The second-home market is robust

On 11. On March 1, 2012, the Swiss electorate approved the popular initiative “An end to the unbridled construction of second homes” and thus decided to severely restrict the construction of second homes. The initiative demanded that the proportion of second homes in a municipality should not exceed 20 percent. An ordinance published at the beginning of 2013 was valid until the implementing legislation for the second homes initiative came into force and provided clarity in the market. Since the 1. The Federal Act on Second Homes (Second Homes Act, ZWG) came into force on January 1, 2016 and regulates the future construction of second homes. The affected municipalities, i.e. localities with a proportion of second homes of more than 20 percent, include practically all tourist regions in the cantons of Bern, Graubünden, Ticino, Vaud and Valais.

Transitional provisions lead to construction boom

Until 31.12.2012, second homes could still be approved under the old law, which led to a marked increase in building applications between March and December 2012 and triggered a veritable construction boom. In theory, construction should have started on all approved buildings within twelve months (with a one-off extension of 24 months). However, as exemptions or staggered quotas were introduced in many municipalities, new construction activity remained at a good level for years afterwards. At the same time, it is still possible under the new regulation to expand the offer under certain conditions. These include a) the demolition of a property with secondary living space, the area of which can (currently) be increased by up to 30 percent in a new building, b) tourist apartments, c) apartments in structured accommodation establishments, d) dwellings in protected buildings or buildings that characterize the local area and e) Protected buildings that characterize the landscape.

Supply surplus steadily decreasing

The balance between supply and demand became unbalanced due to the construction boom from 2012 to 2017. At the same time, a heterogeneous development was observed because the absorption capacity of the various submarkets diverged. While there was a clear transition in the Davos/Klosters region, the impact in Arosa and Lenzerheide, as well as in Flims-Laax, was far less pronounced, as these regions benefit from new tourist offers, the high level of snow reliability and the above-average proportion of Swiss guests. These areas are less dependent on economic development in Europe or other exogenous factors. Because hardly any new buildings are currently coming onto the market, supply is constantly falling and is settling at a healthy level in most regions. This robust market situation is favored by the perfect conditions with plenty of snow in winter and beautiful, dry summer months in the last two years. Financing second homes is very attractive due to the interest rate situation – it’s better to invest your equity in a vacation home than pay negative interest rates at the bank!

Prices remain high and have risen since 2012

Single-family homes in attractive mountain communities are and will remain in demand. As a result, top prices are being achieved in many places for this property category, which are close to the former peak values. The situation is similar for rare luxury properties, which continue to meet with high demand, although marketing times have increased. In the area of vacation apartments, i.e. classic second homes, the price trend varied from region to region – with an upward trend in the vast majority of locations. It should be noted that it was not the second-home initiative per se that was decisive, but the attractiveness of a municipality based on many micro-factors. In recent years, Lenzerheide has become the second most expensive vacation region in Graubünden after St. Moritz (see excursus Arosa-Lenzerheide).

Focus region Arosa-Lenzerheide

Expansion of tourism offering shows positive effect

The acceptance of the second-home initiative did not stop Arosa and Lenzerheide from investing in the future as a tourist center. Since the Urdenbahn cable car, built in 2013/14, connects the two ski regions, Arosa-Lenzerheide now has the largest interconnected winter sports arena in Graubünden with over 225 kilometers of pistes. Today, it is one of the most popular winter holiday regions in Switzerland. Biathlon, snowshoeing, sledging, curling, tobogganing in winter and bear park, mountain, bike and rope parks in summer: the regional leisure and event offerings have been steadily expanded. In 2017/2018, the mountain railroads were back in the black and 2019 also showed a very good business result. Overnight stays have also increased in the last two years.

Economic situation in Europe changes guest mix

The proportion of foreign buyers in the mountains has been declining for several years. Potential buyers from Europe in particular have been confronted with several negative factors since 2011. On the one hand, the euro crisis and the associated appreciation of the Swiss franc, and on the other, the economic weakness in Italy and France as well as new tax conditions abroad. Overall, the vacation markets have compensated for these negative factors and the associated appreciation of foreign competitor destinations such as Austria through increased domestic demand, with the exception of Ticino and the Upper Engadine.

Managed second homes/parahotel industry complements offer

Tourist apartments are partially exempt from the restriction clause. This category includes, in particular, properties that are not individually tailored to the personal needs of the owner and that are offered for short-term rental at normal market prices as part of a structured accommodation business. The rental of vacation apartments is easy to handle thanks to the various brokerage platforms, but is subject to strong fluctuations. According to UBS’s “Alpine Property Focus”, the occupancy rate of vacation apartments in the low season is just 20 percent. The market for managed second homes with a rental obligation has been small to date and in some regions does not even exist. The travel behavior of “Generation X” and the “Millenials” is different compared to the traditional vacation home buyer and is likely to favor this temporary form of accommodation. It is still too early to assess the development of prices and demand on the established vacation apartment market, and no trend is yet discernible. And the following still applies: the top priority is the positioning and touristic attractiveness of a region, in all segments.

Conclusion: vacation apartments remain en vogue – despite, or perhaps because of, the second home initiative

Since the adoption of the second homes initiative, the vacation homes market has offered the desired clarity and legal certainty. When talking about the second-home market, each vacation region must be considered individually. Nevertheless, the demand for second homes in tourist destinations will remain a general need. Today, prospective buyers are looking for good accessibility, infrastructure and offers that meet their needs and an intact landscape. However, factors such as the general economic situation, the level of prosperity, the level of interest rates and refinancing and the psychological expectations for the future should not be underestimated and are almost more important. The vacation property is a luxury object and is only indulged in if the surroundings allow it.

“The supply of second homes currently exceeds demand. For some quarters now, there has been a noticeable increase in interest in almost all tourist regions.”

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