London sees investment surge as Swiss scrap currency cap

  • 10 years ago
  • Uncategorized

Switzerland has decided to scrap its currency cap, a move that has seen interest in London property surge from surprised investors.

Switzerland’s cap was introduced in September 2011, keeping the Swiss france at 1.20 euro. The move was designed to prevent the currency becoming overvalued, but as the euro has weakened, the franc has been pegged to the single currency, prompting the Swiss National Bank to do away with the limit altogether.

The decision came as a surprise to the IMF, as well as to traders and investors. In the immediate fallout, the Swiss franc rose by as much as 30 per cent against the euro, although it settled ultimately at 12 per cent. One trader told the BBC it was “carnage”.

For those holding property in Switzerland with mortgages, or who have mortgages in Swiss francs, the hike in exchange rates will leave them facing unexpectedly higher costs.

“Almost 65,000 Greeks have CHF-denominated mortgages. Dire news for them today,” tweeted Yannis Koutsomitis of the BBC World Service.

While investment in Swiss real estate is likely to be impacted, though, investment by those with Swiss capital in overseas property markets is reportedly increasing, as buyers seek a stable safe haven. London real estate’s reputation has drawn a wave of Swiss buyers, says London Central Portfolio.

“Unlike the rest of Europe, who account for 49 per cent of LCP’s investor base, the Swiss, to date, have not traditionally represented a large buying force in the marketplace,” says LCP, but yesterday marked a turning point.

“Central London [has] in the blink of an eye, become substantially cheaper for them, against a backdrop of Swiss banks now charging customers -0.75% for holding their money. This may presage a new international investment dynamic in this market,” comments Naomi Heaton, CEO of LCP.

“Prime Central London (PCL) real estate is another asset class which benefits from global uncertainty. It remains one of the most globally robust asset classes and with more instability on the economic landscape, together with plummeting oil prices, it remains the ultimate safe haven,” she argues. “Like gold, it benefits in times of uncertainty, but unlike gold, it continues to appreciate when markets recover. “

Specialist London Mortgage Broker, Tim Kemp, CEO of Kemp Private Finance, has seen a similar influx, reporting “numerous calls” from investors wanting to agree finance quickly to move their money out of Switzerland.

Photo: Tracylee

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