For international buyers whose income and assets are in a currency other than Swiss francs, purchasing property in Switzerland involves currency risk. Understanding how currency movements affect the cost of the purchase — and the ongoing cost of ownership — helps buyers manage this risk effectively.
The Swiss franc as a safe-haven currency
The Swiss franc (CHF) is one of the world's most stable and sought-after currencies. It is widely regarded as a safe-haven currency — in times of global uncertainty, investors tend to buy Swiss francs, which causes the franc to appreciate against other currencies. This means that the Swiss franc tends to strengthen during periods of market stress.
For international buyers whose income is in euros, dollars or other currencies, a strengthening Swiss franc increases the effective cost of the property in their home currency. Conversely, a weakening Swiss franc reduces the effective cost. Over the long term, the Swiss franc has tended to appreciate against most major currencies.
Currency risk on the purchase
The currency risk on the purchase itself arises between the time the offer is accepted and the time the purchase price is transferred. If the Swiss franc strengthens during this period, the buyer pays more in their home currency for the same property. For a CHF 2 million property, a 5 percent strengthening of the Swiss franc against the euro increases the effective cost by approximately EUR 100,000.
Buyers can manage this risk by using a forward exchange contract (contrat de change à terme) to lock in the exchange rate at the time the offer is accepted. This eliminates the currency risk on the purchase price but requires the buyer to commit to exchanging a specific amount at a specific rate on a specific date.
Currency risk on ongoing costs
For buyers who finance the purchase with a Swiss franc mortgage, the ongoing mortgage payments are in Swiss francs. If the buyer's income is in euros or dollars, the effective cost of the mortgage payments in their home currency fluctuates with the exchange rate. A strengthening Swiss franc increases the effective cost of the mortgage payments.
Some Swiss banks offer mortgages in foreign currencies (euros, dollars) for non-resident buyers. A foreign currency mortgage eliminates the currency risk on the mortgage payments but introduces a different risk — the mortgage balance in Swiss francs fluctuates with the exchange rate, which could result in negative equity if the Swiss franc strengthens significantly.
Long-term perspective
For buyers who intend to hold the property for the long term, currency risk is less of a concern — over a 10 to 20 year holding period, exchange rate fluctuations tend to average out. The Swiss franc's long-term appreciation trend also means that the property's value in foreign currency terms tends to increase over time, even if the Swiss franc price remains stable.
Buyers should discuss currency risk management with their bank or a currency specialist before completing the purchase. The appropriate strategy depends on the buyer's currency exposure, risk tolerance and time horizon.
Key points
- Swiss franc is a safe-haven currency — tends to appreciate in times of uncertainty
- Currency risk on purchase: CHF strengthening between offer and completion increases cost
- Forward exchange contracts can lock in the rate at offer stage
- Ongoing mortgage payments in CHF: effective cost in home currency fluctuates
- Long-term holders: currency risk less significant; CHF appreciation trend is a positive
Contact Montreux Real Estate to be introduced to currency specialists and private banks experienced in managing currency risk for international buyers.
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