Swiss vacation homes – more popular than ever

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.

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.

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.

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.

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.