Part I of II, by Claudio Grass, Hünenberg See, Switzerland
The covid crisis, and especially the destructive governmental responses to it, have wreaked havoc with the global economy and with our societies. However, the chaos and the widespread uncertainty that prevailed over the last year and a half also served as a useful reminder of the importance of stability, legal predictability and limited state powers.
A great number of High Net Worth Individuals (HNWIs) seem to have recognized the value of a jurisdiction that has a solid track record of demonstrating respect for private property rights and individual liberties. This why Switzerland has once again emerged as an immensely popular destination for the ultra-rich and their assets.
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After the intense pressure applied by the US to dismantle banking secrecy laws, especially under President Obama, a lot of Swiss banks saw their clientele diminish. In the years that followed, demand for Swiss banking services continued to be anemic as many wealthy Westerners were concerned about further escalations in the war against privacy and financial sovereignty waged by many of their own governments too. At the same time, Switzerland saw an inflow of assets from many ultra-rich clients from developing nations and from Asia, that helped its banks weather the storm.
Today, however, the tables have turned once again. The extreme state power abuses and the unprecedented excesses we witnessed since the start of the pandemic have convinced many wealthy Europeans to reevaluate their investment strategies and their jurisdictional diversification plans. Whatever their fears might have been in the past, whatever “worst case scenario” they might have imagined even two years ago, it has all been overshadowed by the realities of the covid era. This “new normal” that we are now all living through presents a far greater threat to their life savings and to their family wealth than any regulatory tweak or legal shift one might have envisioned before the pandemic emerged.
Therefore, many prudent investors and HNWIs have decided to “vote with their feet” and with their money. They are abandoning their own jurisdictions en masse, justifiably worried about the imminent risks they face there. They are relocating to Switzerland and bringing their considerable assets with them. According to the German news agency DPA, Germans, Italians, French and Britons are among the key drivers of this trend, as they are overrepresented in the new money inflows that are boosting the outlook of Swiss banks.
Luxury Real Estate boom
The rapidly rising appeal of Switzerland is also evident in its luxury real estate boom, triggered by the covid crisis. According to a recent report by UBS, the number of luxury home sales rose in the past year by more than half compared to the previous year and it is now around three times higher than its 5-year average.
As UBS real estate expert Katharina Hofer highlighted, “the excess demand caused prices in the luxury segment to skyrocket by 9% in 2020 – significantly more than the 4.4 percent in the average Swiss home market”. The bank also noted that it was foreign buyers that largely fueled this surge. One of the regions that benefited the most was Lake Geneva, with luxury property prices climbing 16%, while the Alpine regions also saw significant increases, around 10%.
Of course, this large wave of new investments is certainly positive for Switzerland on an economic level, but it also sends a strong message internationally about the priorities and the values that high-end buyers and investors look for. The choice of so many HNWIs to invest in real estate in the country and to physically relocate there speaks volumes about what is wrong in their own nations and what is right in Switzerland.
That being said, it is also important to point out that the decision to opt for properties in the country’s biggest cities shows that, even among the very wealthy, there is arguably a misguided optimism about the future of metropolitan hubs. After all that we saw during the covid crisis, and all the lessons that we learned – or should have learned at the very least – it is clear that “big city life” will have numerous challenges going forward. For those of us who value our individual sovereignty, our privacy and our ability to move, work and interact with each other freely, in a structure as decentralized as possible, municipalities populated with like-minded individuals and built on a self-sustainable, off the grid, and independent basis, are far more attractive than large urban centers.
Naturally, this contrast is much less pronounced in Switzerland, as cities like Geneva or Zurich bear no comparison to the likes of New York or London. Nevertheless, even in our small alpine nation, there is a strong case to be made in favor of more contained, harder to access and decentralized communities.
In the upcoming second part, we’ll focus on the specific advantages that Switzerland has to offer, while we’ll also look at the much wider trend that this wave of relocations and asset inflows highlights.
This article has been published in the Newsroom of pro aurum, the leading precious metals company in Europe with an independent subsidiary in Switzerland.
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