INVESTMENT STRATEGY
The onset of the ski season is always a time of anticipation for the downhill faithful. As the days shorten towards the end of the year, alpine towns and villages begin to twinkle. But as the 2022-23 season dawned, there was something particularly special in the mountain air. After two pandemic blighted years, normality had finally returned.
In the thronging queues for cable cars and gondolas, masks and hi-vis COVID marshals were conspicuous by their absence. By night, diners huddled together around bubbling fondue pots without first having to brandish digital vaccination certificates.
Steep demand for alpine homes
While the pandemic kept many tourists away from alpine resorts, it failed to deter those with more permanent intentions. Prospective homebuyers were out in force from the time when the first lockdowns eased in 2020. As in many other real estate markets worldwide, open space and quality of life were primary motivations.
That momentum has outlasted the era of lockdowns. In the year to June 2022, the alpine property market appears to have registered its strongest growth since 2014. According to the Knight Frank Ski Property Report 2023, the average price of a four-bedroom chalet across 23 French and Swiss markets rose by 5.8%. Since the pandemic struck, the gain is 13.9%.
The market strength we’ve been seeing is quite phenomenal.
The strongest gains in 2022 were in the Swiss resorts of Crans-Montana and St Moritz (14%), followed closely by the twins of Davos and Klosters (13.8% and 13.0% respectively.) Not far behind were Les Gets and Morzine, located on the French side of the Portes de Soleil, a 600 square kilometer domain made up of 12 interlinked resorts. Appetite for more luxurious properties is proving especially robust.
“The market strength we’ve been seeing is quite phenomenal,” says Roddy Aris, partner at Knight Frank for the French alps and Paris. “There has been transactions for chalets in Megève this season for as much as €20 million ($21.09m). The benchmark for luxury in Val d’Isère has reached €37,000 ($39,006) per square meter and €35,000 ($36,898) in Méribel. These prices were simply unheard of a year or two ago. Had anyone said this would happen, they’d have been laughed out of court. So, the demand is there.”
We expect the exuberance in the alpine markets to cool.
Whether pricing in alpine markets can keep gaining altitude in 2023 and 2024 is rather less clear, however. Interest rates in the eurozone and the UK have risen sharply to levels not seen since before the Global Financial Crisis of 2007-09. A recession this year remains a possibility, while price falls are already underway in various luxury real estate markets worldwide.
“We expect the exuberance in the alpine markets to cool,” says Kate Everett-Allen, Head of International Residential Research at Knight Frank. “That’s not to say we expect prices to fall. But after three stellar years, we could well see a slowing in the annual rate of price growth.”
Supply shortage
For all the uncertainty over demand, the supply of alpine real estate looks rather more supportive. There continues to be a dearth of eligible properties in some of the most desirable mountain towns and villages.
“The market today is underpinned by lack of supply,” says Roddy Aris. “If someone asks me tomorrow to see a place in Mribel and they’ve a budget of €5m-€10m ($5.27m-$10.54m), I’ve perhaps three properties to show them. The same is true in Courchevel. And it’s even tighter in Val d’Isère.”
In response, new high-end developments are cropping up in various locations. These new-build properties frequently have many of the features that luxury buyers desire, including guest annexes, high speed broadband and gym facilities. In France, buying off-plan can also attract some tax benefits, although there are strings attached.
“Ultimately, it’s hard to beat an existing chalet, which you can see, touch, smell and walk around,” says Roddy Aris. “In many markets, there’s still a preference for homes with an authentic alpine feel, which favors traditional looking properties. And buyers tend to want something here and now rather than perhaps having to wait a couple years.”
The climate challenge
Of course, the alpine market has endured economic weakness before. But now it faces an altogether more existential challenge. The 2022-23 season opened with unseasonably warm weather and the worst snowfall in perhaps two decades.
Temperatures in the Swiss Alps set a record high for early January. It was not only the lower-lying destinations that suffered. Poor conditions marred the festive period in Chamonix, at the heart of the Mont Blanc massif.
Few observers are dismissing this episode as one of the occasional bad years that have always been a fact of life. Other effects of global warming are too hard to deny. Since the turn of the millennium, alpine glaciers have receded by some 20%, with unprecedented losses in Switzerland in 2022 alone. In recent decades, many hundreds of tiny, lower lying winter sports destinations in France, Italy and Switzerland have been abandoned owing to snowlessness.
The surviving four thousand or so resorts are thus having to be creative in the face of the challenge. Introduced several decades ago, artificial snowmaking technology – the cannons that are most common on the “village runs”– continues to become smarter and more energy efficient. “Snow farming”, meanwhile, involves warehousing snow under coverings and reusing it the following season.
Increasingly, though, the authorities in many alpine destinations realize they may not be able to rely so heavily on winter sports for their future prosperity. They are thus emphasizing their year-round appeal by developing other facilities and activities.
The Alps are really coming into their own as a place to go in the summer.
Reinvention
“The Alps are really coming into their own as a place to go in the summer,” says Kate Everett-Allen. “Culinary and cultural festivals – which have long been a feature in places like Aspen in the US – are increasingly common over here. Trail running, mountain biking and hiking are also a big draw. Basically, there are many more people now going for other purposes than winter sports.”
Would-be purchasers of alpine homes are reassessing their priorities too. Traditionally, owners of mountain properties might only spend two or three weeks of the year in residence. Especially since COVID, though, more and more are opting for extended stays. According to Knight Frank analysis, as many as one in four buyers are now seeking either a second home or co-primary property entirely for their own personal use, with no plans to rent out their property.
“I think there’s an acceptance that hybrid working is here to stay,” says Kate Everett-Allen. “A growing number of people are working some of the time from the Alps. This kind of buyer is attracted to places like Chamonix, where there’s a vibrant atmosphere all year-round, a permanent community, schools and so on. It has the infrastructure that would-be residents want.”
The highs and lows
For those who still crave winter sports above all else, the highest resorts may offer the best long-term potential for indulging their passion. However, “buying high” may also involve trade-offs. Because they are located above the treeline, they tend to be much less scenic than their lower-lying counterparts. And they are less likely to host thriving year-round communities and facilities, which can leave them feeling somewhat lifeless for seven months of the year.
“Having wonderful scenery as well as shops and restaurants that are open all year round are important,” says Roddy Aris. “The higher places are often very rocky, and therefore not as attractive or good for taking scenic walks. Contrast that to the green, fresh mid-altitude resorts of the Portes du Soleil, Megève, and Chamonix, where you’re below the treeline, and can walk through flower meadows.”
Alpine summer
As global warming continues, it may also detract from the appeal of traditional summer destinations. Warnings abound that 50C (122F) maximum temperatures could become a regular occurrence across parts of Spain and France, for example. Such conditions could encourage more people to seek out the relative freshness of the mountains in July and August.
This is not the first time that the Alps have reinvented their raison d’être. Skiing only went mainstream in the post-World War II decades. In the 19th century, wealthy foreigners – especially Britons – made pilgrimages for health and wellbeing. The more adventurous went to scale the peaks. While winter sports are far from becoming history, the era before skiing may provide a template for the future. This could bode well for alpine real estate over the long term.
