UBS Alpine Property Focus – Holiday homes approaching a turning point

Engadin/St. Moritz is the most expensive place to buy a second home in the Alpine region. An upmarket home there costs around CHF 20,500 per square meter. This is followed by Flims/Laax and Gstaad, where prices hover around CHF 17,000 per square meter. Zermatt, Davos/Klosters, the Jungfrau region and Andermatt are not far behind, with prices around CHF 16,000 per square meter.

Prices for vacation homes were around 7 percent higher in the first quarter of 2023 compared with last year across all destinations analyzed in the Alpine Property Focus report. The largest increase was recorded in Arosa where prices have risen nearly 20 percent in the last four quarters and are now more than 60 percent above levels seen at the end of 2019. Strong price increases were also seen in easily accessible locations like Hoch-Ybrig, Flims/Laax and Engelberg, where prices rose by 15 percent in the space of a year.

Converting a primary residence into a second home will typically add between 15 to 20 percent to its market value. As a result, the number of second homes in the destinations analyzed has increased by almost 2,500 since the beginning of 2020, an increase of just under 2 percent. And the reservoir of second homes shows no sign of being exhausted. This has the effect that the supply of primary residences is reduced and the depopulation of the Alpine regions is exacerbated.

The price boom witnessed in recent years has been slowly drawing to a close. In the Bernese Oberland, there has even been a slight decline in prices since the fall of 2022. Maciej Skoczek, real estate economist at UBS CIO GWM and lead author of the study, shares his prognosis: “Over the next few quarters, price increases on the vacation homes-market are expected to ease further. There is a period of stagnant prices on the horizon.“

The key drivers of demand through, and following, the pandemic have proven to be unsustainable; overseas vacations are proving to be as popular now as ever, and hybrid work—with people choosing to work from their second homes—appears to have been a temporary phenomenon. What remains after the boom is that second-home prices are a good 20 percent higher. Consequently, the average purchase price of a vacation home is currently around 1 million Swiss francs, which, coupled with the rise in interest rates, weighs heavily on household budgets. The total cost of purchasing a typical alpine apartment currently stands at around CHF 50,000 a year—double that of 2019. Skoczek adds: “Some owners will consider selling vacation homes to realize capital gains while escaping increased costs.“

Price rises also appear to be leveling off in the owner-occupied Swiss market as a whole, whilst a shortage of living space and rising rents are topics occupying the rental market. Find out what else is affecting the real estate market in the “UBS Real Estate Guide“.

UBS Switzerland AG