Saudi Upheaval Could Be Good for Geneva

Saudi Upheaval Could Be Good for Geneva - at - the best of the international financial media

Geneva is a multi-cultural oasis - an interesting and living symbiosis of Orient and Occident.

According to the statistical survey of Canton Geneva, foreigners comprised 39% of its inhabitants at the end of 2004. This is the highest on an international scale.

In the city of Geneva, this rises to over 44%. In the Canton, about 170,000 long-term foreigners are registered, a smattering of over 181 nationalities, including such exotic countries as Belize, the Comores or Equatorial Guinea.

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Within the group of permanently registered foreigners, the Europeans especially Spanish, Portuguese, French and Italians form about a 75% majority, but also strongly represented are the Africans (especially Morocco, Tunisia, Congo, Algiers) with 10.6% and Asians with 7.6%.

The Gulf money has already arrived in Geneva

The Oriental character of the city, despite the obvious French and Southern European influence, without doubt surprises those who travel to Geneva for the first time.

Wandering through Geneva and its splendid inner city, Middle East airlines, you see Saudi-based financial businesses and banks from the Orient. The best spot in town, on the Quai du Montblanc, is for example where Faisal Finance SA is based, a specialist in Islamic Banking'.

Arab men and women in their traditional clothes are a regular part of the city. The expensive jewellers and boutiques in the inner city live quite well off the Middle Eastern clients who are rarely amongst the cost-sensitive ones. I have myself witnessed convoys of black Mercedes S-Class limousines with darkened windows and Middle Eastern registrations driving through the Rue du Rhone, stopping at luxury jeweller Bulgari, where a traditionally-clad Arab woman leaves the car for her shopping experience.

In light of the omnipresence of the Middle East in the city, it may come as a surprise that at the end of 2004, only 227 Saudi Arabians, 54 Kuwaitis and 8 members of the United Arab Emirates live in the canton.

The key to this discrepancy is found when you stroll through the Geneva luxury hotels in the evening. Beau Rivage, Hotel DAngleterre, Palace Hilton, Richemond or Des Bergues are just a few of the fine names.

These luxury hotels are in high demand by the Arabs and their entourages. The Saudi investor Prince Al-Walid bin Talal bin Abdulaziz al-Saud bought the luxury hotel Des Bergues a few years back for a high sum in the double-digit million range.

Many Saudis book their hotel rooms for longer periods, but remain registered in their home country. This might have legal reasons besides personal ones, since a prolonged transfer of residence might bring a reduction of status with it.

Political situation in Saudi Arabia is unclear a chance for Geneva's real estate market

The late King Fahd of Saudi Arabia owned an enormous villa in the city of Colonge-Bellerive, a sought-after town close to Geneva. Since the King used to travel with no less than 300 princes, princesses and servants, the villa soon turned out to be too small for his requirements. For this reason, during King Fahd's visits there were up to 500 rooms booked in the Geneva luxury hotels.

With the death of the pro-Western King Fahd, the future of this until now, relatively stable inner political situation is at breaking point. The missing clarity in regards to the leadership could indeed erupt into a geopolitical crisis, impacting on the financial growth of Europe, Asia and the US. It is the dominant role of the Saudi in the oil market that I see as a cause of future worries.

In case, for whatever reason, the ruling Al-Saud family one day is no longer in control of the oil fields, several retreat plans seem to have been prepared. According to a Geneva-based property manager, Saudi investors have been trying to accumulate the best properties around the Lake, and are still trying.

Apparently several (high-priced) objects have switched owners due to the potentially unstable times ahead in the Middle East, without this being reflected in the property owner's registration'. According to a number of reports, mostly foreign capital has been invested into the Geneva property market. Again and again information emerges that Saudi money in particular has been retracted from US investments and put to use in secure havens'. Switzerland may very well be getting a lot of that attention.

Time to buy Geneva?

Very clear signals can be gained by looking at the property price index, published regularly by the Swiss property service company Wuest & Partner. Since the end of 1999 single-family homes on Lake Geneva have increased their value by almost 46%, since the end of 2001, by 33% and since the end of 2003 still an impressive 13.5%.

Flats show a similar picture the region around Lake Geneva is the leader in Switzerland when it comes to rising real estate prices in recent years. And there are good reasons this will remain so in the coming years.

So it seems reasonable to consider selling US property and buying first-class property or real estate around Lake Geneva. Since more Saudi money is likely to continue to make its way into the safe haven of Geneva, and the offers of prime locations around the shores of the lake are naturally limited and decreasing, I still see a good chance of even higher prices despite the obvious value increase of recent years.

And even if shelling out big sums on properties is not your idea of an investment possibility, I'll continue to look out for ways to indirectly invest in the real estate business (perhaps with listed shares), with a focus on Lake Geneva.

I think it's got great investment potential.

By Beat ErnFor Profit Hunter Files

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