Second home quotas in Switzerland: What is the limit?

Posted on by teatrium

Earlier this year Swiss citizens voted in favour of imposing quotas on holiday homes so that in every commune where at least 20 per cent of homes are second homes, no more second homes can be built. More than 500 communes, particularly in the mountain regions of Valais, Graubünden and Bern would be affected. The cap applies to all owner types (Swiss, Residency Permit holders and exempted foreigners) and will not be retrospective to existing projects and properties.

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There is still a degree of uncertainty on how the vote will be interpreted and applied by the federal government. However it seems likely that a new law will become effective from the 1st of January 2013 and relate specifically to the construction of second-homes – but not the redevelopment of existing buildings. Because any project approved in 2012 will not be affected some Swiss communes are currently granting as many permits as possible under the old law .

Holiday and second home properties for sale in Switzerland will be severely limited for the next 20-40 years

Beat Hartmann, director of the London based Hartmann Singleton ltd, which is currently developing a number of new Swiss chalets in Grindelwald and other parts of Switzerland, points out that “for most resorts the possibility of building new second-homes will effectively be zero until the ratio has fallen below 20%. The construction of new holiday and second homes in Switzerland will be severely limited for the next 20-40 years as the quota in many Swiss resorts is currently between 40-60% and no-one can see how the rate of first residents in these resorts can substantially increase in the short term” (check the newly built Swiss chalets on Te Atrium).

On the other hand Credit Suisse analyst Thomas Rieder argued that the result wouldn’t make such a big difference for foreign property investors because each year only 1,500 new second homes are available to them due to the tight laws governing foreigners buying residential property in Switzerland.

Existing property available for second-home use will still be traded as such and these properties will be acquired via resales. Mr. Hartmann commented on the current market situation: “The demand for properties in the ski resorts has remained high, even in the last 4 years, since the beginning of the financial crisis in 2008. Prices have been increasing slowly and in line with the long term average at 2-4% and we believe that there will be further price increases in the mid and long term due to this new restrictive measure”. Simon Malster of Investors in Property seems to agree: “Prices will go up, as there will be no new constructions. It’s the law of supply and demand” he said.

Swiss nationals may be the most affected as the vast majority of second homes belong to Swiss owners

This action is the nth attempt to restrict the Swiss property market, especially to foreign buyers. Earlier this year the Grisons Administrative Court ruled that the Swiss town of Silvaplana, situated in the Upper Engadin, is entitled to impose a levy on the owners of unoccupied holiday homes. At the time, the local authority estimated that the levy, for a second home (which is not sublet) with three bedrooms, would cost owners in the region of between CHF800 and CHF1,200 per year. The measure formed part of a drive by both the government and the canton to promote main residences, to limit the number of second homes, and to increase the number of homes with full occupancy.

However in this new case Swiss nationals may be the most affected as the vast majority of second homes belong to Swiss owners, not to foreigners.

Beside the high quality of the skiing resorts Switzerland remains attractive to property investors for a variety of reasons: The country offers a very good quality of life, is safe and clean, has great infrastructures, is well connected to other European locations and offers a good fiscal and legal environment to local and foreign enterprises.

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