Location and investment matter when buying a ski property in the Alps, says new research

Location determines the desirability of ski property in the Alps and the potential for capital growth with French resorts no longer dominating the market, according to new research.

In 2015 French Alpine resorts dominated the top half of the rankings with Swiss locations in the lower half but this year there is no clear division between the two countries, the latest Ski Property Report from international real estate firm Knight Frank shows.

It points out that despite the strength of the Swiss Franc and tight restrictions on foreign buyers, Gstaad proved the strongest performer in the year to June 2016 with prices rising by 13% over the 12 month period.

Luxury prices on average increased from CHF30,000 per square meter to CHF 34,000 due to a dearth of quality stock, the Canton of Bern’s favourable tax regime, and, for those looking to become permanent residents, the quality of its international schools.

The Three Valley resorts in France along with Val d’Isere proved to be another standout pocket of growth. Continual investment in the resorts by the owner, Societe des Trois Vallees (S3V), has reinvigorated both tourist and buyer interest.

Indeed, the report points out that ongoing investment, particularly in resorts which in some cases date from the 19th century, is increasingly a key determinant of performance. There is a noticeable correlation between this year’s index results and those resorts renewing their ski infrastructure and investing heavily in the wider provision of non-ski activities.

Both Val d’Isere and Chamonix have been investing and in these resorts prime prices rose on average by 6% and 5% respectively over the 12 month period. However, aside from Gstaad, the index is characterised by minimal price shifts with more than half the resorts seeing prices move by less than 3%.

Knight Frank suggests that in some Swiss markets the lack of properties for foreign buyers, who are usually only permitted to purchase a property up to 250 square meters in size, has supported prices.

The index as a whole increased by 1.8% in the year to June 2016, more than reversing the 1% decline recorded last year but the report explains that while the index results provide an indication of property price movements across the resorts it is important to distinguish the degree to which luxury prices vary across the Alps.

The most expensive resorts of Gstaad, Courchevel 1850 and St Moritz, where prices range between €23,000 and €31,000 per square meter, would in return for €1 million, provide between 32 and 44 square metres of living accommodation. In St Gervais and Chamonix where prices are close to €7,000 per square meter and €10,500 per square meter a buyer would, in comparative terms, acquire an 143 square metres and 95 square metres respectively for the same €1 million investment.

Aside from the specification and maintenance of the ski property itself, which is at the owner’s discretion, it is the location which determines the desirability and hence the future selling price, the report points out.

‘Buyers want to know that when they decide to sell they can do so quickly and move on. The investment plans and strategy of the major resort owners are increasingly being scrutinised by buyers. Key issues of interest to potential buyers include whether the resort has plans to link up and create a wider ski domaine, if the lifts are to be upgraded, if luxury brands are leasing retail space, or if new hotel groups are exploring key sites,’ the report says.

‘There is logic in their thought process. A savvy buyer knows that higher tourist numbers mean fewer void periods, higher returns and ultimately a more attractive and valuable asset. Some resorts identified the value of investing heavily in the resort’s ski and non-ski infrastructure decades ago and it has reaped rewards,’ it adds.

Another consideration for investors is year round letting potential with Alpine resorts now gearing up more to attracting people all year round. Alpine resorts are being marketed as a healthy alternative to a beach holiday while there is the chance of glacier ski-ing and paragliding for the adventurous as well as spa treatments and outdoor sorts like horse riding and tennis.

The report points out that a decade ago restaurants and shops in the Alps closed at Easter and reopened in November but most are now open all year round adding greater vibrancy to the village resorts in the summer. Ski lifts in some resorts run all day providing access to the summits and several operate for free during the summer months.

It also points out that passenger numbers to Geneva and Lyon airports in France are now higher in summer than in winter in cumulative terms, whilst Chamonix is credited with more than two million overnight tourist stays each summer.

‘By offering a broader range of activities from cycle trails to zip lines and from food to music festivals the resorts have met and encouraged this previously untapped pool of demand in the summer months. A boon for second home owners, we expect this trend to strengthen as transport links and the range of amenities are set to improve further,’ the report says.

Looking ahead, Knight Frank predicts that most resorts are likely to see marginal price movements in the next 12 months, but Switzerland may prove the exception to the rule, particularly those resorts where inventories are severely constrained due to the second home cap and foreign purchaser rules.

It also predicts that new build developments across the Alps are likely to command a premium given the lack of sites but particularly in France due to the attractive VAT rebate available on new properties.

Meanwhile, the redevelopment or extension of older chalets is set to continue with some in the Swiss resorts split into 250 square meter and aparthotels, defined as commercial units, will become more prevalent as developers in Switzerland look to find ways to accommodate Lex Weber’s second home cap.

The UK’s decision to leave the European Union has not led to a sudden market downturn nor is it expected to have much of an impact. The report explains that sellers across Europe are less reliant on British demand and there is a broader cohort of buyers with new wealth emanating from Asia and the Middle East which is filtering into the lifestyle market be it ski homes, vineyards or boutique hotels.