Real estate purchase: why favor France over Switzerland post-2023?
What does the recent amendment to the Swiss law LFAIE imply regarding real estate purchases for non-residents?
In the context of a continually evolving real estate market, recent legislative changes in Switzerland, effective since July 2023, have redefined the parameters of real estate investment for non-residents.
This article examines the reasons why, in this new regulatory landscape, purchasing real estate in France is a more attractive option compared to Switzerland, emphasizing regulatory, tax differences, and market opportunities.
Legal Framework for Real Estate Purchase in Switzerland:
In Switzerland, the acquisition of real estate by non-residents is regulated by the Federal Law on the Acquisition of Real Estate by Persons Abroad (LFAIE). The updated version from July 2023 introduces additional restrictions for foreign buyers, often requiring cantonal authorization. Acquisition conditions vary based on property type and intended use, leading to potentially lengthy and costly administrative procedures.
It's worth noting that some exceptions exist. No authorization is required if the property is intended for use as a stable establishment for trade, factory operation, craftsmanship, or a liberal profession. Similarly, no authorization is needed if the property is acquired as the primary residence by the individual, instead of their legal and effective domicile.
Moreover, the high cost of real estate in many Swiss cantons significantly complicates homeownership for numerous households. For instance, the national average reveals that the price of an apartment is approximately 6 times the average annual income of a household in Switzerland, while a house reaches 8 times this income. Ultimately, only about 34% of Swiss households own their homes, a proportion significantly lower than in France, where around 57% of households are homeowners.
Benefits of Investing in Real Estate in France:
In France, real estate purchase offers several advantages, especially for foreign buyers. The regulatory framework is generally more flexible, with no specific authorizations required for non-residents. Additionally, the country provides attractive tax benefits such as tax deductions and advantageous rental investment schemes.
French Side of the Leman Real Estate Market: Dynamism and Attractiveness:
The dynamics of the real estate market in the Leman region are influenced by economic factors and recent legislative changes in Switzerland. In 2023, the market showed remarkable resilience, with sustained demand and prices holding steady across property types, despite an inflationary context leading to an increase in bank rates.
"New properties and individual houses maintain their value, while older properties might see adjusted prices, partly due to the growing awareness of energy performance."
Swiss Border Real Estate: Why Favor France over Switzerland Post-2023?
Focused Comparison: The Leman Region:
The Leman region, stretching between France and Switzerland, provides an ideal comparison for real estate investment. Despite the vitality of the real estate market in the Leman region, changes to Swiss law in 2023 could redirect some demand to the French market. New restrictions for foreign buyers in Switzerland complicate real estate investment, making it less accessible. In contrast, the French market, with its favorable regulations and tax advantages, becomes a more attractive option, garnering increased interest from investors, particularly in sought-after areas like those around Lake Leman.
Impact on Investment Decisions:
The update to LFAIE in Switzerland significantly impacts real estate investment decisions. This trend could influence the real estate market in both countries, potentially leading to an increase in demand and prices on the French side.
If you're considering investing in the Leman region, explore our properties for sale around Lake Leman. Feel free to contact our real estate agencies, BARNES Evian-les-Bains, or BARNES Thonon-les-Bains, to learn more about the real estate market in the region.
We would like to thank Jérémy Sciboz, the main attorney-in-fact within the Edmond de Rothschild group, for his valuable assistance in the development of this article.