Sloping Off at the Chalets

With many people starting to think about their plans for ski season, Abode2 quizzes real estate consultant Sabrina Mercer about what the future holds for the luxury chalet market. By Sonia Jacobs  

While uncertainty abounds in most real estate markets at present, looking at how ski property fared during the 2008 financial crisis provides a certain voyeuristic insight as to what may lie ahead in the coming spell.  

Which resorts are expected to fare better in the current climate? 

Alpine property markets are often influenced by national housing market trends, so looking at national housing market performance can offer a degree of context. Ski resorts driven by domestic demand will likely benefit from an expected increase in domestic travel as each government encourages their population to stay within their borders. In the near term however, transactional volumes are likely to be suppressed across Alpine markets for the next 6–9 months. 

How does the current downturn of COVID compare with the 2008 financial crisis? 

One clear differential is that owners are now generally less leveraged than before the GFC and therefore there are likely to be fewer distressed sales. Industry data on Alpine second home ownership from 2019, shows that 44% of those who bought a ski property between 2004–2008 did so without a mortgage (cash purchase), compared to 81% between 2010 and 2014. For purchases between 2015–2019, this share had fallen to 47% as credit has become more available and cheaper.  

Consequently, the overall level of leverage is likely to be lower and less acute owing to affordability levels, with owners holding on to their property unless they need to sell, thus maintaining price levels. This is expected to be particularly true for prime and super prime markets.  

How will travel be affected? 

It goes without saying, but COVID has had a catastrophic impact on global travel. The rate at which restrictions will be lifted will impact tourist-dependent ski resorts and potentially their property markets. While the expectation of travel patterns after the crisis will vary, international leisure travel may be affected by some lingering nervousness to travel too far from home and by the availability of airline seats, in the short to medium term. On a positive note, European Schengen-zone countries (including Switzerland), have started to reopen their borders, thus permitting travel within these countries. Ski resorts with good rail connections, or in close proximity to centres of population, are likely to benefit more than remote resorts. This leaves France for example, potentially less vulnerable and less reliant on overseas tourism. 

How are property owners adapting? 

The large proportion of employees teleworking from home in the wake of COVID has been a catalyst for accelerating flexible working patterns and home working.  

As a consequence, many homeowners will likely want to spend a few weeks, or even months, at a time at their holiday home, rather than a weekend break, and may want to work from there. While travel restrictions also mean trips could be less frequent, but for longer periods. Purchasers of ski property are likely to attach a higher value to both indoor and outdoor space, as they spend long periods in their home at one time for both work and recreation. Good connectivity is essential, and for those considering a chalet purchase - the availability of fibre optic should be high on the property wish list. 

 What is the real estate outlook in the near term?  

Transactional volumes are expected to be suppressed across Alpine markets for the next 6–9 months, with vendors who can, holding on to their properties. Those wanting or needing to sell anything other than prime property, are likely to have to discount asking prices by up to 10-15%, possibly more in certain cases. That said, new build stock is likely to fare better than resale, particularly where a property has already been for sale for some time. 

Swiss and Austrian Alpine markets proved fairly resilient during the GFC, and many of the same fundamentals, such as low supply, still hold true. In France, meanwhile, there is less availability of new-build stock in the majority of French ski resorts compared to 10–12 years ago. This is likely to cushion any downward price pressure.