Skip the pricey ho­tel—with the hous­ing mar­ket down, you should buy your own Alpine pad

Apart­ment prices in the town have fallen 15 per­cent since 2012 “A strong franc is poi­son. We’ve lost most of the for­eign buy­ers”

Bloomberg Businessweek (Asia) - - CONTENTS - −Dalia Fahmy and Rox­ana Zega

The fi­nanciers and cap­tains of in­dus­try pay­ing pre­mium prices to bed down in Davos in Jan­uary may not no­tice, but apart­ments in the Swiss town that hosts the an­nual meet­ing of the World Eco­nomic Fo­rum are start­ing to look like a bar­gain.

Prices for hol­i­day homes have dropped as much as 15 per­cent in

the past three years, ac­cord­ing to Swiss bank UBS. Sup­ply is up be­cause of a build­ing boom, while a strong Swiss franc is damp­ing de­mand from for­eign­ers. The franc gained 9 per­cent against the euro in the past year, spurring those in the mar­ket for a se­cond home to con­sider lux­ury prop­er­ties in France or Aus­tria in­stead. “It’s very un­pleas­ant be­ing a prop­erty in­vestor in Davos at the mo­ment,” says UBS an­a­lyst Matthias Holzhey, who says he ex­pects prices to fall an ad­di­tional 5 per­cent in 2016. “A strong franc is poi­son. We’ve lost most of the for­eign buy­ers.”

That’s not hav­ing much im­pact on room rates dur­ing the WEF, which runs Jan. 20-23. Prices for Davos va­ca­tion rentals dur­ing the rest of the ski sea­son have fallen about 10 per­cent this year as for­eign­ers shy away from the strong franc, but they’ve held steady for the week of the fo­rum, the lo­cal tourist of­fice says. Real es­tate agency Markutt Treu­hand has rented about 150 places in the town, rang­ing from 3,000 francs ($2,980) to 50,000 francs for the week, as much as seven times typ­i­cal win­ter prices. On Airbnb, a twobed­room apart­ment in nearby Klosters is listed for 770 francs a night, about five times the nor­mal rate. “There’s noth­ing avail­able for the WEF week,” says Gre­gor Lo Presti, a snow­board­ing in­struc­tor who’s man­ag­ing reser­va­tions for a half-dozen flats.

Prompted by con­cerns about price goug­ing, the fo­rum’s or­ga­niz­ers in 2014 in­tro­duced a list of ho­tels that agreed not to raise rates more than 10 per­cent dur­ing the event, though the group says many own­ers haven’t added their name to it. “We want to make sure ho­tels are not pric­ing out peo­ple who want to par­tic­i­pate,” says Adrian Monck, the WEF’s head of pub­lic en­gage­ment. “We have peo­ple com­ing from civil so­ci­ety, academia, the me­dia, and they want to stay in rea­son­ably priced places.”

To guard against un­bri­dled de­vel­op­ment, Swiss vot­ers in 2012 ap­proved a bal­lot mea­sure lim­it­ing se­cond homes to no more than 20 per­cent of the hous­ing stock in any mu­nic­i­pal­ity. A build­ing frenzy en­sued as de­vel­op­ers rushed to com­plete projects be­fore the law took ef­fect this month. Last year 1,140 apart­ments were listed for sale in Davos, 27 per­cent more than in 2014.

Al­though lux­ury home prices in Davos are about half what they are for sim­i­lar places in St. Moritz or Zer­matt, sales have been slow. Bro­ker Sascha Ginesta has sold only one of the four apart­ments in a com­plex called Moun­tain Rock, which was com­pleted in 2012, with units rang­ing from 1.8 mil­lion francs for three bed­rooms on the ground floor to 4.6 mil­lion francs for a four-bed­room pen­t­house fea­tur­ing vis­tas of the snowy peaks. Chris­tian Fross, an­other bro­ker, re­cently sold a two-bed­room flat that had been on the mar­ket for nine months af­ter cut­ting the price 10 per­cent, to 1.5 mil­lion francs. “The mar­ket is stop­ping be­cause sellers are ask­ing too much,” he says. “It’s like a bub­ble.”

An on­go­ing con­cern for land­lords: One big an­nual meet­ing aban­doned Davos last year, and the WEF’s agree­ment with the town is up for re­view in 2018. Dom­i­nated by its mas­sive con­fer­ence cen­ter and large apart­ment blocks, Davos lacks the charm of many smaller Swiss towns with their quaint chalets and wood-framed houses. So it can ill af­ford a big dropoff in the con­ven­tion busi­ness, says Adrian Dinkel­mann, the lo­cal eco­nomic de­vel­op­ment chief. “We were al­ready ex­pen­sive com­pared to other in­ter­na­tional des­ti­na­tions,” he says. With the strong franc, “now we’re fac­ing even more com­pe­ti­tion.”

The bot­tom line WEF at­ten­dees still pay top dol­lar for Davos lodg­ings, but apart­ment prices in the town are fall­ing af­ter a build­ing boom.

You won’t find many chalets in Davos, which re­lies more on con­fer­ences than do other re­sorts

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