Judging by the headlines, the City of London is facing progressive depopulation as highly paid hedge fund managers and their ilk decamp to the fiscally more favourable shores of Lake Zug, landmark of the small Swiss canton of the same name.
The exodus is not exclusively British. Germans, Dutch and Scandinavians are also prominent among those contacting property agents and relocation specialists, whether for personal moves or company-prompted transfers.
The appeal of Zug, a canton and cantonal capital of the same name, is not new. In the 1960s politicians in what was then a rural and undeveloped region identified lower taxes and business-friendly policies, particularly for foreign companies, as the way forward.
Their timing was inspired. The initiative came as Zurich, Switzerland’s commercial capital just to the north, was tightening work and residency rules, complicating life for non-Swiss employers. Zug was small, basic and still largely unknown. But it was conveniently close to its bigger neighbour – Zurich is less than half an hour away by train or car – and had decent infrastructure and plentiful lifestyle attractions to boot.
In the years that followed Zug’s low taxes and minimal red tape attracted ever more foreign companies. Cantonal tax laws were particularly favourable to trading groups. Glencore, the world’s biggest metals trader, is based locally; commodities trader Trafigura, spun off from the former Marc Rich group, is just across the cantonal border in Lucerne, though many staff live locally. And big multinationals such as Johnson & Johnson, Siemens and biotech groups such as Biogen Idec and Amgen have divisional or regional headquarters in the canton.
Zug has also become a magnet for millionaires, whether foreign or, less often, Swiss. Sergio Marchionne, the Italian chief executive of Fiat, and Sebastian Vettel, the German Formula 1 racing driver, count among residents. Erwin Conradi, former top executive of Germany’s Metro retail chain, owns a vast villa on the lake. His next-door neighbour is Daniel Vasella, chairman of Switzerland’s Novartis pharmaceuticals group.
The inflow has had a massive impact on housing. “I’d say 70 per cent of my clients are foreigners,” says Kurt Blunschi, head of Residence Immobilien, one of the leading property agents in the region.
“Sustained foreign buying has protected Zug prices during the rare downturns and pushed them up faster than elsewhere in the good times,” he adds. “Even in the early 1990s, when Switzerland had one of its rare property recessions and prices fell by 30 per cent, Zug was down only 15 per cent and recovered soon after.”
As in Geneva, Zurich’s “Gold Coast” or prestige Swiss ski resorts such as St Moritz and Klosters, prices have been supported by inadequate supply. “Even in the recent economic slowdown, prices have remained broadly stable or, if anything, continued rising slightly,” says Armin Seemann, an independent property agent specialising in high-end villas and apartments.
But the past two years have seen an important, if subtle, change. As recession made some foreign groups more cautious, reducing relocations or cutting budgets, fiscal and regulatory factors have prompted new interest from independent buyers from the European Union, notably Britain.
Hedge fund and private equity types have grown more prominent, as threatened, or actual, UK tax changes have prompted them to review London residency. Agents play down media hype about a mass exodus but they do report greater interest from wealthy, self-employed people working in financial services. Peter Auf der Maur, who heads local relocation company Le Concierge, knows of at least one UK hedge fund group – which he declines to name – in talks with three Swiss cantons, including Zug, about moving up to 70 staff, including 30-40 families.
Zug’s agents stop short of predicting a boom. “Inquiries have increased but that’s not necessarily been followed by people coming”, acknowledges Auf der Maur. Others suggest greater interest from financial types has only compensated for a slight decline from more traditional buyers.
“Prices have stabilised at a high level,” reckons Thomas Frigo, head of the Zug office of international estate agency Engel & Völkers. “Many customers have definitely become more picky and price sensitive. But our biggest problem remains the lack of suitable properties.”
In spite of that, and the canton’s modest size, Zug offers surprising variety. Many top-end buyers favour Zug itself, a small town of 23,000 with an attractive medieval core, good shopping and extensive property development on its surrounding hillsides. But some prefer the canton’s quaint villages where old, gabled farm buildings and traditional chalets can lie cheek by jowl with modern developments.
Buonas and Risch, on the west side of the lake, appear nondescript farming villages to the passing visitor but have big villas tucked away out of sight. Walchwil, a more developed community on the other side of the lake, has greater initial appeal, with apartment blocks and houses rising in terraces from its lakeside main road. The village also has the canton’s lowest taxes, although the relative steepness of its terrain deters some buyers.
Wholly different again is Oberaegeri, 20 minutes east of Zug on a climbing road that leads to the village’s own small lake of the same name, along with stunning views of some of Switzerland’s highest peaks. At more than 700 metres altitude, the village has the further advantage of often being above the midwinter mist that can descend lower down and the scenery is certainly dramatic. But the village can be just a bit too isolated and “alpine” for some purchasers.
Irrespective of location, the opportunities for new building are limited by tough zoning laws and the mountainous topography that makes many hillsides unusable. Almost all of the space in the most attractive locations has been built, with scant plots left. And while there is an established resale market for existing homes, the most sought after properties seldom surface. “It has always been a sellers’ market, especially in the past 10 years,” says Frigo.
The lack of availability can lead to frustration. Amanda Kröpfli, the British half of an established Anglo-Swiss couple, is keen to buy after years renting and laments the lack of affordable choice. “It’s just impossible,” she says. Even agents acknowledge “opportunistic” pricing by many local vendors for less than top-notch properties. “They must understand, at these prices, foreign buyers in particular only want properties of the highest standard,” says Frigo.
“Most buyers’ dream is a villa on the lake in extensive grounds, with panoramic mountain views. The trouble is there are hardly any of them,” he adds. Usually owned by established Swiss families, such homes seldom change hands publicly, being either passed down within the family or sold privately by word of mouth.
Modern penthouse apartments with unobstructed views in small blocks have accordingly become many buyers’ main target. Such properties can start from about SFr3m (€2.1m), rising to about SFr5m, depending on location, with properties closest to the town of Zug commanding the highest prices.
Predictably, given the canton’s property shortages, agents’ books can be thin. Engel & Völkers has a big villa in Walchwil, currently under development but allowing the buyer to determine interior design, for SFr4.77m. The seven-bedroom home, with 460 sq metres of living space, is set in 1,400 sq metres of grounds with an unobstructed lake view and includes a swimming pool and underground parking.
Haig Simonian is the FT’s Switzerland correspondent
Engel & Völkers, tel: +41 41-728 7711, www.engelvoelkers.com/com/
Residence Immobilien, tel: +41 41-711 6767
Seemann Immobilien, tel: +41 41-750 3847