Following four years of price corrections or, at best, stable prices, the Alps are firmly back on the radar of second home buyers and investors
Savills Alpine Homes Spotlight 2013
Following four years of price corrections or, at best, stable prices, the Alps are firmly back on the radar of second home buyers and investors. Savills and Alpine Homes experienced a doubling of transaction levels in Austria in the first half of 2013 compared to the same period in 2012 and a corresponding 57% increase in the Swiss Alps.
Out of the 27 resorts surveyed, all resorts have either stable or increasing prices. 55% of resorts have witnessed price increases of more than 5% in the last 12 months. This is in contrast to 2012 when 28% of resorts surveyed were still witnessing price falls of more than 5%. This can be attributed to a returning level of confidence, cash rich buyers, low interest rates and a flight to traditional, mature markets.
An increasing number of buyers in the Alps come from overseas. Nearly a quarter of Savills Alpine buyers are British living outside of the UK, typically in Hong Kong, Singapore, Geneva or Dubai. Russian buyers are also particularly active at the top end of the market, spending on average 1.5 times the amount of the UK buyer.
Jeremy Rollason, managing director, Alpine Homes, comments: “We are now seeing increased buying activity in prime Alpine markets (excess €10 million). High Net Worth buyers (HNWI’s) overwhelmingly preferred to rent out their ski chalets during the last three seasons but we are now seeing them return to the market. They face a wide choice of possible locations and product so research their markets thoroughly before investing.”
Savills Research found that different countries attract different buyers to their markets and have seen different price levels and trajectories as a result.
Austria
UK buyers in Austria are having to compete more with domestic buyers, as well as other EU investors including Dutch, German and Belgians. Average prices paid are up by 10% on average since 2012. This echoes an annual house price increase of 12.4% in the rest of Austria during 2012.
Austria boasts one of the fastest growing tourism markets, with a 5% increase in international arrivals last year, compared to an average of 3% across the rest of Europe. A relaxation of buying restrictions to non-EU citizens in 2012 is likely to add further competition in second home buying and create upward price pressure.
Jeremy Rollason, comments: “Austria continues to offer buyers fantastic value, higher returns and across the board, better capital appreciation prospects.”
France
From March 2012 to March 2013, there was a 19% decline in house sales in France. Lack of vendor and buyer confidence caused by budget cuts, negative growth outlook, downgraded credit ratings, high unemployment, increased wealth tax, proposed pension reform and proposals to increase corporation tax were some of the influencing factors. This has rubbed off in the second home markets. In the Savoy region (Courchevel, Meribel, Val d'Isere, La Plagne and Megeve,) foreign buyers fell to 13% of all buyers in 2012 (compared to 20% of the total in 2007). At the same time, UK buyers fell from two thirds to just one third of the total buyers. This reflects the weakness of sterling over this period contributing to lack of demand. With lower prices, recovery prospects and still low interest rates, the fundamentals now exist for a pick up in demand.
Switzerland
Switzerland experienced house price growth of 2.1% in the 12 months to September 2013, buoyed by economic expansion, low interest rates, growth in real wages and immigration and investment in the residential sector.
Savills and Alpine Homes witnessed a 57% increase in transactional volumes to June 2013 (year on year) for second homes in the Swiss Alps. Despite the continued strength of the Swiss franc, buyers are motivated by the fiscal environment and financial stability, underwritten by lifestyle and exclusivity factors. New legislation restricting the construction of second homes to no more than 20% of the total (Lex Webber) is beginning to limit the supply of newly built properties.
“In two years time, you will not be able to walk into an estate agent in Verbier and buy an off plan property,” predicts Jeremy Rollason. “This is good news for existing second home owners, but not so good for the wider functionality of the market. We expect that the Federal Government may come up with dispensation provisions for certain categories of touristic residences but we await the fine print.”
Yolande Barnes, director of World Research at Savills sums up the outlook for Alpine residential real estate. “The increasing number of High Net Worth Individuals globally is increasing demand for real estate in many jurisdictions. With average prices up by an average of around 5% across the Alps since 2012 and a growing diversity of buyers, ski property is again increasing in popularity, particularly among wealthier, cash rich buyers. Limited and exclusive supply, made more so by market regulation, means that buyer appetite will remain robust. Investors in alpine property expect to enjoy, as well as profit, from their assets and these expectations are set to keep demand strong. Savills thinks it is likely that alpine resorts will see similar growth in 2013 – 2014 as in 2012 – 2013.