Corona crisis affects real estate market – boom in holiday apartments is on shaky legs


The prices for holiday apartments in the Alpine region rose significantly in the Corona year 2020. But this boom is unlikely to be sustainable.

Last year, during the Corona crisis, many Swiss people withdrew to a holiday apartment.

Foto: Maxime Schmid (Keystone)

The corona crisis is driving up the prices for holiday apartments in the mountain regions. The increase averaged 4 percent last year compared to 2019, like one current analysis by UBS shows. It is the largest increase in eight years.

But the upswing is likely to be short-lived. “In three to five years, the price increases should weaken again,” says UBS real estate expert Matthias Holzhey. “It depends on how quickly we get back to normal.” Holzhey means, for example, traveling without restrictions or the return of employees to their regular offices.

The analysts at UBS anticipate that in the medium term, demand for holiday homes will decline again in view of higher prices and therefore decreasing affordability. Demand is therefore likely to fall below pre-pandemic levels. The prerequisite is that home work decreases again and trips abroad become easier.

After buying the sale

At the same time, the supply of available apartments is likely to increase: “Underestimated maintenance costs, overestimated rental income when renting out to tourists or simply the desire for more variety during the holidays will encourage some of the youngest spontaneous buyers to rethink and resell,” write the UBS experts.

This trend could be reinforced by a generation change. 40 percent of the second homes were built between 1960 and 1980. Many of the current owners bought the property at this time. The owners are very old and wanted to sell their holiday home for the rest of their lives. In many cases, the new owners face high renovation costs.

No evidence of a bubble

However, UBS does not expect a real estate bubble to form during the Corona crisis, which will burst after the pandemic. Since the prevailing freeze on construction of second homes does not allow for any significant expansion in supply, “the potential for setbacks should be limited”.

“Setback potential” means the difference between the development of rental prices and purchase prices for condominiums. If the two are too far apart, this indicates a decline in prices.

The most expensive tourist destination in the European Alpine region is St. Moritz. A high-standard holiday apartment there currently costs just under 17,000 francs per square meter. That is almost 1200 francs more than in March 2020.

There are two reasons for the strong demand for second homes: Due to the travel restrictions, more Swiss people spent their holidays in Germany last year than in previous years. Local holiday resorts became more attractive practically overnight, as a result of which some households discovered the appeal of a possible holiday home.

In addition, the holiday apartment offers an opportunity to break out of everyday life, if that Home office can be relocated to the mountains without further ado.

Foreign buyers are taking advantage

Swiss holiday apartments are also interesting for foreign buyers. According to UBS, local properties generally enjoy the reputation of being safe investments, so that they are also in great demand in economically uncertain times.

Furthermore, the prices for holiday apartments in Austria or Germany have increased significantly more than in Switzerland in the last five years, which at least partially outweighs the long-term disadvantages in prices and exchange rates for holiday apartments.

The UBS experts agree that vacation rentals are a luxury hobby. An apartment with a purchase price of around CHF 1 million costs between CHF 20,000 and CHF 30,000 a year to maintain. (Read here: Is it worth buying a holiday home?)

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Corona crisis affects real estate market boom holiday apartments shaky legs


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