Preliminary research will inform you that in order to buy property, whether residential, investment or commercial, you must have a permit/license and be compliant.
Swiss regions are known as 'cantons' and each has its own rule about foreigners and their ability to legitimately buy property. Broadly though, if you already live in Switzerland and have a permit so to do as well as being an EU national, or you hold a Swiss C Permit (permanent residence permit), you can buy property. The same is true of a Swiss B permit (initial residence permit), however you are restricted in that you must live in the purchased dwelling. Buying in Switzerland can be rather a drawn out process and you should expect to pay around 5% of the sale price in additional fees.
All this being said and even if you fall into one of the above categories, the vast majority of the Swiss population rent. Whilst it is a very small country, 70% of folks do not own their own homes, plus, there are many urbanised global cities in Switzerland, which essentially means competition is fierce both in terms of the rental market and in terms of residential sales.
So, why the pre-amble? Well, we want to establish the fact that as brokers we are far less likely to encounter non-Swiss nationals buying in Switzerland than we are professionals relocating there and renting.
The treatment for FX activities is different depending on why you are there and what you want to achieve...so, this post, fuelled by the nuances of the Swiss property market (rental and sales), seeks to explore how to minimise your FX risk and maximise both your disposable income and potential return should you elect to come back to the UK, or anywhere else for that matter.
Yes, we are focussing on UK nationals, but this is simply as a means of framing the discussion. Tourism and investment from China and other South East Asian and pan-pacific territories is on the constant increase for the Swiss. Whilst the relationship between Japanese Yen (JPY) and Swiss Franc (CHF) is neither as volatile nor as cyclical as that of Sterling (GBP) to CHF, the factors that move markets and rates are broadly the same the world over. The figures might be different, as might be the margin of movement as a result of 'x' or 'y' coming to bear, but, a young professional from Hong Kong would do just as well to approach their FX risk in the way we will go into as someone moving to Geneva from London.
RENTING: Who pays?
Unless you're an avid base jumper or a late teen on a gap year you're unlikely to find yourself seeking longer term accommodation without your employer having a part to play.
No, key to how to deal with foreign currencies when it comes to your placement, secondment or relocation to Switzerland is whom will be paying the rent each month (or upfront for a specific period) and how will those funds be paid?
1. You are paying your rental costs directly from your CHF salary.
2. You are paying your rental costs directly, but your salary remains in GBP.
3. Your employer is paying your rental costs directly and in CHF.
4. Your employer pays rental costs direct from the UK (if we suppose this is the location of the parent company).
We could list more variants as to how your arrangement might be set-up, but, it is worth disconnecting your actual salary from your rental costs, so we'll jut stick with these 4. We advise separating your rental liability like this because rental costs are a fixed sum that will always need to be paid.
Interestingly though, we are going to look at longer term rental scenarios too which could involve securing tenure before the expiring of an existing contract or you having to renegotiate your rent and how rates of exchange can on the one hand improve your negotiating position, but also pose a risk to you if not properly considered.
1. YOU ARE PAYING RENTAL COSTS FROM YOUR OWN CHF SALARY.
So, you receive you salary in CHF and from that you need to pay your rent. Fair enough, it is the common format.
In this scenario your interest should be making the most of the excess disposable income you have net of your rental outgoings. If you ongoing GBP expenses, for instance UK mortgage, then this is an area you way wish to look at.
In discussion with one of Prime Cap's highly experienced, startlingly handsome and notably modest traders you can establish whether or not the rate of exchange from CHF to GBP is favourable, what a favourable rate might look like, and a rough time frame as to how long you might have to wait (supposing the rate is presently unfavourable) before the time is optimum time to restock your GBP coughers.
On the basis that the rate could be worse and, supposing that you're not planning on leaving or losing your job for anywhere between 6 to 12 months, locking in a rate of exchange using a forward contract would be an excellent way to maximise what you're getting whilst living where you do. We're also, of course, supposing that you CHF expenses are not going to sky rocket in the near term whilst you salary will remain the same.
One obstacle often raised - what happens if i want the money i have already committed to a forward contract?
