Demand for second homes in Switzerland has soared
While prices stagnated or even dropped for years, prices for second homes are now booming. Higher demand on the housing market since the COVID-19 pandemic is not the only reason.
Prices for second homes are booming
Not so long ago, the prices for second homes changed only slightly and some even dropped. Since the Second-Home Initiative (ZWI in German) was passed in 2012, prices on second homes were well below national residential property prices. But the COVID-19 pandemic made its mark on the vacation housing market. This is not without consequence for prices of second homes in Switzerland's popular tourist areas, which have been skyrocketing in recent quarters.
For owner-occupied homes in tourist regions that are used as a second home, prices in Q2 were up 11.3% year-on-year. For single-family homes, prices climbed by 16.2%. Second homes have made up for the difference in price growth in the meantime.
High demand means higher prices
Prices are being boosted by the major rise in demand for vacation homes. For instance, there were more searches for condominiums in Upper Engadine at the end of 2021 than in January 2020. The situation is similar for Surselva in Laax or Flims and central Graubünden. Property searches in popular vacation spots in the Cantons of Bern and Valais are trending in much the same manner. While search alerts for condominiums increased significantly throughout Switzerland during the same time period, on average the number was not quite as high.
Coronavirus pandemic sends prices on the housing market soaring
The robust demand for vacation homes is due in large part to the COVID-19 pandemic and the now-common practice of working from home. The latter is ideal for second homes, as these can now be used for more than just a short weekend break. Now that prices are no longer stagnating, second homes are an investment alternative for wealthy investors to diversify their assets.
Second homes in much shorter supply
Robust demand, combined with the impact of the ZWI, has made it far more difficult to find a second home in tourism regions, both for condominiums as well as single-family dwellings. The supply of all housing listed for sale or rent has dropped since the all-time high in Q1 2020 from 4.5% to 2.5%. In the same period, the supply on average across Switzerland dropped only from 4.4% to 3.5%.
The lack of available housing is also underscored by quicker turnaround times for sales in tourism areas. Condominiums are listed for an average of 116 days, which is about 50% less than in 2016. Single-family dwellings paint a similar picture, dropping from 195 to 123 days. However, in both segments the time and expense for marketing is higher than the national average, which is due to such factors as a greater geographical distance between potential buyers and the properties listed.
How will supply and demand develop for second homes?
By all accounts, the greater interest in second homes will continue. Furthermore, the lack of new construction activity is likely to impact the market and exacerbate the supply problem. That said, the spike in mortgage interest that began this year will probably stifle demand for second homes. Due to the scarcity and lack of new construction, the prices of second homes look set to rise further. However, we expect significantly lower price momentum.