On a steep hill sloping down to Lake Geneva, this one-bedroom two-bath terrace apartment is on the top floor of a three-story building. Originally conceived as a three-bedroom, the space was renovated into more of a loft style, with a 750-square-foot common room, currently laid out with separate spaces for socializing, dining and working.

The kitchen is separated from the dining area by an island. Sliding glass doors lead from the great room to a terrace that overlooks the town of Montreux and the lakeside Montreux Palace Hotel, with the Swiss Alps in the background. The unit has a fireplace, and there is under-floor heating throughout.

The bedroom, at the back of the apartment, has an en-suite bath. A second bath off the living room is available for guests. Although the apartment is on the top floor, it has a private street-level entrance at the back of the building. It shares the building with two other units, which also have private entrances. The shared garden has palm trees and a small outdoor eating area. The building was completed in 2008.

The town of Montreux, in the French-speaking canton of Vaud, is across the lake from Geneva. English is spoken widely in the area. In 10 minutes you can walk to Lake Geneva, where pleasure boats are anchored in a private harbor. Palm trees along the lake thrive in the town’s mild microclimate, which differs dramatically from the colder temperatures in the surrounding mountains. The nearest swimming beach is a 20-minute walk, and there are many shops within easy walking distance. Geneva is 50 minutes away by car.

MARKET OVERVIEW

The real estate market in Switzerland is relatively stable. Tobias Just, head of real estate research for Deutsche Bank Research in Frankfurt, says research by the European Mortgage Federation has found that Switzerland has the lowest rate of homeownership in Europe, at 31 percent compared to a homeownership rate of about 60 percent in Western Europe as a whole.

Yet at the same time, demand is high in comparison to the number of homes on the market, according to David Colle, director of Luxury Places, a real estate company with offices in Geneva and Lausanne.

“There are 10 clients looking for a house for each property for sale,” he said. The presence of the United Nations in Geneva, as well as the large number of multinational corporations, keeps demand high for well-appointed homes.

Prices grew 4.5 percent in 2008, said Nicholas Barnes, a London-based partner in Knight Frank Residential Research. In the country as a whole, he said, prices per square meter are 5,500 to 6,000 Swiss francs (which roughly works out to $470 to $515 per square foot). But Geneva and Zurich tend to be higher — 12,000 to 15,000 Swiss francs per square meter ($1,025 to $1,285 per square foot).

“The best skiing areas tend to be more expensive on average because they are distorted by second-home buyers,” Mr. Barnes said. Prices in ski destinations range from 10,000 to 20,000 Swiss francs per square meter ($850 to $1,700 per square foot). Mr. Barnes said they can top out as high as 35,000 Swiss francs per square meter ($3,000 a square foot).

Some economists expect to see the Swiss economy contract within the next year, Mr. Barnes said. If this happened, he added, it would “inevitably impact upon the residential property market.” However, at present, the market still looks quite strong compared with many those of many neighbors.

WHO BUYS IN SWITZERLAND

“Foreign second-home buyers in the Alps are mainly British and German,” Mr. Barnes said. Buyers also come from Italy and France, as well as Belgium, the Netherlands and Luxembourg. Mr. Colle, a real estate agent, works with buyers from North America, Asia, South Africa and Brazil as well as the European Union.

A significant portion of his clientele comes from Russia or the Middle East, especially Saudi Arabia and the United Arab Emirates. He cited the tax structure as one attraction for foreign buyers, because the wealthy are not required to declare their income. Instead, he said, taxes are levied as a lump sum negotiated between the taxpayer and the tax authorities. The lump sum is based on the rental value of their primary home. In extreme cases, Mr. Colle said, “the lump sum comes to less than 1 percent of your income.”

“It is a nightmare for foreigners to buy property in Switzerland,” Mr. Colle said. The country has 26 states, called cantons, and each one has different regulations for foreign buyers. In the canton of Geneva, Mr. Colle said, foreigners can buy only if they are residents of Switzerland.

Foreigners are allowed to buy second homes in the canton of Vaud, which has 12 cities designated as tourist destinations, including Montreux, the site of this property. But Mr. Colle said there were restrictions on the size of the lot, the size of the property and other elements. On top of that, he said, only 48 homes per year may be bought by foreigners in the city of Montreux. Right now there is a one- to two-year waiting list for foreign buyers in Montreux.

In the case of this property it can be sold now, but the buyer will have to remain on the waiting list — at least 18 months — before the sale can be finalized. In other words, a potential buyer signs a sales contract and puts ten percent down at the notary office, and then when the buyer gets to the top of the waiting list, the remaining 90 percent is paid.

In the meantime, a buyer can lease the property from the seller until the sale is finalized. According to Mr. Colle, sellers prioritize local buyers because they can get all their money right away. For this reason, sometimes sellers will accept lower sale prices from locals.

Transaction costs, too, are different in each canton, but Mr. Colle said each one requires buyers to pay a stamp duty and a tax. Combined, these costs range from 2 to 4 percent of the purchase price; in Vaud, he said, they come to 3.3 percent.

Notary fees also vary by canton, and are generally lower — about 0.5 percent of the price — in German-speaking parts of the country like Zurich, Mr. Colle said. In Vaud they are 1.7 percent. The real estate agent’s commission, usually 3 percent, is paid by the seller.