The stock market boom and remote working requirements have pushed up holiday home prices in Swiss mountain resorts. UBS warns that legislation does not provide any protection against corrections of excessive prices.

Last year, the market for Swiss vacation homes saw the biggest price increase since 2008, reaching new highs, according to the «UBS Alpine Property Focus» published on Tuesday.

Prices for chalets and condominiums in the Swiss Alps increased by an average of almost 10 percent in 2021, with prices in some regions rising even higher. Properties in Arosa, Engelberg, Flims/Laax and the Jungfrau region for example, rose more than 15 percent in 2021, according to the bank's calculations.

Work From Home

The most expensive properties are in St. Moritz' ski resort, where the square meter averages 19,500 Swiss francs, followed by 17,000 francs in Gstaad in the Bernese Oberland and at 16,000 francs in the Jungfrau region.

The main drivers behind the second home boom were work from home requirements, which gave city dwellers the opportunity to install offices in their second homes in the Alps, and the available capital, fueled by a surge in stock markets, the report said.

An Empty Market

In the meantime, however, UBS has observed an empty market, which is partly related to the law on second homes, which has practically banned second homes from being built in tourist regions. The ban has been in place since 2012.

As a result, the Alpine regions are considered sold out, with particularly difficult market conditions in the Grisons, Bern and Central Switzerland regions.

Steep Increase 

A simple example shows how strongly the price of second homes has risen since the outbreak of the pandemic. Today, a second home can cost 1 million francs, whereas before the pandemic they were selling for 860,000 francs.

With an average mortgage of 60 percent of the purchase price, this increase corresponds to 55,000 francs more equity and 20,000 francs more required annual income.

Price Excesses

Adding to this are energy prices, which have risen sharply since the outbreak of the war in Ukraine. «Taking into account past rises in energy prices and potential further increases, the overall cost of using an average vacation apartment next year is likely to be a good one-third higher than before the start of the second-home boom in 2020,» real estate economist and lead author of the study Maciej Skoczek, said.

But anyone who hopes that the construction ban might indicate a value guarantee could be disappointed, as objects affected by price excesses are subject to certain fluctuations in supply, the report said.

Opportunistic Locals

UBS expects an increase in supply, not least because a certain clientele is likely to use the property bull market to realize capital gains.

Furthermore, some Alpine residents might be attracted by the average premium of about 15percent which they can be expect to get when they sell their first home as a second home.