Swiss chalets continue to attract foreign buyers

Property firms selling chalets to foreigners say the controversial new law capping new holiday homes is not really affecting business. visits Grimentz, where 81 per cent of residences are second homes, to find out more.

This content was published on January 13, 2013 minutes
Simon Bradley in Grimentz,

Sunrays burn through the gaps of ancient larch wood granaries in the old village centre of Grimentz, high in the Anniviers Valley in canton Valais, casting shadows on the snowy floor. Old and new chalets, and the odd crane, jostle for space on the steep slopes overlooking the small but fast-growing alpine resort.

Today all is quiet as the village lets out a collective deep breath after the crazy holiday week. Local and foreign property developers and agents are meanwhile still digesting Swiss voters’ decision last March to impose a 20 per cent ceiling on the number of second homes in any community. The new “Lex Weber” law came into force on January 1.

Alpine communes like the one in which Grimentz belongs, where 81 per cent of residences are second homes, are particularly affected by – and angry about – the changes.

“Nobody expected the law to be passed,” said Will Herrington, an agent for Mark Warner Property, who manages and sells chalets and apartments in the resort.

Restrictions already apply to foreign nationals buying holiday homes in Switzerland, allowing only 1,500 new units per year. Yet the prospect of further restrictions under Lex Weber for both Swiss and non-Swiss, on top of a gloomy global economic climate and high Swiss prices, do not appear to be deterring affluent foreign buyers who seem to have rediscovered an appetite for Swiss property.

“Things are ticking over. We’ve had a certain amount of interest over the past 3-4 months,” said Herrington - from Britain - who has been in living in Grimentz with his family for the past seven years. “With the stock available Lex Weber won’t have a significant impact on business.”

“Good for business”

Other property specialists echoed this sentiment.

“In the short term Lex Weber has actually been good for business,” said Simon Malster from Investors in Property. “We’ve noticed quite a lot of clients who have been thinking about buying in Switzerland and have decided that now is the time to do something about it.”

Ski property in Switzerland is expensive. Apartment prices are 30 per cent higher than in France and more than double those in Austria. For many buyers, however, investment in Swiss property is a safe long-term investment, a means of hedging against risk and currency fluctuation, with the added potential of rental income. Mortgage rates are also highly attractive.

“Demand dropped away in 2008-2009. But since November 2011 there has been a sea change with greater interest for ski property in Switzerland and new buyers,” said Jeremy Rollason, managing director of Alpine Homes/Savills.

Around one in five holiday homes in Switzerland are owned by foreigners. Until recently the market was traditionally dominated by German, Dutch, Italian and British buyers. But over the past two years new buyers from Russia and the Far East have entered the mix.

Second homes

There are approximately 500,000 second homes in Switzerland. Canton Valais has the most with 62,000 occasionally occupied properties, followed by Graubünden (48,000), Bern (45,000) and Vaud (43,000).
The cantons with the highest proportion of holiday homes are Graubünden (37%), Valais (36%), Ticino (24%) and Obwalden (22%).
573 communes have a recorded rate of holiday homes of higher than 20 per cent, with some over 80% such as St Luc (82.8%) and Grimentz (81.8%) in Valais and Laax (80.9%) in Graubünden.
Most second homes in tourist regions are not commercially operated and are occupied on average 30 to 40 days per year.
(Source: Federal Spatial Development Office)

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Although business has picked up in the short term, there are still many outstanding questions about the future supply of holiday homes and the flexibility of the new law.

From March 2012 to January 1, 2013, tourist regions witnessed a rush of planning applications from an average of 3,000 residential units to 8,000 in the ten months up to October 2012 as landowners brought forward building projects.

“I imagine every last available plot here has planning permission. There is nothing left,” said Herrington, casting his eye over the packed slopes.

Under new regulations, developers who applied for building permits before March 2012 will be able to build them within three years’ receipt of the permit and sell them as second homes. But it is not clear what happens for permits applied for between March and December and granted by the commune. The cantonal courts of Valais and Graubünden said yes, but the Federal Court now has to rule after appeals by the Helvetia Nostra association.

Real estate purchase for foreigners

Foreigners (individuals and companies) wishing to buy Swiss property must first obtain a permit from the canton where they wish to purchase. The number of such permits is strictly limited.
EU/Efta citizens and C-permit holders living in Switzerland are not considered “persons abroad” in this context.
Property bought for the purpose of creating a permanent business operation is exempt, unless the business trades, leases or rents that property out.
Foreigners buying property to use as a home must use it as their main residence.
Restrictions on foreigners buying Swiss property limiting the number at 1,500 new application per year were put in place in 1961 aimed at preventing overseas investors from distorting the domestic housing market.
The regulations were enshrined in law in 1983 and modified later. The law later also assumed the informal name of former Justice Minister Arnold Koller. A government proposal to abolish the rules was rejected by parliament in 2008. The lower house of parliament again rejected calls to scrap the Koller Law in December 2012. The Senate is set to vote on the issue next spring.

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Gaping holes and hot beds

As well as the pending applications, developers are waiting to see whether planning permission will be granted to new large developments which are a mix of hotels and apartments. In these cases, the owners of the apartments would be obliged to rent them out when not using them themselves, thus potentially solving the hot-cold bed issue.

Herrington smiles. Grimentz is fortunate as it has a handful of fairly large projects still to build which already had approval, such as the Chalets d’Adelaide project – currently a gaping hole on the hill - a new cable car due to link to the nearby resort of Zinal in 2013/14, and a spa project. These should keep builders and property agents busy for the next four to five years.

“There’s a good range of chalets and apartments on offer from apartments at SFr800,000 to chalets at SFr5 million with swimming pool. The one thing missing is having the odd plot available to build a tailor-made chalet,” said the Mark Warner agent.

Less choice in future?

Against this backdrop of restrictions and uncertainties, firms selling to foreigners are nonetheless worried they may have less choice in a few years’ time.

“The window of opportunity remains but it’s narrowing. There’s about a two- to three-year supply of property available,” said Rollason.

The levels of future demand and limited supply are likely to drive up prices, his company warns.

For Herrington the situation is now fairly clear: “In the long-term we will have to be more dependent on re-sale properties, but this will be harder as you can only sell on after owning a place for five years if you are a foreigner and ten years as a Swiss, so there is not a constant turnover of available properties.”

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