Second home purchasers are integral to the core Alpine home markets of France, Switzerland and Austria. To fully understand their drivers, it is necessary to examine the underlying markets in the country that shape them.

First, background economies have an impact. Austria’s economic performance, like France, was tempered in 2013 by ongoing austerity measures aimed at resolving the EU sovereign debt crisis. Austria recorded GDP growth of 0.3%, against 0.4% in France. Austria is set to see better economic growth, partly driven by stronger demand from its largest trading partner, Germany. Switzerland’s position outside the EU cemented its appeal as a safe haven for wealth during recent European economic turbulence. GDP growth of 2% was recorded in 2013, and continued strength is forecast (Figure 4).

While Austria and France are both within the Eurozone area, their housing markets, with different national policy and governance, have performed very differently. Austria enjoyed a period of buoyant house price growth in the last decade, at a time when other Eurozone housing markets were in decline.

Prices rose by 25% between Q1 2007 and Q1 2014. A strong market in Vienna characterised by low levels of supply and a very high proportion of institutional investor ownership, has led growth (prices up 76% since 2007). At the national level, prices stabilised in Q2 2014, recording modest falls of -0.1%.

France’s residential prices initially held up well during the global financial crisis, prices fell by just 10% between 2007 and 2009, rallying to a new high in the third quarter of 2011. Since then, confidence in the French market has been weak, compounded by a faltering domestic economy and uncertainty around some of Hollande’s wealth policies.

Stability is returning to the French market, however, and prices grew by a modest 0.5% in the second quarter of 2014, the first quarterly growth recorded since 2012. A further sign of improved confidence, the number of transactions grew 9.2% in the year to June 2013. GDP growth forecasts point towards a tentative economic recovery (Figure 4), which should bolster residential market demand in the near term.

Switzerland experienced sustained levels of residential price growth between 2008 and 2013 (the price of houses grew by 28%), running counter to many other European markets. Economic expansion, low interest rates, growth in real wages and immigration of wealthy individuals all supported housing demand.

Click on Figure 4 to enlarge

Switzerland has one of the world’s strictest citizenship systems, requiring 12 years of permanent, legal and notated residency, fluency in one of the official languages and integration into Swiss culture and community. As such, most ‘foreign’ residents tend to remain so, and their numbers reached a new high of 1.9 million in 2013.

In response, Switzerland introduced new quotas for EU citizens in 2013. Foreign buyers are also heavily restricted on residential property purchase – just 1,500 permits are released a year – although the rules vary significantly by canton. Indeed, the number of permits issued has been falling in recent years. 1,500 were issued in 2009, in 2013 this had fallen to 1,020.

House price performance

Various European housing markets have behaved in very different ways since the credit crunch and Euro-crisis. While British and French property owners saw significant price falls in 2008, Austrian and Swiss house prices just went on growing. This means that a significant price gap has opened between these countries. While recent UK market recovering is making French property look cheaper to British buyers, Switzerland and Austria continue to look over 25% more expensive than they did in 2007.

Click on Figure 5 to enlarge

Taken from
Spotlight: Alpine Property Market 2014-15