Lockdown might impact peoples' ability to move across borders, but it doesn't stop money flowing into tax havens around the world.
The economic shocks of coronavirus have meant that offshore financial centres such as Switzerland are back to their old tricks: Banking peoples' money away from their more risky homelands.
UBS, a Swiss bank and the world's largest wealth manager, announced its profits were up by 40%. In the first three months of 2020, it saw $12 billion in net new money, nearly treble the amount banked in the previous quarter.
"We successfully managed March’s high volumes and activity across our trading and client platforms, including peaks of three times the normal levels," Sergio Ermotti, the bank's CEO, told investors on Tuesday (28 April).
This enabled the bank to gain a higher share of wallet from its clients, Ermotti added.
Pre-coronavirus, Switzerland's popularity for offshore banking was fading as its banking sector could no longer guarantee client secrecy. However, the country's notorious stability combined with low COVID-19 infection rates have renewed its appeal among the international wealthy who use its private banking services.
"There are some countries where the risk of your money and your wealth being more at risk than others does potentially also lead to inflows into safe and secure places like Switzerland," says Anna Zakrzewski, who leads Boston Consulting Group's Global Wealth Management division.
Post Pandemic Planning
"Highly volatile global conditions triggered by the COVID-19 pandemic are driving high-net-worth individuals (HNWIs) to reassess the concept of secure investment," is the view of citizenship advisory firm, Henley and Partners.
This "post-pandemic planning", as they call it, has seen HNWIs buying up foreign citizenship at a record pace. Year-on-year applications for Cyprus’s real estate-linked investment migration program were up 250% in the first quarter of 2020. Portugal’s popular Golden Residence Permit Program was up by 50%.
However, with most European borders firmly closed, there is little evidence to suggest that citizenship is being sought to move abroad.
Instead, investors are turning to real estate investments in these countries to diversity their portfolios, says Henley and Partners CEO, Juerg Steffen. The first quarter of 2020 was the second best yet for the Portuguese property market
Thanks to a general slide in European currencies, investors from Asia and North America are also buying at a discount. “A 12% currency advantage for a US dollar buyer purchasing a sub-£1 million ($1.3 million) property in London may not result in a vast saving but for a £20 million ($25 million) property that saving can be a game changer," says Alasdair Pritchard, a partner at real estate consultancy, Knight Frank.
As their country emerges out of lockdown, Chinese investors are buying as well. Investment property portal Sodichan says it has seen an increase in Chinese buyers looking at countries which offer citizenship investment programmes like Portugal and Cyprus.
But whether these wealthy buyers move into their new homes will only become apparent once borders open up. Until then expect more money to find its way offshore.
This article originally appeared on Forbes.
