Construction of all new second homes in Switzerland has been banned frustrating British buyers...

On 22nd of May Switzerland’s highest court ruled that the ban on the construction of new second homes voted for at a referendum held in March last year would now apply immediately. It is retrospective so almost all 2,000 new building permits which were issued after March 2012 are now blocked.

The decision has had a devastating effect on the building industry in the touristic areas of Switzerland. Some developers are being forced to immediately halt construction on properties which are under construction and many sales having to be voided. Some huge development schemes worth many millions of Swiss francs are now blocked by this court decision and this will have a serious impact on Swiss developers building in the popular ski resorts with predicted losses of 8,600 jobs by 2015.

Simon Malster of ski property sales agency, Investors in Property is concerned that the surprise decision will lead to increased property prices in the short term and a shortage of quality properties in the long term. He explains that the Swiss referendum system is in part to blame and says that “In 2012 there were 12 Swiss referendums and the important issue of banning construction of second homes was slipped in between the proposal of “six weeks of vacation for everyone” and a vote on the re-introduction of the fixed book price agreement!!”

The process first started in 2007 when an activist, Franz Weber began collecting signatures for a referendum to block new construction of second homes (for Swiss and foreigners) in areas which already had more than 20% of second homes – which includes just about every ski resort in Switzerland you can name . In the referendum which was finally held in 2012, the Swiss voted by the narrowest of margins in favour of the ban however the regions which would be most affected voted strongly against it . The cantonal courts of Valais and Engadine struck out objections by Helvetia Nostra (Hanz Weber’s pressure group) and upheld the building permits which had been granted by the local communities. Developers assumed that permits granted during the transition period between the vote in March 2012 and the introduction of the new legislation on 1st January 2013 would be valid and some started building new projects. However, in a surprise decision in May 2013 the Federal Court overturned the Cantonal Court’s decisions and went even further than anyone had anticipated; they effectively voided almost all building permits granted after March 2012.

Simon Malster, a UK solicitor himself explains that the decision seems to breach the fundamental principle of law that legislation cannot be retrospective. His point is that the question voters were asked to decide at the referendum was “did they agree that new building permits for the construction of second homes should be banned from 1st of January 2013” but the court decided to ban them immediately from March 2012 when the vote took place. Thousands of building permits which were thought to be valid have now been caught by the new rules and blocked. Malster comments, “It seems totally unfair that a developer who applied for a building permit before the referendum but which was granted before the end of the year and who started to build the property has now lost everything.”

Simon Malster comments, “we specialise in selling ski chalets off-plan which are to be built to order and when the court decision was announced we had to call some clients with the disappointing news that their dream chalet could not now be built. In some cases we have been able to find them another new build which has a building permit which is still valid”. Some developments which are now blocked include a huge scheme in Crans-Montana with total projected sales of around 200m sfrs which was to be built overlooking the golf course. Although there are still some other new properties in Crans which are being built and which have valid permits , the loss of a project of this size and importance is a huge blow to the construction industry. A study published by the BAKBASEL research institute in February showed that around 2,500 second homes were built in Switzerland per year between 2000 and 2010, amounting to annual investments worth CHF1.2 billion (£0.82 billion).

So how will this affect the Swiss property market? The simple law of supply and demand tells us that as no new building permits are to be authorised then prices will increase. Although Investors in Property still have plenty of new properties to sell in many of the top Swiss ski resorts which are to be built in the next couple of years; when those are sold there will be no more. Simon Malster’s message is clear - buy in Switzerland now while you can.