Investing with a view

Thinking of making a purchase in the Alps? We sought the help of Knight Frank’s mountain experts who offer advice on the factors you might need to consider before you take a leap into the Alpine property market, from investment trends and current performance to future predictions.

Investing with a view

A ski chalet has long been the ultimate luxury purchase. Of course, in reality, the term ‘chalet’ doesn’t come close: the best ski homes are multi-million pound architect-designed marvels that combine Alpine heritage with state-of-the-art features – everything from pools, spas and cinema rooms to eco-credentials alongside traditional log fires and saunas.

Whether you’re looking for the thrill of snowsports, a retreat for the family or somewhere to entertain friends, there are also significant investment benefits – providing you choose well.

The right time to invest in the Alps?

Choosing your resort is the first step. Each has its own appeal, but most have healthy property markets. Knight Frank track 16 French and Swiss Alpine resorts in their Ski Index – which assesses the market conditions across key French and Swiss Alpine resorts. Of these, 10 recorded rising prices in 2018. The Swiss resort of Villars topped the list with a 6 per cent increase.1

While some areas did see a fall in prices over the year to June 2018, Alpine properties seem far more resilient to economic and political factors compared to the main housing market. The global financial crisis, geopolitical tensions and property regulations are largely offset by the flow of wealth into these areas and good investment in infrastructure.

According to Frank Knight, almost every buyer in the Alps will rent out their property at some point. Even owners of chalets in the GBP30 million-plus bracket tend to rent out their home because, with a good management company taking care of the details, it’s a simple way to recover costs.

It's a particularly appealing option in France, where buyers of off-plan or new-build can claim a 20 per cent tax rebate (in the form of a VAT refund) in return for meeting certain stipulations, including an agreement to rent out the property and offer para-hotel services.

Location location location

If you don’t already have a preferred location, then testing out the options in person is the best way to make a final choice. 95 per cent of Frank Knight’s clients stay in the Alps before buying a property there.

While you can look at investment trends online, it’s important to get a feel for different resorts. Each has its own pros and cons, from the ski conditions to après-ski and non-skier activities, such as restaurants, shops and spas, faster ski lifts and security.

An important factor is ease of travel – especially if you intend to rent out your chalet. It’s not just about proximity to airports, but the speed of roads and availability of transport. While high altitude resorts can offer a better level of snow, you’ll need to consider whether that’s worth the added transfer time.

Consider year-round appeal

Another factor to consider is the length of the skiing season – whether for yourself or for prospective guests. Resorts that offer year-round facilities as well as snow are always going to be more in demand.

While school holidays and New Year are the busiest times of year in the Alps, December and February are also popular months, particularly with the Eastern Europe, Russian and Benelux markets. March and April are popular too with visitors from the Middle East, South East Asia and Europe.

Chamonix and Verbier see the most demand for rentals during the summer season, but Gstaad and Verbier have the longest seasons.

The world-famous Les Trois Vallées and Val d’Isère resorts have particularly strong occupancy rates throughout the season thanks to the international clientele.

How is the market performing?

The proof of a resort’s popularity lies in its rental performance. Areas where rentals are profitable are also areas where resale values are good. The two markets are closely linked.

According to Knight Frank, the overall rental market is growing strongly as it gains a share from the hotel business. Performing particularly well are the markets in Val d’Isère, Courchevel and Méribel.

In terms of sales, the very top end of the market has cooled in the last four years, but overall price growth has been strong.

Prices for an apartment in Chamonix, Megève, Méribel or Val d’Isere are between GBP1 million and GBP4 million, while a chalet will cost between GBP2.2 million and GBP10 million. In the Swiss Alps, Verbier, Gstaad, Crans-Montana and Villars, apartment prices start at GBP1 million and chalet prices at GBP4.5 million.

The future of Alpine investments

When you’re considering an Alpine property, however, past performance is only part of the picture. You also need to look at whether a resort or area is on an upward trend – and that means investment.

As the expectations of visitors grow, many ski resorts are, in fact, investing heavily in their infrastructure. Val d’Isère, for example, expects to see a major rise in popularity with the creation of the country’s highest hotel, Le Refuge de Solaise, at 2,551 metres; the resort’s first palace hotel, the Mademoiselle Val d’Isère; the much anticipated GBP250 million Le Coin de Val redevelopment, and a new black run.

Chamonix is upgrading its lifts, while Courchevel plans to open a multi-season water park. Villars in Switzerland has invested CHF20 million in a new apartment project at Domaine du Roc, CHF30 million in ski and non-ski infrastructure, and another CHF40 million in parking.

While currency fluctuations clearly have an impact on property prices, there is one more factor to consider – climate change. Some lower altitude locations may see declining numbers of visitors as snow becomes less reliable. Here the decision is both a personal and a financial one.

If you’re planning on perfecting your carved turns, you’ll need good snow, of course. If finding renters is more important, a resort with year-round appeal and an outstanding property will still be attractive for those looking for luxury and world-class facilities.

1Knight Frank ski property report 2018

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Key risks of investing in real estate

The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested

  • General real estate risk: an investment in real estate may be affected by various matters, including, but not limited to, vacancies following expiry or termination of leases or licenses leading to reduced occupancy rates, the property manager's ability to collect rents or license fees, competition for tenants, fluctuating local real estate conditions, changes in government regulations relating to land use and zoning, environmental, occupational and safety matters, existence of uninsured or uninsurable risk, natural disasters, acts of war or terrorism. Property markets can be cyclical

  • Real estate risk: property can be difficult to buy and/or sell quickly and the Fund Manager of underlying investments may apply a deferral on redemption requests. The value of property is generally a matter of the valuer's opinion rather than fact

The information in this document is based on our knowledge of current tax legislation. Please remember that HSBC Private Banking does not provide tax advice and we remind you that you should seek independent tax advice. Also please remember that tax rules may change in the future and depend on individual circumstances.

Risk warning

The value of investments can fall and you might get back less than you invest.

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