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Secondary Residences Worldwide - International - June 2012

This report provides an overview of secondary residences in key locations worldwide. The definition of ‘secondary residence’ used in this report refers to residential properties purchased freehold for private use in addition to a primary residence. While the focus of the report is clearly on holiday residences, individual residential properties that are purchased for investment purposes are also included in the discussion. In fact, many secondary residences are purchased with both objectives in mind (ie holiday accommodation and investment).

In addition, wealthy individuals and households may well possess several houses and/or apartments in addition to their primary residence. For instance, Silvio Berlusconi, the former Italian prime minster and reportedly the richest person in Italy, owns five substantial ‘secondary’ residences in addition to his primary residence, the Villa San Martino near Milano, which is a three-sided building constructed around a courtyard that features a large pool and tennis court. The five properties include: a 19th-century estate outside Milan, the Villa Belvedere, worth an estimated €86 million; an estate on Sardinia’s exclusive Costa Smeralda, worth about half a billion Euros; a luxury residential complex on the Caribbean island of Antigua; a US$6.9-million villa in an exclusive gated community in Bermuda; and an historic mansion, the Villa Correnti, located on the shores of the Lago Maggiore, in northern Italy.

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Table of contents

  1. Introduction

      • Report structure
        • Holiday rentals and destination clubs
          • Timeshare excluded from report
            • Key findings
              • Abbreviations
              • Data Sources

                • Overview

                    • Demographic outlook
                      • Figure 1: Trend in population, by age segment in selected OECD countries, 2010-50
                    • Economic growth trend
                      • Weakness in the Eurozone and Japan offset by rebound in US
                        • Slowdown in emerging economies
                          • Stronger growth forecast for 2013
                            • Improving financial conditions
                              • Figure 2: Overview of World Economic Outlook projections (% change unless noted otherwise), April 2012
                            • Interest-rate outlook
                              • Exchange rates
                                • Figure 3: Recent and forecasted exchange rates for major currencies, 2010-13
                              • Trend in residential property values
                                • Figure 4: Knight Frank Global House Price Index, 2011
                                • Figure 5: Prime property-price trend in key urban and resort locations, 2011
                              • French and Swiss locations high in price rankings
                                • Figure 6: Average price per built square metre in prime urban and resort locations, 2011
                              • Property yields and transaction costs
                                • Figure 7: Comparison of key property-related statistics between selected countries, 2012
                              • High net worth individuals
                                • Figure 8: Trend in the number of HNWIs and their wealth, by region, 2007-10
                              • Asian HNWIs surpass Europe’s total
                                • India moves into top 12
                                  • Figure 9: HNWI population*, by major country, 2009-10
                                • Ultra-HNWIs
                                  • Where the wealthy buy second homes
                                    • Figure 10: Where the wealthy from different parts of the world buy second homes, 2010
                                • Secondary Residence Locations by Environment