Well, entering into this type of arrangement should be done with eyes wide open and only if you are committed to converting/moving a definite amount over a regular period at a fixed price.
Forward contracts do also mean that you can keep your funds in CHF if you wish and then settle the contract in one go at the end of the contract period...in fact (and this is where we make our bang) if the domestic savings structures/instruments you're able to access allow you to achieve higher returns that you might get were your funds in the UK, locking in a rate and sending the full amount saved in one go a year hence would maximise the rate of exchange as well as how hard you're earnings are working for you.
2. YOU ARE PAYING YOUR RENTAL COSTS DIRECTLY, BUT, YOUR SALARY REMAINS IN GBP.
For those on secondment, placement or simply stationed in Switzerland for a period of time, your contract or package may yet be remunerated in sterling. This is not uncommon and presents an interesting set of issues relating to your living costs whilst abroad.
Once again, Prime Cap's team can assist. First we isolate those CHF costs your know will not change (or can reasonably expect not to change for a certain period). We then buy these forward at the prevailing forward market rate to the tune of that isolated sum.
Doing so means that you're not paying a variable sterling amount each month with the changing rate of exchange. Failing to lock in a rate would leave you at the mercy of the markets. Sure, you might pay less one month and more then next, but a) do you want the worry of the being the case and b) what happens if the rate moves to such an extent that you cannot actually affordably meet your commitments?
You will not find Prime Cap's team telling when they think the market will rally or fall or the extent to which either might happen. What we can and will do though is talk you through more general trends, the typical effects of certain data related releases to the markets and the seasonal or cyclical characteristics of certain currencies.
All of these feed in to you deciding whether or not you want to convert currencies. On the one hand we are a shop from which you can procure the most favourable tools to aid you in your FX undertakings and on the other hand we are a source of information, accessible and willing to provide context to clients who feel they need a devil's advocate or the experience of an entity whose purpose is to interpret movements, subtle or overt, across an array of data sources.
Next, we overlay forward buying with assessments as to the merits of other FX related products. In August our 'Emerging tech' sub-team wrote up a piece on 'Cash Access Solutions', what they are and how one might use them. Basically these are various ways of accessing your funds as cash rather than moving them around electronically. Well, we find that many of our clients living abroad but salaried in GBP prefer to us one or more such tools to a) eliminate their exposure, b) keep track of their foreign currency spending and c) obviate the need for local currency bank accounts during their stay.
3. YOUR EMPLOYER IS PAYING YOUR RENTAL COSTS DIRECTLY AND IN CHF.
This is the creme de la creme of scenarios! If you can avoid having to fiddle with the markets, losing margin and time to rates and brokers, then you find yourself a fortunate person.
Have you ever asked your employer whether they'll pay direct?
Having said that though, there are those within the financial services sector who would rather take their chances and elect to try and out-manoeuvre the system.
Does it seem like we're trying to talk you out of becoming a client? May be we are! Or may be we are sticking to our mission...as a provider of solutions. Asking you employer to handle your accommodation costs, whether near or long term, is a solution to an FX conundrum; arguably the optimum one.
4. YOUR EMPLOYER PAYS RENTAL COSTS DIRECT FROM THE UK.
Any international payment made by a body corporate is a source of great interest to the Prime Cap team.
On the basis that 65% of Ltd companies engaged in international business rely solely on their bank to facilitate international payments and an even greater proportion of Prime Cap's target market, LLPs mind, do the same, we salivate at the prospect of being connected to such firms and bringing what could well be an enlightened approach to their global payments activity, saving them sizeable margin and generally ensuring their bottom line is in the best shape it can.
A business incorporated in the UK and sending funds from it, or incorporated outside the UK and sending money in - whether the employee controls the FX exposure, or it is carried by the business - this is our bread and butter and has been since Lehman's was still trading.
For more information on any of the topics discussed or simply to chew the fat on the markets, how to approach making the most out of a need to convert funds or how to prolong a rate honeymoon by use of simple over-the-counter instruments, give our team a ring. It won't cost you a bean and may save you much more than that.
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