North American luxury ski property market sees strong price growth

North America has outperformed Europe for luxury ski property value growth, seeing average prices increase by 13.3% compared to 1% in the 12 months to June 2014, a new analysis shows.

Overall, Knight Frank’s Prime Ski Property Index reached its lowest point in June 2009 but has since increased by 23.5%. It increased by 5.9% in the year to June 2014 following growth of 4.6% a year earlier.

Queenstown in New Zealand and Aspen in the United States recorded the strongest rise in luxury prices, up by 24.8% and 20.7% respectively.

Knight Frank says that New Zealand’s economic upturn, foreign investment and low interest rates are fuelling price growth in the antipodean resort. In Aspen despite annual price growth of over 20% luxury prices are still 18% below their pre-crisis peak.

While North America has had much stronger growth in the last year, the picture is very different if analysed over a longer time period. Average prices across the North American resorts remain 9.9% below their 2008 peak whilst the comparable figure for Europe is already 8.8% above.

Amongst Europe’s top performers is Morzine, a resort which arguably comes the closest to being recognised as a truly year round destination and one that is investing heavily in its infrastructure. Luxury property prices here rose by 6.7% in the year to June.

Val d’Isere, which has seen sales strengthen in 2014, particularly in the €1 million to €2 million price bracket, saw prices increase by 3.2% following two years of largely flat growth.
 
The Swiss resorts are broadly mid-table this year with Zermatt leading the pack having seen annual price growth of 5.5% and uncertainty in the market surrounding Lex Weber, the introduction of a 20% cap on second homes per commune, has delayed some purchase decisions.

‘It will take another year for the law to be fully implemented and thereafter we fully expect confidence to return. Already, speculative investors are starting to take advantage of some lower prices, confident that stock levels will tighten in the coming years driving prices upwards,’ the report says.

With the Winter Olympics now over it remains to be seen whether the Russian city of Sochi will break into the big league of European resorts, the suspicion is it will continue to cater almost exclusively for a domestic clientele. Despite the large amount of new supply delivered in the last year, prime prices in the resort rose 4% in the year to June.

Cortina, the most upmarket resort in the Italian Dolomites, is at the foot of the rankings table. The Italian resort saw prices fall 11% in the year to June. Such discounts, combined with the strength of the pound against the euro, may make for a strong buying opportunity for sterling purchasers.

Overall in Europe, during the 2013/2014 season, demand continued to be focused on the resorts located within an hour of Geneva Airport in particular Morzine/Les Gets, Megeve and Chamonix. The €1.5 million to €2 million price bracket in Val d’Isere has also seen strong activity, with many buyers wanting to be in the heart of the resort.

In the year to June, Knight Frank’s Alpine enquiries came predominantly from prospective European buyers, who together accounted for 61% of all applicants. The Europeans were followed by Asian and Middle Eastern buyers at 12% of the market each, Russians and CIS nationals at 5% and North Americans also at 5%.

Analysis of enquiries data by price band shows that there was stronger demand for properties priced below €2.5 million in 2014, accounting for 72% of applicants, compared with 47% a year earlier. The proportion of buyers looking at properties above a €20 million threshold by comparison has shrunk from 7.6% in 2013 to 3.8% in 2014.

The price of a luxury home in the Alps can vary significantly, a fact that surprises some non-European buyers. Courchevel 1850 leads the pricing stakes with the average luxury property priced around €30,000 to €32,000 per square meter but in Chamonix, a two hour drive away and crucially outside the desirable Trois Vallées, prime prices are €7,000 to €8,000 per square meter.

The Swiss resorts of St Moritz, Gstaad and Zermatt while not quite competing with Courchevel 1850 in terms of price, all rank highly with prices ranging between CHF20,000 to 27,000 per square meter.

The Knight Frank report says that the Swiss Franc proved the safe haven currency of choice during the global financial crisis, to the extent that the Swiss government opted to peg it to the euro in 2011, and this has enabled some British buyers to take advantage of the currency play.

The 2011 vote that capped the percentage of second homes to 20% (Lex Weber) has added some uncertainty to the market whilst the authorities finalize the details of the law. These restrictions, together with the existing regulations that allow non-residents to purchase in certain zones (Lex Koller), will undoubtedly create a lack of new supply. This in turn is bound to generate demand in the coming years, especially in the top resorts, according to the analysis.

The report also points out that the forthcoming decision on the future of the lump sum form of taxation (Forfait Fiscal) is also adding to overall concern, however, once the position is clearer there is a good chance that we will witness a surge in activity with confidence returning.