                                  • Alpine/winter sports
                                    • Austria
                                      • Many ski resorts located in Tyrol
                                        • Figure 11: Property prices, by type of location in Kitzbühel, 2011
                                      • France
                                        • French Alps recovering faster than Rockies
                                          • Figure 12: The Knight Frank Prime Ski Property Index, Q2/2011
                                        • Buying newbuilds saves on notary fees
                                          • Sale leasebacks in the French Alps
                                            • MGM French properties – a developer of sale leasebacks
                                              • Figure 13: MGM’s holiday residence development projects, 2012
                                            • New MGM ski properties in the Savoyard Alps
                                              • Prime resort areas
                                                • Increasing demand
                                                  • Italy
                                                    • Prime ski resorts in far north
                                                      • Valle d’Aosta
                                                        • Lakes and mountains
                                                          • The ‘Milky Way’ resorts
                                                            • The Dolomites
                                                              • The Italian ski-property rental market
                                                                • North American Rockies
                                                                  • Real estate important to Colorado’s local resort economy
                                                                    • Property values down sharply in Colorado ski resorts
                                                                      • Upscale neighbourhoods less impacted by crisis
                                                                        • Prime ski properties more affordable
                                                                          • Park City, Utah 
                                                                            • Big Sky, Montana
                                                                              • Yellowstone Club went into Chapter 11 in 2008
                                                                                • Spanish Peaks files for Chapter 7 bankruptcy
                                                                                  • Other cheaper properties available
                                                                                    • Whitefish, Montana
                                                                                      • Jackson Hole Wyoming 
                                                                                        • Aspen, Colorado
                                                                                          • Whistler, Canada’s prime ski resort
                                                                                              • Figure 14: Residential property* transactions in Whistler, 2008-11
                                                                                            • Switzerland
                                                                                              • High density of HNWIs
                                                                                                • Figure 15: Source markets for buyers of properties sold for CHF5 million (€4,163,000) or more, 2011
                                                                                              • Top Swiss resorts
                                                                                                • Figure 16: Single-family house prices in key resort locations in the Grisons and Ticino, 2011
                                                                                                • Figure 17: Apartment prices in key resort locations in the Grisons and Ticino, 2011
                                                                                                • Figure 18: Land prices in key resort locations in the Grisons and Ticino, 2011
                                                                                              • Gstaad – one of the most exclusive property markets in world
                                                                                                • Beach/coastline/warm weather
                                                                                                  • Brazil
                                                                                                    • Figure 19: Appreciation in residential property prices in Brazil, 2011
                                                                                                  • Soaring prices in prime urban markets
                                                                                                    • Growing income and middle class boost property market
                                                                                                      • Debt burden at dangerously high levels
                                                                                                        • Growing middle class spurs housing-market growth
                                                                                                          • The democratisation of property market
                                                                                                            • Mortgage reforms have helped loan market grow rapidly
                                                                                                              • Local house-price variations
                                                                                                                • Figure 20: Average prices of apartments in Brazil, by city/region, new and existing apartments, April 2011
                                                                                                                • Figure 21: Trend in prices of houses developed, by Cyrela Brazil Realty, y-o-y to end Q1/2011
                                                                                                              • Transaction volumes growing but not at alarming pace
                                                                                                                • Acute housing shortage
                                                                                                                  • Upswing in prices defies fears of overheating
                                                                                                                    • Figure 22: Prices and rentals for apartments in Brazil’s two main cites, 17 November 2011
                                                                                                                  • Barra da Tijuca, a key venue for 2016 Summer Olympics
                                                                                                                    • Rental yields falling
                                                                                                                      • North-east catching up with south
                                                                                                                        • Where foreigners buy in Brazil
                                                                                                                          • Caribbean
                                                                                                                            • Barbados, a prime location for British buyers
                                                                                                                              • Figure 23: Source markets for those considering buying prime property in Barbados, 2011
                                                                                                                            • British Virgin Islands, prime destination for elite
                                                                                                                                • Figure 24: Source markets for those considering buying prime property in BVI, 2011
                                                                                                                              • Value destinations: St Lucia, St Kitts and Antigua
                                                                                                                                • Corporate structures popular
                                                                                                                                  • Financing possibilities
                                                                                                                                    • China/Hainan Island
                                                                                                                                      • First run-up in prices in mid-1990s
                                                                                                                                        • Second boom starting in 2010
                                                                                                                                          • Bubble denial
                                                                                                                                            • Property prices fell nearly 30% in a month
                                                                                                                                              • Tough measures to cool speculation
                                                                                                                                                • Housing-market restrictions loosened in Haikou
                                                                                                                                                  • Provincial government dependent on property-generated revenues
                                                                                                                                                    • Local economy over-dependent on property
                                                                                                                                                      • By end 2011 values had plummeted
                                                                                                                                                        • Luxury apartments go begging
                                                                                                                                                          • Credit bubble inflated property prices
                                                                                                                                                            • Prices plunged across country in late 2011
                                                                                                                                                              • Further price falls likely in Hainan
                                                                                                                                                                • Clearwater Bay – a white elephant?
                                                                                                                                                                  • Cyprus
                                                                                                                                                                    • Figure 25: Breakdown of foreign residents in Cyprus, by national origin, 2011
                                                                                                                                                                  • Housing market
                                                                                                                                                                    • Figure 26: Residential property transaction volumes, Cyprus, 2006-11
                                                                                                                                                                  • Development market
                                                                                                                                                                    • Secondary-residence market
                                                                                                                                                                      • Key developments
                                                                                                                                                                        • What attracts second-homebuyers to Cyprus
                                                                                                                                                                          • Buyer profile
                                                                                                                                                                            • British buyers
                                                                                                                                                                              • Russian buyers
                                                                                                                                                                                • Other nationalities
                                                                                                                                                                                  • Market outlook
                                                                                                                                                                                    • France
                                                                                                                                                                                      • Côte d’Azur
                                                                                                                                                                                          • Figure 27: Buyers of residential property on the Côte d’Azur, 2010
                                                                                                                                                                                          • Figure 28: Buyers of prime property on the Côte d’Azur, 2011
                                                                                                                                                                                        • South-west France
                                                                                                                                                                                          • Figure 29: Buyers of prime property in South-west France in 2010
                                                                                                                                                                                        • Italy
                                                                                                                                                                                          • Figure 30: Buyers of prime property in Italy, by country source market, 2011
                                                                                                                                                                                        • Pre-crisis values unlikely to be reached anytime soon
                                                                                                                                                                                          • Prime locations have held up relatively well
                                                                                                                                                                                            • Tuscany and Umbria
                                                                                                                                                                                                • Figure 31: Buyers of prime property in Tuscany/Umbria, by national source market, 2011
                                                                                                                                                                                              • Sardinia’s Costa Smeralda
                                                                                                                                                                                                  • Figure 32: Buyers of property on the Costa Smeralda, by national source market, 2011
