Geneva, touted as a haven for London bankers facing heavier UK taxes, may lure fewer than predicted thanks to a housing shortage, crowded schools and a 44% income-tax rate. Barclays president Robert Diamond this month joined a chorus of financial leaders in arguing that Britain's 50% tax on bonuses would drive bankers away from London. The Swiss Private Bankers Association said the "arbitrary" tax will boost the allure of Geneva, whose bankers oversee about 10% of the world's foreign-held private wealth.

"It's a joke, it's lobbying," said Tim Dawson, an analyst at Geneva-based brokerage Helvea AG. "People are dreaming if they think the London investment-banking world is going to move. There is more office space in Canary Wharf than in the whole of Switzerland," he said, referring to London's second financial district.

The UK's chancellor of the exchequer Alistair Darling said this month that banks awarding discretionary bonuses of more than £25,000 would have to pay a one-time levy of 50%.

That followed earlier decisions to boost the top tax rate to 50% and rescind special breaks for residents whose tax home is outside the country.

That's making Britain a "hostile environment" for wealthy people and many are considering relocating to rival financial centres, said Caroline Garnham, a partner at London-based law firm Lawrence Graham LLP, who advises on tax planning.

The numbers choosing Switzerland will be small, and banks with Swiss roots, such as Credit Suisse Group AG and UBS AG, will probably find it easiest to move workers, said Stefan Schuermann, an analyst at Zurich-based Vontobel Holding AG.

"I don't expect huge masses; there is going to be some inflow," he said. "You don't easily move just because of tax issues if you have a family."

Those keen to settle in Geneva, a city of less than 200,000, will face housing constraints.

Just 92 detached houses were vacant throughout the canton on this summer, as population growth outpaced expansion of the property market, according to figures from the canton's statistics office. Geneva's vacancy rate for all types of accommodation stood at 0.21 %, compared with 0.66 % in Zurich and 2.3 % in London. The median price of a four-bedroom house in Geneva was more than €1m in the third quarter. The average price of a property in Kensington and Chelsea, London's most expensive borough, was just under €900,000 in October, according to UK land registry data.

"The pressure on services might become an issue," said Glen Millar, a Geneva-based consultant at Kinetic Partners, which says it is looking to relocate 15 hedge-fund firms to Switzerland from London after the UK announced a higher tax rate in April. "For that reason, arrivals may remain a trickle."

It isn't just Geneva. Switzerland struggles to compete with the day-to-day attractions of London, a city whose population almost matches that of the whole country.

Switzerland "cannot match the force of attraction and integration of international melting pots like New York or London for hiring talent from all over the world", the Swiss Federal Council said in a report this month outlining strategies required to keep the country's financial centres competitive.

While each Swiss canton sets its own tax rate, allowing local officials to negotiate individual tax deals with wealthy immigrants, those rules are coming under pressure. Zurich, Switzerland's biggest city and the home of UBS and Credit Suisse, will abolish special tax privileges for foreign millionaires on 1 January. The canton's top rate of income tax is 40.3 %.

"Some of the German-speaking cantons around Zurich are able to offer tax rates that never exceed 20%, but people don't want to move there, they prefer the lifestyle around Geneva," said Thierry Boitelle, a partner specialising in tax at law firm Altenburger.

Altenburger advises clients to relocate only those functions that "add value", while leaving back office and administration jobs in cheaper locations.

With Swiss firms overseeing a quarter of the world's offshore private wealth, it may make sense for private equity and hedge fund managers to move to Switzerland, said Millar at Kinetic.

BlueCrest Capital Management Ltd, a London-based hedge fund firm that oversees about $15.4bn, plans to open a Geneva office as increased taxes and regulation make London less attractive, a person familiar with the situation said last month. It follows Brevan Howard Asset Management LLP, Europe's largest hedge fund manager, which said in September it may open an office in Switzerland.

The country has added 10 to 20 single-manager hedge funds over the past two years, according to the Swiss Funds Association. Switzerland's 136 hedge funds managed $17.3bn at the end of June, compared with 828 overseeing $263.2bn in the UK, according to Eurohedge.

"Limiting the income of investment managers, in addition to taxing them a lot, might encourage them to come to Switzerland," said Frédérique Bensahel, a partner at the law firm FBT who advises hedge funds that have moved to Geneva.

Altenburger receives six to 10 relocation inquiries a month at its offices in Geneva and Zurich, with about two turning into actual moves, Boitelle said. "It's not a wave but a steady stream," he said.

"If you're coming from London, Geneva is a small village."