Foreign investors advised to take profits in Switzerland

Foreign investors in search of a safe haven in the midst of the financial crisis have stormed into Swiss real estate, driving prices to record highs atop profits generated by the rise of the Swiss currency.

The hotel market has been particularly popular. Since 2008, funds, investment companies and family offices from Austria, France, Germany, the UK, Italy, Qatar and Saudi Arabia have been buying up hotels in Switzerland with zest. Orascom Development Holding, founded in 2008 by Egyptian entrepreneur Samih Onsi Sawiris, has invested no less than CHF1.8 bn (€1.46 bn) in the Swiss hotel market. 'Today, 40% of the Swiss five-star hotels are owned by foreign investors,' said Roland Schegg, professor at the Walliser School for Management & Tourism.

Market watchers believe now may be the right time to lock in profits for many investors as the Swiss franc appears to have peaked. 'With the euro crisis subsiding, the Swiss franc will likely fall by 15% to CHF1.40 against the euro within the next 12 months,' predicted analyst Moritz Westerheide from Bremer Landesbank, a financial institute well known for its exchange rate forecasts for German export companies. Already the franc has fallen against the euro from CHF1.20, the bottom rate set by the Swiss Nationalbank at the peak of the euro crisis.

'This is a good time for foreign investors to consider taking profits since demand for property is still high and Swiss institutional investors are looking for ways to grow their property portfolios inside the country,' noted Daniel Stocker, head of research at Colliers International in Zurich.

'Investors from other European countries and the US who only fled into Swiss property looking for a safe haven during the financial crisis should think about an exit as long as the franc is overvalued,' agreed Günter Vornholz, professor for real estate economics at the EBZ Business School in Bochum.

However, this advice does not apply to foreign investors wanting to keep part of their capital in the Swiss currency regardless of the exchange rate, he added. 'With Swiss 10-year treasury bonds yielding only 1.05%, real estate is a far better place to keep money for anyone wanting to stay in the Swiss franc.'