(Bloomberg News) Swiss insurers are finding property investments less profitable as millionaires push up apartment prices in Geneva, Zurich and Basel.

Baloise Holding AG was outbid this summer on an apartment block in Basel, the country's third-biggest city, when a wealthy individual offered 20 million Swiss francs ($21.7 million). At that price, Switzerland's third-largest insurer would expect annual net income of 900,000 francs in rent, said Martin Wenk, Baloise's head of asset management. That building would have generated a lower return, he said.

Baloise, Helvetia Holding AG and Swiss Life Holding AG, the Alpine nation's biggest private real-estate investor, are being outmuscled as record-low interest rates spur the country's 352,000 millionaire households to buy property. Private individuals, seeking to preserve their wealth amid Europe's debt crisis and declining stock markets, are also being drawn by eight consecutive years of gains in Swiss apartment prices.

"They accept lower returns, which institutional investors would not accept," said Fredy Hasenmaile, head of real-estate analysis at Credit Suisse Group AG in Zurich. "This buyer behavior could add to the beginning of a property bubble."

The average price of apartment blocks, which house two or more families, rose 6 percent in the first nine months of this year, bringing gains over the past 10 years to about 40 percent, according to Zurich-based property consultants IAZI. Insurers own about 7 percent of the 710 billion francs of Swiss multi- family properties, Wuest & Partner estimates.

'New Phenomenon'

"It's a new phenomenon," said Patrick Frost, Swiss Life's chief investment officer, who oversees the firm's 15 billion- franc real-estate portfolio. "We still have a lot of high-net- worth individuals in this country and they keep their money closer to home these days."

Insurers and pension funds typically invest about 10 million francs, while private individuals usually spend 3 million to 5 million francs, according to IAZI, which surveyed about 100 billion francs of real-estate assets.

Millionaire households are 9.9 percent of the total in Switzerland, the second-highest proportion after Singapore, according to Boston Consulting Group. Their appetite for property investments was boosted after the Swiss central bank cut its benchmark rate to zero in August.

Rising real-estate prices are among the greatest threats to the economy, Swiss National Bank Chairman Philipp Hildebrand said in June. He warned more than a year ago about the possibility of a bubble.

'Different Objectives'