                                                                                                                                                                                                • Venice targeted by second-homebuyers
                                                                                                                                                                                                  • Monaco
                                                                                                                                                                                                    • Hit by crisis
                                                                                                                                                                                                      • Prices can reach €60,000/square metre
                                                                                                                                                                                                        • Buyer profile
                                                                                                                                                                                                          • Figure 33: Buyers of property in Monaco, by national source market, 2010
                                                                                                                                                                                                        • Mid-market under pressure
                                                                                                                                                                                                          • Portugal
                                                                                                                                                                                                            • Surge of interest
                                                                                                                                                                                                              • Uninformed potential buyers
                                                                                                                                                                                                                • The Algarve
                                                                                                                                                                                                                  • Figure 34: Breakdown of prime property buyers in the Algarve, by nationality, 2011
                                                                                                                                                                                                                • Madeira increasingly attracts buyers
                                                                                                                                                                                                                  • Spain
                                                                                                                                                                                                                    • House prices down more than 30% since peak
                                                                                                                                                                                                                      • Banking reforms to hit holiday-home prices hardest
                                                                                                                                                                                                                        • Glut of coastal properties
                                                                                                                                                                                                                          • Costa del Sol housing market a bellwether for Spain
                                                                                                                                                                                                                            • Building land prices down 20% in 2011
                                                                                                                                                                                                                              • Shrinking market
                                                                                                                                                                                                                                • Collapse accelerating in 2012
                                                                                                                                                                                                                                  • More decline in prices likely for 2012
                                                                                                                                                                                                                                    • Trend in property transactions by nationality
                                                                                                                                                                                                                                      • Figure 35: Trend in property registrations, by nationality in Spain, 2008-10
                                                                                                                                                                                                                                    • Mallorca, a prime target for foreign buyers
                                                                                                                                                                                                                                      • Figure 36: Source markets for prime Mallorcan real estate, 2011
                                                                                                                                                                                                                                    • Marbella/Costa del Sol
                                                                                                                                                                                                                                      • Thailand
                                                                                                                                                                                                                                        • Oversupply developing in Pattaya condo market
                                                                                                                                                                                                                                          • Pattaya lowers limit on foreign ownership
                                                                                                                                                                                                                                            • Hua Hin attracts Thai buyers
                                                                                                                                                                                                                                              • Floods boost resort-condo demand
                                                                                                                                                                                                                                                • Wealthy Asians drive Phuket market
                                                                                                                                                                                                                                                  • United Arab Emirates
                                                                                                                                                                                                                                                    • Values crashed after 2008
                                                                                                                                                                                                                                                      • Signs of a recovery in Dubai but not Abu Dhabi
                                                                                                                                                                                                                                                        • Figure 37: Property value trends in Abu Dhabi and Dubai, year-on-year January 2012
                                                                                                                                                                                                                                                      • US
                                                                                                                                                                                                                                                        • 50 million secondary residences
                                                                                                                                                                                                                                                          • Figure 38: Breakdown of sales of residential properties, by type, 2003-11
                                                                                                                                                                                                                                                        • Cash purchases of distressed properties prevalent
                                                                                                                                                                                                                                                          • Figure 39: Breakdown of the way home purchases were made, by type of property, 2011
                                                                                                                                                                                                                                                        • Holiday-home purchase price declined
                                                                                                                                                                                                                                                          • Holiday properties further away
                                                                                                                                                                                                                                                            • Motivational factors
                                                                                                                                                                                                                                                              • South is favoured location
                                                                                                                                                                                                                                                                • Outlook for future purchases
                                                                                                                                                                                                                                                                  • High foreclosure rate should stimulate second-home purchases
                                                                                                                                                                                                                                                                    • Home prices to fall in 2012
                                                                                                                                                                                                                                                                      • Building permits picking up
                                                                                                                                                                                                                                                                        • But supply could be reduced …
                                                                                                                                                                                                                                                                          • Foreclosures drag down neighbourhood property values
                                                                                                                                                                                                                                                                            • Florida
                                                                                                                                                                                                                                                                              • Figure 40: Trend in new listings*, 2011-12
                                                                                                                                                                                                                                                                              • Figure 41: Trend in pending sales*, 2011-12
                                                                                                                                                                                                                                                                              • Figure 42: Trend in the number* of properties for sale, 2011-12
                                                                                                                                                                                                                                                                              • Figure 43: Trend in the number of days a property remains on the market before being sold, 2011-12
                                                                                                                                                                                                                                                                              • Figure 44: Trend in the median selling price of homes, 2011-12
                                                                                                                                                                                                                                                                              • Figure 45: Type of property purchased in Florida, by major source market, 2010
                                                                                                                                                                                                                                                                              • Figure 46: Price range for homes purchased, by leading foreign-buyer nationalities in Florida, 2010
                                                                                                                                                                                                                                                                              • Figure 47: Percentage of Florida sales to foreign buyers, by market area, 2010
                                                                                                                                                                                                                                                                              • Figure 48: Market area for foreign purchases of property in Florida, by major source market, 2010
                                                                                                                                                                                                                                                                          • Branded Residences

