Spiralling property prices paid by new rich Geneva residents from central Asia and Russia have started to set alarm bells ringing.
While some local officials welcome their recent arrival, others are concerned as lakeside mansions that have soared in value over a short period are snapped up. There are also suspicions of money laundering.
In Geneva’s “Beverly Hills”, chic communes like Cologny, Anières and Vandoeuvres, which stretch northeast of the city alongside the lake and which have welcomed wealthy new residents from Russia and Central Asia, the value of property has exploded over the past five years.
“It’s as if we’ve been hit by a meteorite,” Jean Murith, a Cologny official in charge of construction, told the weekly Hebdo magazine.
The price of land has risen from SFr650 ($665) per square metre in 2003 to over SFr3,000 this year – and even as high as SFr7,960.
At the beginning of 2010 Dinara Kulibayeva, the daughter of the Kazakh president, Nursultan Nazarbayev, and wife of oil magnate Timur Kulibayev, bought a huge property in Anières worth SFr74.7 million – up from SFr8million ten years ago.
In July Timur Tillyaev, the husband of Lola Karimova-Tillyaev (daughter of the Ouzbek president, Islam Karimov) purchased a house at Vandoeuvres for SFr43.4 million, which was allegedly valued at SFr14 million just four years earlier. They join Kazakhs, Russians and citizens from other former Soviet states who have moved to the area.
Money is no object to the newcomers, said Murith.
“They say, ‘I’ll take it. How much does it cost?’ And if you add a zero they still buy it,” he commented.
Good tax payers
For Jérôme Félicité, director of the luxury estate agency Gerofinance Dunand, Geneva is an attractive location for international clients: “It’s appealing for its taxes, security and attractive quality of life”.
But he admitted that certain properties were “overpriced”.
Mark Müller, the canton's minister in charge of construction, felt speculation was not to blame.
“The places bought are in magnificent areas that are highly sought after by the rich elite,” he told Swiss national television.
Müller welcomed the arrival of the affluent newcomers, adding that it enabled “a certain number of good tax payers to settle in the canton”.
But other local officials are not happy.
“It’s unhealthy,” Catherine Kuffer, mayor of Vandoeuvres, told the Mise au Point TV programme. “They don’t integrate into communal life and pretty soon they leave and prices go up. It’s a vicious circle.”
“Where does the money come from? Is it clean?” asked Patrick Ascheri, mayor of Anières. “If they paid that much in taxes I would be happy, but the person who comes doesn’t work and pays a lump sum taxation rate, so we can’t identify their real tax situation which should benefit the commune.”
“They buy properties at exorbitant prices without any link to the real market value.”
Social Democrat Carlo Sommaruga said it was fairly easy for the rich to settle in Switzerland, whatever their background.
“The moment you say you are a millionaire and have the means to live, it’s open arms, then once you have the residence permit you can buy a property,” he told swissinfo.ch.
For Bernard Bertossa, the former Geneva prosecutor and judge of the Federal Criminal Court, the whole affair smacks of “recycling money”.
“It’s out of proportion, indecent and a provocation in a canton where the majority of people have difficulties finding somewhere to live at a reasonable price,” he told the programme.
Bertossa compared the situation in Geneva with the south of France or the Costa Brava in Spain.
“These [real estate] markets are very sensitive to money laundering, as there is no control of the origin of the funds, the financial intermediaries live abroad and the person selling doesn’t worry where the money comes from,” he said, adding that as prosecutor he would have opened an inquiry into the suspicions.
Philippe Kenel, a Geneva lawyer, concurred: “Banks don’t want any more non-declared money so that finds refuge in real estate where there are a lot fewer checks concerning the origin of funds.”
Sommaruga said he had asked the Swiss government to explain how it was possible that a member of Nazarbayev’s family could buy such an expensive property in Geneva without any checks. Nazarbayev was embroiled in money laundering investigations in the early 2000s involving Switzerland and the US.
“The government’s reply was there was that nothing could be done as we have no legal means to intervene.”
Pierre-François Unger, head of Geneva canton economics department which approves the sales, said his margin for manoeuvre was limited and he had no “inquisitional” powers.
“All we can do is say yes or no to the residence permit and yes or no as to whether there is willingness or certainty that this is their main place of residence,” he told the programme, adding that changes should be made to federal law.
“There is a lack of curiosity by everyone. The moment you pay everything is allowed,” concluded Bertossa.
Swiss Property Market
Switzerland’s property market is expected to avoid the type of crash seen in other countries despite fears this summer it was starting to overheat.
A continued steady rise in house prices and demand, fuelled by low interest rates, has led to a spate of warnings from top financial officials in the past few months.
Property prices have been heating up in Zurich and around Lake Geneva. House prices have risen to 1990 levels in Zurich and interest rates are likely to remain low for some time.
But mortgage lending in Switzerland has been tight since the country suffered in the property crash of the 1990s. Buyers of residential homes can expect to be asked for a 20 per cent down payment on a property before receiving a loan.
Experts believe that demand for home ownership may start to slacken slightly as the reduced rate of immigration into Switzerland puts a brake on rental prices. A large influx of foreign workers in the past five years has increased demand for rental flats, but immigration levels are forecast to be only around half as strong as the boom year of 2008.
Switzerland has one of the lowest rates of home ownership in the developed world. The recent trend of rising rents and lowering interest rates has boosted the rate of home ownership to 40 per cent, but this is still well below countries such as Germany 45%, France 54%, Britain and the US 69%, and Spain 81%.
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