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UBS Alpine Property Focus: Comparing top destinations in the Alpine region
Prices for vacation homes in the Swiss Alpine region have recovered slightly, but are failing to keep pace with those in top Austrian and French destinations. Long term, very little will prevent the stock of second homes in Switzerland from increasing despite the Second Home Act.
Zurich, 23 May 2018 – The vacation home market in the Swiss Alpine region is showing signs of recovery. Prices in Swiss resorts rose by 1% on average compared to the previous year after an extended correction phase. Domestic price trends, however, are lagging those in Austria, which is up 5%, and France, where prices climbed 3% year on year. But the vacancy rate in Switzerland remains stable at 3.3%.
St. Moritz still the most expensive destination in the Alpine region
Engadin/St. Moritz is still the most expensive tourist destination in the Alpine region. Vacation home prices in the upper segment here average around CHF 15,000 per square meter. Gstaad is a close second. Courchevel, France and St. Anton am Arlberg and Kitzbuhel, Austria round out the five most expensive vacation spots, with square-meter prices for high-quality second homes hovering near CHF 13,000.
In Switzerland, Verbier and Lenzerheide follow St. Moritz and Gstaad as the next-priciest destinations at CHF 12,000 per square meter. But average prices in the upper segment also exceed CHF 10,000 for top destinations Zermatt, Films/Laax and Davos/Klosters. A vacation home with 80 square meters of living space under a half million francs can only be found in niche locations such as Evolène, Leukerbad or Disentis/Mustér.
Prices rise in most top Swiss destinations
Engadin/St. Moritz, the Jungfrau region and Saas-Fee enjoyed price increases of more than 5% year over year. The rises in Gstaad, Flims/Laax, Andermatt, Zermatt and Davos/Klosters were more moderate. In Arosa and Engelberg, prices continued to fall, by just under 2%. The top Valais locations of Verbier and Crans-Montana suffered the sharpest price drops compared to the previous year (of around 3%).
Stock of second homes continues to grow despite Second Home Act
The Second Home Act sounds advantageous to vacation home owners since it puts tight restrictions on new construction of second homes. But most of the around 80,000 first homes in the tourist destinations (40% of the entire stock) are not subject to any restrictions on use. The number of grandfathered first homes that actually hits the market depends chiefly on the population trends in the localities. Because populations have been falling since 2013 in around two-thirds of these vacation spots, demand for first homes has suffered. If this trend continues, more second homes will come onto the market. If only 1% of the homes used as main residences is converted into second homes annually, the stock of second homes will increase 0.6% each year.
Renting only somewhat attractive
In recent years, online portals have made it significantly easier to let vacation homes, and the number of homes advertised for rent has soared. But above-average rental income can be obtained only in locations with special tourist attractions (such as Engelberg, Zermatt and the Jungfrau region) and during the peak winter season. The daily average of successfully rented properties is only around one out of three. In the low season, occupancy is a meager 20%. The achievable yields are also lower and more volatile than the average in large Swiss cities.
Short-term market outlook is optimistic
The weaker franc and Switzerland's sound economic performance should strengthen domestic and foreign demand this year as well. We expect second homes in the Swiss Alpine region to experience another slight price increase this year.
A comparison of Alpine vacation home markets
Selected results by regions
The UBS alpine property focus 2018 report is available on the Internet via this link: https://www.ubs.com/global/en/wealth-management/chief-investment-office/investment-views/alpine-property-focus.html
UBS Switzerland AG
Dr. Matthias Holzhey, Head Swiss Real Estate Investments, Chief Investment Office WM
Tel. +41-44-234 71 25, email@example.com
Maciej Skoczek, Swiss & Global Real Estate Analyst, Chief Investment Office WM
Tel. +41-44-234 68 09, firstname.lastname@example.org
Claudio Saputelli, Head Swiss & Global Real Estate, Chief Investment Office WM
Tel. +41-79-513 50 45, email@example.com