Switzerland: Prices for second homes in holiday resorts to fall in 2020

PriceHubble, the PropTech company specialising in Big Data and artificial intelligence for data-driven solutions for real estate markets, today presented its new analysis on the development of second home prices in the Swiss Alps. How have prices developed over the last 10 years? But most importantly, has interest in real estate in these communities increased since the lockdown in the wake of the Covid-19 pandemic?

2010-2016: a market influenced by the Lex Weber

The Lex Weber, which came into force on 1 January 2016, aims to limit the number of second homes in all municipalities to 20%. New flats in particular are affected by this federal law, and dwellings built after 11 March 2012 or for which a building permit was issued after that date.

As a result, the Swiss market experienced a veritable "race for second homes" from 2012 onwards, both in terms of purchase and construction. Prices per square metre rose sharply during this period and subsequently stabilised in 2013 and 2014.

A second phase emerged between 2015 and 2016: With the Swiss franc appreciating and supply significantly exceeding demand, prices collapsed until the Lex Weber was passed in its final version. From then on, investors calmed down and prices continued to rise until 2020, supported by the peak of the Swiss franc.

A significant price difference between primary and secondary residences

For all the areas studied, whether they are at low, medium or high altitude, the prices per square metre for second homes are significantly higher than the prices for main residences. In some cases, the difference can even amount to several thousand Swiss francs. There are several possible explanations for this phenomenon.

The difference in price levels between main residences and second homes can be explained by the fact that second homes are generally more upscale. The main residences (flats and houses) are older and often larger, which has a downward effect on prices per square metre. Finally, new buildings constructed in holiday resorts are purchased by residents with strong purchasing power who are looking for a luxurious holiday home.

The impact of Covid-19 on second homes in 2020

Of the 82 municipalities studied, Covid19 had a primary impact on the number of transactions.

In fact, transactions increased by 19.3% in one year between the third quarter of 2019 and 2020. Between the second and third quarters of 2020 alone, the number of transactions increased by a record 14.5%.

Of course, not all types of real estate have experienced the same resurgence of interest from buyers and investors. The house segment in particular increased: while they accounted for 14% of second home transactions in the first quarter before the crisis, they now amount to 25% of sales (in the third quarter of 2020).

In terms of prices per sqm, second residences have seen an increase of 2.7% in one year between Q2 2019 and Q2 2020. In 2020, a decrease of 1% in prices per sqm of second residences (flats and houses) in resort was observed. While prices for second residences in the resort houses segment have decreased significantly (-3.5%), prices for flats, on the other hand, have increased slightly (+1.5%).

What about the resorts on the other side of the Alps?

In the French part of Switzerland, the price development per sqm is much more stable for transactions in alpine resorts. Over 5 years, prices per sqm are stable, apart from a slight appreciation in 2016-2017. Since 2019, however, they have been declining.

A decline of around 5% can be seen, which started before the lockdown began in 2020. In terms of typology, this decline is mainly due to the flats segment, while houses, for their part, show a slight increase over the same period in 2019.

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