New analysis shows that demand for property in the Alps is rising

Demand for Alpine property is rising, spurred on by a more resilient Eurozone, greater clarity over tax and the second home cap in Switzerland, as well as a weaker euro, says a new analysis report.

The latest results of the Knight Frank Prime Ski Property Index underline a broadly stable market environment with only 13% percentage points separating the strongest and weakest performer.

Val d’Isere and Meribel lead the 2015 Ski Property Index recording annual price growth of 5.8% and 4.5% respectively Prime sales activity in the French Alps is focussed between €1.5 and €2.5 million with resorts such as Chamonix and Courchevel 1550 increasingly popular .

Indeed, the number of sales completed in Megeve in the first half of 2015 was double the number of sales agreed during the whole of 2014 while previous uncertainty in the Swiss market is giving way to renewed optimism as clarity emerges surrounding taxation and the second home cap.

The report points out that currency movements have played a pivotal role in determining demand across the region. For many, having decided to buy a ski home, choosing where to buy and weighing up the pros and cons of the different ski resorts can be a challenging task.

The report also points out that Swiss rules on who can buy what, and where, can be complex for even the most experienced property lawyer due to the rules for residents and non-residents according to Lex Koller and Lex Weber.

Home to the world’s oldest ski resorts, the French and Swiss Alps attract in excess of 80 million ski visits per annum and account for a third of the total number of ski resorts worldwide. In the past year ski homes in Europe’s top resorts have continued on the same trajectory that they have been following since 2008 with no radical acceleration or deceleration just small single digit shifts year on year.

Overall, the index proved largely static with only a marginal 1% fall recorded in the year to June 2015. Val d’Isere and Meribel lead the 2015 rankings with the price of a typical four or five bedroom chalet in each resort rising by 5.8% and 4.5% respectively in the year to June.

The report explains that the length of Val d’Isere’s ski season explains its long- standing appeal, particularly with British buyers. Few other Alpine resorts can guarantee sufficient snow to ski during both the Christmas and Easter holiday periods.

In Meribel’s case, a combination of its location in the heart of The Three Valleys and its pricing explains its 4.5% increase year on year. Meribel provides better value than Courchevel 1850, but can compete with 1550 and 1650 in terms of facilities.

Investment in the form of new residential developments such as Olympe in Les Allues and Point de Vue in Meribel Village has also helped to build confidence amongst buyers, the report explains.

In real price terms, the exclusive resorts of Courchevel 1850 and Gstaad come out on top, with prime prices typically around €25,000 and CHF30,000 per square meter respectively. A prime ski chalet in Gstaad is, on this basis, four times the price of an equivalent property in the French resort of St Gervais.

In the French Alps the super prime market  of €15 million plus has slowed, partly because of the absence of Russian buyers but also because a number of ultra high net worth individuals (UHNWIs) are reviewing their budgets and considering spreading their capital across multiple properties or assets in different locations.

The report suggests that the performance of the Swiss resorts in this year’s index is strongly linked to whether non-residents are able to buy in a given location and how close the local commune is to its 20% threshold for second homes. St Moritz, for example, which saw values decline by around 7.2% year on year has few properties available for foreign buyers.

The unpegged Swiss Franc has rebounded whilst the Euro has weakened leading to repercussions for foreign buyers. British buyers looking to purchase in the French Alps are now in a stronger position than two years ago, the GBP/ EUR exchange rate has moved from approximately 1.17 to 1.43 during this period.

The report also explains that Switzerland’s unpegging of the franc from the euro in January 2015, whilst initially unnerving for buyers, has rebounded. Prior to its unpegging the pound stood at CHF1.54, it dropped to CHF1.31 but by August it had returned to CHF1.52.

Taking account of currency movements only and focussing on the year to July 2015, a British buyer who bought a French property in July 2015 instead of a year earlier will have saved approximately 11%, whilst in Switzerland the same buyer’s budget would have shrunk marginally, by 2%.

‘The French and Swiss Alps now present buyers, both lifestyle purchasers and investors alike, with an interesting scenario, one that differs significantly from three years ago.
Switzerland remains a long-term opportunity for investors. Although foreign purchasers are faced with a higher entry cost due to the strength of the Swiss Franc, the country still offers an unrivalled level of privacy and security,’ says the report.

‘The availability of quality stock is at its highest for three to four years and those wanting to sell are increasingly considering offers. Switzerland, as a result, may be the closest it has been to resembling a buyer’s market for several years,’ the report adds.

However, it also points out that two regulations operating in tandem have stymied the Swiss property market. Lex Koller, in force since 1983, restricts where and what non-residents can buy, allowing them to only purchase in certain tourist areas and up to a maximum of 250 square meters of official living space.

The introduction of Lex Weber in March 2012, imposed a 20% cap on the number of second homes within any Swiss commune. After a period of consultation, full details of the rule, which applies to both residents and non-residents alike, are expected to be published within the next six to eight months ending a period of uncertainty.

‘Going forward, we expect some of the smaller and less well-known Swiss ski resorts, where second homes are well below the 20% threshold, to see above average price inflation as Lex Koller pushes buyers off the beaten track,’ the report says.

‘By spring 2016 we expect the Swiss market to be gaining traction. Greater certainty in the market will mean a return to a simple equation between supply and demand, sales volumes will increase but asking prices will not be as open to negotiation as they currently are. France, too, is entering a new phase,’ it adds.

The report also explains that buyers who opted to sit on the side lines until the Eurozone crisis had run its course are now active once more, buoyed by low interest rates, the upturn in foreign demand due to the weak euro and the recent low level of construction which has insulated prices.

With a general election in France expected in May 2017 the country’s adherence to its strict austerity programme is expected to wane, buyers are, as a result, looking more favourably on France.

Also, the European Court of Justice’s ruling that France can no longer apply the so-called ‘social charge’ on rental income and capital gains, a measure introduced by Francois Hollande in 2012 and which equates to a saving of up to 15.5% for all non-residents, has fed through to buyer sentiment.

The number of sales completed in Megeve in the first six months of 2015 was more than double the number of sales during the whole of 2014 and Chamonix has seen record prices achieved in price per square meters terms, both reflect the upturn in buyer sentiment.

‘We expect the Swiss to increase their market share in the French Alps over the next few years. Outside the jurisdiction of Lex Weber, Swiss buyers can take their pick of the French resorts, many located within a 90 minute drive of Geneva and crucially find chalets at a third of their own market’s value, the report adds.