“Politicians must enable the construction of primary residences” Interview in the Engadiner Post with Sascha Ginesta

The goal of less construction following the adoption of the second homes initiative has been achieved. However, too little construction activity is not good either, as there is a lack of apartments for locals. The public sector is needed. Real estate agent Sascha Ginesta is convinced of this.

Engadiner Post: Mr. Ginesta, the Real Estate market is running like clockwork, which must please you as a real estate agent?
Sascha Ginesta: Of course we are pleased. For us, however, the price trends are less important than the fact that transactions are taking place. It would be worse if there was hardly any market, as was the case around five years ago …

… but the higher the prices, the more commission you earn?
The volumes have a certain influence, that’s true. But they cannot be weighed against the number of transactions. If I have a ten percent price increase but can conclude two fewer transactions, the bottom line is that there is less money in the till.

Where do you see the main drivers for the current price boom?
There are three important topics and two side issues. The shortage of supply, which is primarily due to the effects of the second home initiative. Secondly, we are experiencing a sharp increase in demand due to the pandemic. Thirdly, financing is extremely favorable. I would describe the diversification of your own investment Portfolio as a side issue. Anyone who has made money on the stock market, for example, may now want to invest in real estate. Real estate can also be an attractive alternative for investors who have their money in an account and are paying negative interest rates. On the other hand, it is the change in travel behavior; vacations in the Swiss mountains are in.

Certain markets are performing better than others; prices are higher in the Upper Engadin than in the Lower Engadin. Could demand pressure also increase in the lower Engadin?
We are actually seeing the trend of rising prices in all Graubünden tourist regions. The Lower Engadine started at a lower level, but has caught up. If we look at this in percentage terms, all resorts have actually seen a similar trend over the last two years. In terms of transaction prices, the Upper Engadine is clearly still in the lead.

Is the current development healthy?
Perhaps not healthy, but it comes as little surprise. The trend was already apparent before the pandemic, but the fact that prices are now rising so sharply is due to coronavirus. Since the Second Homes Act came into force, hardly any more homes have been built, so there is a shortage of supply, which is driving prices up. This is in line with market logic and cannot be described as unhealthy per se. But it is a development that can probably not continue as extreme as in recent months forever.

You mentioned the effects of the Second Homes Act. Does the law also have negative consequences, especially for the market for first homes?
You always have to keep in mind what the second homes initiative was intended to achieve: to stop building new vacation homes, and this goal has been achieved. However, if no more apartments are built at all, this is not only a good thing, especially for the first-home market, where new apartments are urgently needed. These were previously created in the wake of the construction of second homes, so to speak. Today, this driver for a financially exciting project is missing.

It’s not that there are no more new second homes, on the contrary. The law offers many loopholes …
… I would not describe these as loopholes. There are exceptions defined in the law, for example the expansion of buildings that characterize the local area or the additional construction of second homes to cross-finance hotel operations; there are possibilities for expansion. But there is no significant increase in construction. The building permits primarily apply to the replacement or extension of existing properties.

The fact is that a very large number of apartments, the so-called old-law apartments that existed before the initiative was adopted, have no restrictions on use. If they are converted into a second home, the local resident is at a disadvantage.
This is the case when we talk about apartments that were built before March 11, 2012. Under the old law, these can be used freely as primary residences, but also legally as secondary residences. Legally, there is no conversion. However, this has always been the case and has nothing directly to do with the initiative. There are virtually no loopholes for first homes built after this date. If the local authority carries out serious checks, no one who is not resident and tax resident here is allowed to live in such properties. This is the responsibility of the local authorities, and they would do well to monitor this seriously.

However, there are political efforts at national level to soften the law on second homes. One example is the motion by National Councillor Martin Candinas, which demands that the living space can be increased by 30 percent in the event of demolition and reconstruction, including for additional second homes.
This relates to existing buildings, which today may be extended by 30 percent. In the case of demolition, the 30 percent may not be extended under current regulations, nor may there be more units, and the building must be on the same site. This is in line with many other political efforts, such as densification or energy-efficient construction. Existing buildings should be allowed to be renovated or redesigned as efficiently and sustainably as possible. This does not prevent a single first home, but is an improvement to the existing situation.

Where do you see the problems in the primary housing stock?
That apartments will be rented out as vacation apartments in the long term or that apartments that have been used as primary residences up to now will be sold. And when they are sold, it is clear what will happen: they will be used as second homes in the future. However, as already mentioned, this is legal. Another problem is the scarcity of building land. Where is there still a greenfield site today where someone can put up a house with rental apartments? For me, the greatest challenge is for politicians to make the construction of first homes possible and to provide the necessary building land.

However, the public authorities would also have the opportunity to intervene via the Second Homes Act. For example, it could restrict the unrestricted conversion of apartments under the old law. Yes, the Second Homes Act could be tightened up in this respect. But I doubt that any municipality will go ahead and act accordingly.

Why?
On the one hand, the added value from second homes is very important for the municipalities’ coffers, in terms of property transfer and property gains taxes. Secondly, you have to ask yourself who would be directly affected by such a tightening: Again, the local resident who has lived and worked here for 30 or 40 years and would suddenly no longer be allowed to sell such an old-law apartment as a second home. The destruction of value would affect precisely this local resident. In my opinion, the law on second homes is already very strict today. What was not taken into account at the time is that we still need construction activity – for primary residences.

Where else could politicians take action?
I think in terms of structure planning. The municipalities are currently being called upon to revise this and to provide the right impetus with the upcoming zoning plan revision. In my opinion, the municipalities should very consistently define the residential zones that they still have left in the habitable locations for local housing construction, preferably in central locations with short distances and high utilization. It is also important to consistently mobilize the remaining building land reserves, but there are plots of land that owners do not want to build on because they disturb the view or impair privacy. This problem can be counteracted with well thought-out building legislation. What is absolutely necessary is more rental apartments. I have the impression that the Engadin has been out of the rental apartment market for some time now. In other regions, on the other hand, beautiful rental estates are being built, for example in the Chur Rhine Valley. I’m not talking about residential silos or classic staff apartments, but attractive blocks of rental apartments with perhaps twelve to fifteen apartments. Little to nothing is happening in the Engadin. Also because the construction costs are higher than in the Rhine Valley in Chur, which reduces the return on investment.

They say so. Private individuals don’t build such housing estates because the returns are not attractive enough. So it’s up to the public sector?
I am not saying that private individuals cannot build such developments. If attractive plots are available, I am convinced that investors can be found for such apartment buildings. I am fundamentally opposed to the public sector acting as a developer for apartments and intervening directly in the market. For land owned by the political municipalities, for example, there are ways of transferring it to housing cooperatives that operate independently and in a target-oriented manner in accordance with defined statutes and regulations. In cities, such housing cooperatives are very effective in combating the housing shortage.

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