Vacation homes market Apartment prices in the Alps are slowly climbing again

After a longer phase, in which the prices for vacation homes sank, prices rose slightly last year by 1.1 percent.

byMaciej Skoczek 14 Sep 2018

Significant price increases of sometimes up to 5 percent over the previous year were registered in the destinations of Engadin/St. Moritz, the Jungfrau region and Saas-Fee. In contrast, Gstaad, Laax/Flims, Andermatt, Zermatt and Davos/Klosters increased at a slower pace. Arosa and Engelberg recorded slight corrections of just under 2 percent. Verbier and Crans-Montana, top locations in Valais, had to absorb the strongest price reversals – around minus 2 percent.

The number of vacation homes should continue to grow

If new vacation homes cannot be built, prices of existing properties invariably move in lockstep with demand. For owners of vacation homes, the current legal environment looks advantageous: the Zweitwohnungsgesetz (Swiss Act on Secondary Residences) severely limits the construction of second homes in Swiss tourist destinations. Despite this, the offer of new vacation homes should not be drying up any time soon.

Apartments subject to a grandfather clause represent a large reserve of second homes

Apartments subject to a grandfather clause as defined by the Swiss Act on Secondary Residences are apartments that were legally approved or lawfully existed on 11 March 2012. Since the federal law does not subject them to any use restrictions, they represent a large reserve of potential secondary residences. However, their reutilization in roughly two thirds of analyzed localities may be restricted by local regulations. Already before adoption of the secondary residence initiative in 2012, most heavily touristed municipalities – foremost in the canton of Graubünden – managed the residential market with the help of plans regulating the proportion of first homes, surface contingents, incentive taxes or zoning regulations. Even so, the proportion of use-restricted apartments subject to a grandfather clause is in many places below 10 percent. Only in Oberengadin, where the municipalities already introduced usage restrictions in the 1980s, up to one third of the apartments subject to a grandfather clause could be entered into the land registry as primary residences.

A shrinking population increases the inventory of secondary homes

Around 800,000 residences (40 percent of total inventory) are used in vacation destinations as a primary residence. If only 1 percent of these residences was converted annually into a secondary home, the inventory of secondary residences would grow by 0.6 percent per year. How many first homes really come onto the market as secondary homes depends in particular on the development of the size of the population in the respective destinations. In case of increasing demand for first homes – for example, in Unterwallis – correspondingly fewer second homes will come on the market. A comparison of building permits and population growth currently suggests there is a current overproduction of first homes and thus to an increase in the inventory of secondary homes. That primary residences with the assistance of replacement construction are deliberately converted is not the intention of the Swiss Act on Secondary Residences. If this opportunity is exploited excessively as a loophole in the law, further restrictions should be expected on the local level. In some destinations the introduction of appropriate restrictions is already a subject of discussion (among other places, in Davos and Zermatt).