Swiss secondary home market: Rising prices

The market for secondary homes in Switzerland continues to record rising prices. Gstaad is one of the places in the Alps with the highest prices for holiday apartments, which have increased by 7% until the end of March 2023. According to a study by UBS, the current price for an apartment is around one million, compared to around CHF 750,000 last year.

In Engadin and St. Moritz, a luxury secondary home costs CHF 20,500 per square metre. Flims, Gstaad, Zermatt, Davos, Klosters and the Jungfrau region follow.

The price increase is explained by the Corona epidemic. People have discovered working from home far from city centres, which has led to an explosion in demand for secondary homes. Due to the initiative on second homes, such properties are now rare. If the political situation regarding secondary homes does not change, they could be further restricted.

Nevertheless, the number of secondary homes has increased by more than 2,500 properties since the 2000s and the building ban, which is due to a conversion of primary homes to secondary homes. In the coming years, however, it could become difficult to make a profit on a purchased secondary home.

An end to the price increase could be in sight. With the end of the Corona crisis, people will want to resume their old habits and travel further afield.

Rising mortgage rates could also put the brakes on high purchase prices. In the Bernese Oberland, prices for holiday apartments have already been declining since October 2022. Furthermore, it has become more difficult to obtain a mortgage for a secondary home. Equity requirements can rise to 30%, compared to 20% for a primary residence. The capital of the occupational benefit scheme or pillar 3a cannot be used for the amortisation of the mortgage either. The amortisation is also stronger than for primary residences.

Maintenance costs, especially for older buildings, should not be neglected as energy and material costs have increased in recent years. It is also advisable to consider the renovation needs before buying. In the case of an apartment, the amount of the renovation fund must be checked. The notary and transfer costs should also be taken into account when buying.

If one owns a holiday property, the tax office adds an estimated rental value tax to the income, which is taxable in the canton of the holiday home. If the property is rented out, the rental income is added to the rental value, but interest and maintenance costs can be deducted. Income from holiday apartments is usually lower compared to other properties, and in the low season these accommodations are often difficult to rent.

High accommodation prices are only possible in tourist destinations such as the Jungfrau region, which indicates an annual occupancy rate of only 60 %. Price fluctuations are therefore more pronounced for holiday rentals. It is advisable to think carefully before embarking on the purchase of a holiday property.

Finally, it must be taken into account that the initiative to restrict the construction of second homes may be weakened and new properties could flood the market, leading to a general decline in prices. For further information, the UBS statistics are recommended.