be shifting and the market seems
to have turned: there is greater uncertainty in respect of the tax treatment of
these ultra-wealthy residents and the luxury villas that they own are falling
in value. Zurich
cancelled this arrangement a few years ago.

But what of the housing market
for those looking to spend less than SFr10 million ($10.6 million) on their house? I have noted
a fall in the number of new car registrations over the past two years since the
Swiss franc brushed parity with the euro and before the Swiss National  Bank effectively pegged the franc to the euro
at 1.20 – a level still some 20 per cent higher than a year before. But as the
city wakes up after a long hot summer and children are back to school, other
signs never seen before have been appearing. These signs are on houses
advertising their availability for rent - Geneva
has had a housing shortage for a number of years. And the new international
schools and expanded older ones are advertising to attract the parents of
international children whereas before there was a long waiting list at each
school and places at the better ones were very difficult to find.

Costs and dollars

Swiss wealth managers have been
hit by the combination of higher costs in local currency whilst much of their
income is in US dollars. This has combined with a perfect storm of uncertain
markets and the removal of the veneer of the unbreakable secrecy and discretion
of the Swiss banking industry following on from the US and OECD attempts to
prise the banks open and the much publicised thefts of data from certain
institutions which was then offered for sale to EU governments. Banks have
quietly been shedding staff and non-performing relationship managers. As all
new business has to be tax compliant it is often also harder for RMs to take
their clients with them if they wish to join a new employer.

UBS’s Swiss housing bubble
index has risen every quarter since mid 2009 and now stands at 1.20, its
highest level since the early 1990s when the market was crashing following the
market boom of the 1980s.

A spokesperson for Grange &
Cie, a Geneva real estate agent, confirmed to your correspondent that there are
more residential homes available than before but stated that the rental rates
remain as high as ever. Another agent put me on hold for 10 minutes before
cutting me off (an indication of the level of service you can expect from local
realtors).

A review of agents’ web-sites reveals a number
of higher end apartments still asking for over SFr10,000 a month - but also
confirms that the market is more liquid than before. It is certainly turning
into more of a buyer’s market. More signs are going up on villas and there is a
small three bedroom family home in my street available for SFr6,000 per month.
But it has been empty for more than a year.

In the end, the real estate
market anywhere is safe as houses – but Geneva
real estate has increased in value throughout the financial crisis and
international companies are retrenching in the face of increased costs – so the
oldest adage in the book remains – let the buyer beware.