Effect and side effect of the Second Homes Act

From construction boom to supply shortage

Even before the law came into force, numerous tourist regions experienced a veritable building boom: between March and December 2012, planning applications skyrocketed, as second homes were still being approved up to this point. Many of these projects have been implemented. Only a few new builds came onto the market after 2015. The result: a significant supply shortage, exacerbated by increased demand, especially during the Covid pandemic. To this day, vacation apartments in top destinations are rare and in high demand, which has reduced vacancy rates and driven prices up further.

Engadin:
Between tradition and innovation

The second-home initiative demanded a high degree of adaptability from the municipalities in the Engadin. A strong Swiss franc and economic developments in Europe also contributed to a decline in the proportion of foreign buyers in the first few years after the introduction of the Second Homes Act. New markets and creative concepts were in demand, such as managed apartments that are rented out to guests and form part of a structured accommodation concept. While construction restrictions limited the range of offers, the region has further strengthened its attractiveness through targeted investments in tourism. Factors such as a comprehensive and exclusive gastronomic and shopping offer, infrastructure and the beauty of the landscape make the Engadin unmistakable and contribute to the fact that the region remains one of the most popular vacation destinations in Switzerland.

Luxury properties and sought-after locations

Single-family homes in attractive mountain communities are and will remain in demand. This is why top prices are being achieved for this property category in many places. The situation is similar for very rarely offered, exclusive luxury properties, which continue to meet with high demand. The price trend for vacation apartments, i.e. traditional second homes, varied from region to region until the start of the Covid-19 pandemic in 2020. However, since supply has become scarce in many places, prices have been rising constantly and at a comparable percentage rate. Unfortunately, to the detriment of the local population, this boom has also driven up prices for first homes in equal measure.

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

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. For prospective buyers, the focus is on good accessibility, suitable infrastructure and offers for their needs and an intact landscape. With the end of the pandemic and as a result of geopolitical uncertainties and the end of the negative interest rate phase, demand has returned to pre-corona crisis levels. It is therefore still at a good, but no longer euphoric level. As a result, supply quotas have increased slightly and the market is consolidating at a high level. We therefore expect market prices to remain stable or rise slightly in line with inflation in the coming months.

If you would like to take a closer look at the latest data on the Engadin Real Estate market, you can download our market reports here.

Price development of residential property in Graubünden (Source: WuestPartner)