Vacation homes Swiss vacation homes – more popular than ever

Swiss vacation homes are in demand right now. Prices continue to rise and supply remains limited.

byJürg Zulliger 19 Mar 2021
Image: UBS

Towns and villages in the Swiss mountains such as Gstaad, St Moritz or Zermatt are in high demand. Indeed they come top in virtually all international rankings of the top locations for vacation homes. “In St. Moritz and in some other municipalities, the square-meter price for apartments is therefore very high,” explains Maciej Skoczek, economist and real estate analyst at UBS. Condominiums in the Upper Engadine start at about CHF 15,000 per square meter. For the best locations with a good view and high-quality construction, the top prices often reach CHF 25,000 per square meter and above. There is absolutely no sign of crisis or stagnation – on the contrary, at the luxury end of the market, the sky is the limit when it comes to prices, states Maciej Skoczek.

Dynamic price increases

Many locations in other parts of the canton of Graubünden are also popular, as well as in the cantons of Ticino, Valais, Bern, Obwalden, Nidwalden, Schwyz and Glarus. However, the advertised prices for apartments, and especially for detached houses and chalets, vary greatly depending on the canton and municipality. The market is also subject to certain fluctuations. Shortly before the second-homes initiative came into force in 2016, there had been considerable new construction activity and this regional excess of supply still needs to be absorbed. Prices are now on the rise again, especially last year. In 2020, the year the coronavirus hit, owning real estate in the mountains became apparently more important. According to provisional figures, prices have risen nearly everywhere. “Prices have increased by roughly 4 percent within a year,” explains Maciej Skoczek.

Current prices for second homes

Municipality

Municipality

Prices in CHF per m2

Prices in CHF per m2

Price changes 2020

Price changes 2020

Municipality

Adelboden

Prices in CHF per m2

9360

Price changes 2020

6.6%

Municipality

Ascona

Prices in CHF per m2

9200

Price changes 2020

4.5%

Municipality

Davos

Prices in CHF per m2

10140

Price changes 2020

4.4%

Municipality

Engelberg

Prices in CHF per m2

9150

Price changes 2020

8.9%

Municipality

Flims

Prices in CHF per m2

10890

Price changes 2020

5.9%

Municipality

Saas-Grund

Prices in CHF per m2

4090

Price changes 2020

2.6%

Municipality

Wildhaus-Alt St. Johann

Prices in CHF per m2

4930

Price changes 2020

7.8%

Municipality

Zermatt

Prices in CHF per m2

12050

Price changes 2020

5.2%

Changed conditions

Domestic tourism is benefiting in several ways. Anja Beck, Head of Residential Property at Engel & Völkers in Zug, explains: “A place in Switzerland rather than in the south of France or Mallorca is currently at the top of many clients’ wish lists.” The travel restrictions and quarantine measures as a result of coronavirus seem to be the reason why Swiss properties are preferred. Then there is also a second trend: housing preferences are changing as more and more people work from home in the medium to long term.

Suddenly, the idea of staying at your “retreat” is an attractive one, not just during the holidays or on weekends. And given that 45- to 50-minute commutes from urban areas are quite normal, somewhat longer distances are also acceptable under the new conditions. "Locations that can be easily reached from the lowlands are likely to benefit to an above-average degree," says Maciej Skoczek. This applies especially to the Lower Valais or the Chur Rhine Valley where popular destinations such as Flims or Laax are located. Prices in Engelberg have also risen considerably.

Property remains in short supply

Demand remains high, supply often short. This is due to the fact that new construction activity remains low in many places. Since the second-home initiative entered into force in 2016, new construction is not possible in municipalities where second homes account for 20 percent of housing stock. However, the cantons permit certain exceptions, for example for tourist accommodation or for conversions of older apartments.

The motives and requirements for purchasing a vacation home still vary from person to person. For some, it is crucial that the location and infrastructure offer a wide range of sports facilities. Others not only want to use the apartment themselves, but also to rent it out regularly in order to cover some of the running costs. A third group sees a vacation home as a long-term investment opportunity with a view to making the property their main residence after retirement. These property owners should check the quality of the location and the local infrastructure carefully, as well as taxation levels, health insurance premiums and other costs of living.

Consumer good or investment?

When it comes to the question of whether a vacation home is also an investment, prospective buyers should remain realistic. “In our opinion, a vacation property is more of a consumer good than an investment,” says Maciej Skoczek. The running costs, e.g., maintenance, rental and management, taxation of imputed rental value and/or rental income, are usually higher than is generally assumed. In addition, rentals in the mountains are often subject to strong seasonal fluctuations.

Checklist for purchasing a vacation home

  • Location: As always with real estate, the potential depends heavily on the local environment. In particular, you should carefully check the accessibility and infrastructure, i.e., the proximity of ski lifts, cable cars and other sports and leisure facilities. What about how much sun it gets, the view, the tranquility and the quality of the surroundings? A combination of good access and an attractive landscape is ideal.
  • Constraints: Buyers should find out about the relevant rules on the purchase and use of second homes. Official documents such as the land register entry, the municipal building regulations and the zoning regulations are key. For condominiums, it is important to read the regulations of the condominium associations and check the health of the renewal fund.
  • Financial sustainability: The purchase price and running costs must be sustainable in the long term. Remember that holiday homes are generally subject to different rules than a primary residence. For example, capital from your pension fund and pillar 3a cannot be used to finance them. The bank usually finances up to 60 percent of the purchase price or the market value of such properties. One percent of the mortgage amount has to be repaid each year and a repayment obligation applies up to a loan-to-value ratio of 50 percent.
  • Ease of resale: The properties that sell most easily are those in a very good location and which are ready to live in without any prior renovations or conversions.
  • Rental to third parties: Owners often have to plan a long journey to reach their property. Clarify how you will organize the handing over of keys, cleaning and urgent repairs, and by whom. In addition, you should consider the time and hassle involved in administration, advertising, looking after guests, repairs and dealing with complaints.

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