Heading To The Hills

"This year's ski season is going to be historic" says the French secretary of state for Tourism, and the Alpine property market is hitting the same historic highs.

The latest market comment from Leggett Immobilier has given a comprehensive overview and explains why the agency's Alps team has seen a staggering 250% increase in sales this year. Key reasons given are:

• a severely limited amount of stock, with tough planning constraints restricting new builds
• buyer demand for "fresh air" and the desire to "work from holiday home" (WFHH)
• the continued low cost of borrowing, with average interest rate for new homes reaching record low at 1.15%

Heather Byrne runs the Alps team and comments: "I have lived and worked in the Alpine property market for 17 years and can't remember a period like it. Buyers' wishes have been changing in the last few years, with increased demand for energy efficiency, outside space and clean living, but Covid has accelerated things tenfold. Both domestic and international buyers are competing for a limited supply of property - our team has been making full use of both virtual tours and electronic contracts. My advice for anyone looking to buy is to let your agent know exactly what you are looking for and to stress the fact that you have your financing in place and are ready to move quickly. If you are looking to sell then we have a long waiting list of local, national and international buyers in place - act now."

Tourism professionals are confident that the French Alps are going to have a very good season and M Lemoyne has said that the Government will do everything in their power to facilitate this. The budget given to Atout France to promote the resorts has been tripled (to two million euros), and the Government is working with local pharmacists on ways of simplifying, and speeding up, the acceptance of pass sanitaires. He added that the Government has already given out 650m euros in compensation, which equates to 10bn euros in turnover and 120,000 jobs, for the 325 French resorts, which welcome 10m tourists (a third of whom come from abroad).

The international market is equally as important to the property sector in the Alps and, the already strong, demand is going to be boosted by the new “Travelski Express” service from London. Indeed, “The race is on for a ski chalet in the Alps” was the headline in the Sunday Times last October. This was one of many such stories, as the UK market picked up after the double vaccination programme began to work.

With two ski seasons impacted by the pandemic a longer term trend seems to be emerging. New research shows that buyers are now looking for larger, airier, properties with outdoor space and access to clean air and countryside. Mountain living is, once again, back in the spotlight, with an already limited supply being put under severe pressure from unprecedented demand.

The top end of the market is equally affected. A recent survey of global wealth advisors states that 11% report an increased desire to buy a ski property following the Covid pandemic, with this figure increasing to 26% among European HNWIs. Common sense dictates that this is purely driven by the mountain air, views and sheer space available in the Alps.

In terms of capacity, hotels were hit hard, with demand switching to private chalet rental – where guests are self contained and can more easily follow safety protocols. Once again, limited supply means that the investment market is booming.

To understand the local market we should first look at the national one. The latest figures from the Notaires de France tell us that in the last 12 months there were 1,130,000 transactions across the country, the highest number this millennium. They note that this figure is all the more remarkable as it includes the period that the country was in lockdown. In addition, they note that transactions are increasing “in favour of a new typology of properties and toward geographical areas away from major cities”. Price rises are slowing for apartments (5% increase, compared to 6.3%), whilst price rises for houses continues to rise (6.6% compared to 6.5%).

One of the key factors here is the continued low cost of borrowing. The Notaires tell us that “the average interest rate for new home loans reached a new low of 1.15% in April 2021, and thus helps to sustain dynamic transaction volumes”. Bullishly, they go on to say “An increase in rates would not break market dynamism: in fact, borrowers are aware that they are currently exceptionally low; no indicator suggests a sharp rise, so a reasonable increase in rates would not significantly alter the purchaser borrowers’ cash-flow effort”.

The second key factor, as stated earlier, is the limited amount of stock available on the market. This is particularly the case in the Alps, where a restriction in new supply, as building permits remain hard to obtain. Estate agents are finding it increasingly hard to obtain new mandates and vendors are (wisely) choosing those who can market to both a local and international audience. Those agents who can help expediate sales (by using virtual tours, e-mandates and electronic signatures) are reaping the rewards.

With rising demand and limited supply, rental yields should be protected over the medium and long terms. We are continuing to see increasing enquiry levels for newbuilds, which can offer a 20% VAT rebate and reduced transfer tax. Indeed, Leggett Immobilier is now running continual professional development training specifically, Other key market drivers on the new build market – even though they have been around in the Alps for many years, we see them as a big growth market.

Developers and architects seem to have been quick to realise that demand has shifted and that buyers are now looking for lighter space with balconies, home offices and outside space much in demand.