Leading Experts Provide Geneva Real Estate Overview
Geneva, April 16, 2019: The American International Club (AIC) hosted an informative panel on the Geneva real estate market. The panel consisted of Stéphane Tanner of Tanner Conseil, former director general of tax administration for the Canton of Geneva; Julien Blanc, partner of GVA Law, former secretary general of the Swiss Association of Real Estate Professionals; and Mark Muller, lawyer, partner at Muller & Fabjan, and vice-president of the AIC.
Mr. Tanner discussed real estate taxes in Geneva. He provided an overview of the taxes involved in the initial property purchase (3% to the canton of Geneva), ongoing cost (1% of property value per year), and sale/succession (including inheritance taxes). Mr. Tanner noted that a homeowner in Geneva has to pay income tax on the valeur locative or rental value. The rental value represents what an owner theoretically would receive if the property was rented to someone else. This tax on phantom rental income can be offset by deductions of mortgage interest payments and other costs for the upkeep of the property. Mr. Tanner noted that discussions on the abolition of valeur locative have been ongoing, but cannot be resolved until a replacement of this lost income can be found.
Me. Blanc talked about becoming a property owner in Geneva. He pointed out that foreigners (except EU citizens) can only purchase housing property in Switzerland, if they are eligible for C Permit. Me. Blanc mentioned the Swiss Constitution and the civil code protect property owners, such as limiting the State’s invasion on personal property and protecting civil rights and prerogatives. Personal ownership can be individually or via co-ownership structures, such as a limited liability company or cooperative; the same structures can be used for commercial purposes. He noted that notaries have to authenticate property transactions. Me. Blanc added that property financings are traditionally a 20% down-payment / 80% mortgage. Part of the down-payment (maximum of 10%) can come from the second pillar of retirement savings, while the third pillar may help reduce taxes on debt amortizations.
Me. Muller addressed droit du bail or renter’s contracts. He stressed that form and process are important from a federal law perspective. Me. Muller said that Geneva renters have many rights covering lower rental prices, repairs and maintenance, which can be presented to landlords. Geneva rental prices can be fixed, and possibly change as the property evolves via improvements by the owner, interest rate changes, etc. He stated that renters must give three-months-notice to end a rental contract, with the option to find a viable replacement before that time. He added that it is much more difficult for a landlord to annul a contract with a renter.
A key question from the audience was the risk of mortgage interest rates rising, leading to a crash in property prices. While acknowledging this risk, Mr. Tanner replied that supply and demand are the overriding factors. Mr. Tanner added that the outcome of upcoming May 19th referendum on corporate taxation can impact future property supply and demand.
AIC President, Ed Schneider, closed-out the event by thanking the panelists, and presenting each of them with a lifetime AIC membership certificate and a bottle of champagne.
link to presentation Mark Muller