Yann Tavernier, CEO and founder of Themis Capital SA
Indirect real estate reduces risk and brings significant tax benefits.
Many property owners know the pain of dealing with problems, maintenance, management supervision and the impact of taxation on the income from their investment, which is only decreasing in a world of virtually zero interest rates. Every owner of an investment property should ask themselves what form of investment is best suited to their objectives: direct or indirect? The year 2020 saw a record number and volume of issues of collective real estate products on the Swiss market, indicating a growing interest in indirect real estate investment. While direct ownership of real estate can be attractive when things are going well, the increasingly rapid changes in the market and the hyper-specialisation required to manage a property in the best possible way and to obtain the best possible return on it require a continuous upgrading of knowledge.
Investing in a collective investment product has significant advantages. Managing a property is time-consuming and can be very costly. The professional teams of property management companies optimise processes and negotiate favourable conditions with the service providers they mandate thanks to the high volume of work they entrust to them.
The diversification of a collective investment portfolio ensures optimal risk spreading and the Finma supervision of management companies and collective investment products guarantees a high level of professionalism, appropriate organisation and the absence of conflicts of interest.
The tax system is also more favourable for indirect investments, thanks in particular to two important levers. Firstly, the distribution of dividends from these products is exempt from income tax for investors, provided that these dividends represent the distribution of rental income and that the real estate collective investment product invests directly in buildings. On the other hand, the value of the real estate investment securities held by the investors does not enter into their personal wealth, whereas a real estate property held in their own name or in a real estate company is integrated into the wealth of its owner and taxed there.