An assessment almost ten years after coming into force - using the Engadin as an example
The Engadin holiday apartment market has undergone a remarkable development since the second-home initiative was adopted in 2012. The legislation passed at the time stipulated that the proportion of second homes in a municipality may not exceed 20 per cent. A decision that presented many tourist regions in Switzerland - including all municipalities in the Engadin - with new challenges. However, what initially sounded like a banal restriction turned into a critical turning point: holiday properties not only remained in demand, but also became more attractive in many places and increasingly put pressure on the market for primary residences.
From a building boom to a shortage of supply
Even before the law came into force, numerous tourist regions experienced a veritable building boom: between March and December 2012, building applications skyrocketed, as second homes were still being authorised up to this point. Many of these projects were realised. After 2015, only a few new builds came onto the market. The result: a significant shortage of supply, exacerbated by the increased demand, especially during the Covid pandemic. To this day, holiday flats in top destinations are rare and highly sought-after, which has reduced vacancy rates and driven prices even higher.
Engadin:
Between tradition and innovation
The second-home initiative demanded a high degree of adaptability from the municipalities in the Engadin. A strong Swiss franc and the economic development of Europe also contributed to a decline in the proportion of foreign buyers in the first few years after the introduction of the Second Homes Act. New markets and creative concepts such as managed flats that are rented out to guests and form part of a structured accommodation concept were in demand. While construction restrictions limited supply, the region further strengthened its attractiveness through targeted investment in its tourism offering. Factors such as a comprehensive and exclusive range of restaurants and shops, infrastructure and the beauty of the landscape make the Engadin unmistakable and help to ensure that the region remains one of the most popular holiday destinations in Switzerland.
Luxury properties and sought-after locations
Single-family homes in attractive mountain communities are and will remain in demand. This is why top prices are being realised for this property category in many places. The situation is similar for very rarely offered, exclusive luxury properties, which continue to meet with high demand. In the case of holiday flats, i.e. classic second homes, the price trend varied from region to region until the start of the Covid-19 pandemic in 2020. However, since the supply shortage has set in in many places, prices have been rising constantly and at a comparable percentage rate. To the detriment of the local population, this boom has unfortunately also driven up prices for primary residences in equal measure.
Conclusion: holiday flats remain en vogue - despite or perhaps because of the second home initiative
When talking about the second-home market, each holiday region must be considered individually. Nevertheless, the demand for second homes in tourist destinations will remain a general need. For prospective buyers, the focus is on good accessibility, infrastructure and offers that meet their needs and an unspoilt landscape. With the end of the pandemic and as a result of geopolitical uncertainties and the end of the negative interest rate phase, demand has levelled off again at the pre-coronavirus crisis level. It is therefore still at a good, but no longer euphoric level. As a result, supply ratios have increased slightly and the market is consolidating at a high level. We therefore expect market prices to remain stable or rise slightly in line with inflation in the coming months.
If you would like to take a closer look at the latest data on the Engadin property market, you can download our market reports here.
Price development of residential property in Graubünden (Source: WuestPartner)
