Over the past six months, the Swiss real estate market has witnessed noteworthy developments, particularly in the realm of vacation properties and second homes. In this report, I'll provide my view onto these changes:
1. Market Resilience Amid Global Challenges
The Swiss vacation property market has shown remarkable resilience despite ongoing global uncertainties. Investors continue to view Switzerland as a safe haven and are increasingly interested in diversifying their real estate portfolios by investing in Swiss properties, particularly in picturesque alpine regions. Foreign investors are especially keen on properties in these regions.
2. Financing Challenges and Rising Costs
In an Article by Handelszeitung earlier this year, Maciej Skokzek, Real Estate Analyst at UBS, sheds light on the financial aspects affecting the Swiss vacation property market. In recent months, financing conditions have taken a hit. Mortgage interest rates have more than doubled compared to early 2022. For instance, in the case of a property valued at 1 million Swiss Francs with a 60 percent loan-to-value ratio, current interest costs are estimated to be around 15,000 Swiss Francs annually. Just a year ago, these costs were approximately 6,000 Swiss Francs. Moreover, investors now have the option to allocate the necessary capital for property purchases into alternative investments like bonds, which, thanks to the rise in interest rates, now offer a positive return. Consequently, the appeal of purchasing a vacation property as a capital investment, has diminished.
3 Supply and Demand Dynamics
Ten years ago, the second-home initiative was passed, which prohibits the construction of new second homes in municipalities where more than a fifth of homes are already second homes. This law has resulted in a lack of supply, with few existing homes being put on the market and hardly any new ones being built. As a result, in the renowned regions of Graubünden, Berne, and Central Switzerland, only around 1.5% of housing stock is currently available for sale.
According to a study by economist Robert Weinert on Wüest Partner, many tourist resorts and valleys around Chur, Arosa and the Engadin are expected to face a severe housing shortage due to the anticipated building activity. As a result, the canton of Graubünden should brace itself for tough times. The study predicts that only 570 new flats will be built by 2026 for every 1,000 required.
4 Steady value increasing for second homes
According to the UBS Alpine Property Focus 2023, holiday homes in the Alps have cumulatively increased in price by almost 25% since the end of 2019, while the overall market has risen by 15%.
Despite currently record-high prices, vacation properties are expected to offer long-term value preservation. Swiss Alpine chalets in prime locations remain in strong demand from investors, as Switzerland's reputation as a safe haven safeguard against declining prices. As long as the Swiss Franc retains its status, this international purchasing power reservoir is likely to protect against price drops.
In conclusion, if you aspire to own a luxurious property in a prime location in the Swiss Alps, rest assured that it is still a safe and solid investment. However, you should be prepared to pay a premium for it.
beyoul offers a solution to premium prices in the Swiss Alps.
So the question is: is now the right time to buy a second home?
There are several questions to be addressed when taking this decision:
1. How much am I ready to invest to buy a second home?
2. Am I financially capable or willing to open a mortgage for a second home?
3. How much the running costs to maintain a second home will impact my financial goals?
4. How much will I use a second home?
The answers to these questions are very personal, of course. However, I want to underline today a new possibility in the Swiss Market, brought by beyoul, that is the solution for owning a second home with peace of mind.
Financial impact when buying a second home in a traditional way
I want to approach the topic starting from a quick calculation of costs. Suppose you want to buy a second home in Flims, where the price per square meter starts at 16,000 CHF. If you want a new built or prime location, you should expect to spend even more. For a 4.5 room apartment of approximately 100 square meters, the expected price would be around 2,000,000 CHF.
Assuming you are willing to open a mortgage for a second home, you still need to pay 40% of the price in cash, which comes up to 800,000 CHF. Then, you have to take out a mortgage of 1,200,000 CHF, with an interest rate of approximately 3%. This is quite an expensive investment, I must say.
Let's approach the calculation differently. Assuming you have 250,000 CHF in liquidity and need to take out a mortgage for the remaining amount, the maximum cost of the flat you can buy is around 650,000 CHF. But what kind of property can you get for that amount in the Swiss Alps?
It's important to keep in mind that you'll need to renew and furnish the property yourself, and any unexpected maintenance costs will also be your responsibility. And don’t forget the tax implications you suffer from the imputed rental value.
Additionally, you should consider how frequently you'll be able to use the property. Taking into account family and work commitments, you may only be able to spend an average of 3-4 days per month, which means 36-48 days per year.
Financial impact when buying a second home in beyoul co-ownership model
Let's apply the same calculations to a beyoul property in co-ownership.
If you have a cash down payment of 800,000 CHF, like in example n.1, you can purchase 2 shares of a co-owned property worth 3'220'000 CHF with beyoul, such as Casa Dado in Flims. With this, you get much more than 3.5 rooms and 80 m2, as Casa Dado is a unique 4.5 attic in Flims Dorf that spans over 129m2.
What's more, compared to our previous calculation, you get to stay in the property for double the amount of days, as 2 shares allow you to stay in the property an average of 72 to 96 days (depending on your preferred season).
What if your budget is 250,000 CHF as in example number 2? You can buy a share in the new development in Fontauna, Disentis. This will give you ownership of a brand new 3.5 room apartment spread over 107 sqm and you will also be able to use the shared amenities like the spa! And still used it the average time of a traditionally owned property, 36 to 48 days a year.
In conclusion, beyoul provides you with the chance to take part in secure real estate investments in Switzerland as a co-owner of a property, allowing you to acquire with the same down payment necessary to buy 100% of a property, a property whose values is circa 3-4 times higher. At beyoul we have made sure that 1/8 of the property corresponds to the average time a 100% owned second home is typically used (44 credits. Furthermore, all maintenance costs are shared equally among the 8 co-owners and managed by beyoul. This makes owning a second home hassle-free for you.
What are you waiting for? Join our community and start owning smart - your luxury home at 1/8 of its price.