                                                                                                                                                                                                                                                                              • The hotel-branded residence sector
                                                                                                                                                                                                                                                                                • A preponderance of North American locations
                                                                                                                                                                                                                                                                                  • Figure 49: Hotel-branded residences (freehold), chains ranked, by number of projects, 2011
                                                                                                                                                                                                                                                                                • Confusion about the term
                                                                                                                                                                                                                                                                                  • Time is more valuable than money for buyers
                                                                                                                                                                                                                                                                                    • The business model
                                                                                                                                                                                                                                                                                      • What’s the revenue stream?
                                                                                                                                                                                                                                                                                        • An empirical study of the sector
                                                                                                                                                                                                                                                                                          • Objectives
                                                                                                                                                                                                                                                                                            • Methodology
                                                                                                                                                                                                                                                                                              • Online survey
                                                                                                                                                                                                                                                                                                • Interviewee profiles
                                                                                                                                                                                                                                                                                                  • Figure 50: Profiles of interviewees and the companies they represent, 2011
                                                                                                                                                                                                                                                                                                • Current practice
                                                                                                                                                                                                                                                                                                  • Licensing fees
                                                                                                                                                                                                                                                                                                    • Technical service fees in most cases
                                                                                                                                                                                                                                                                                                      • Hotel-branded-residence management agreements
                                                                                                                                                                                                                                                                                                        • Hotel brand relationship with HOAs
                                                                                                                                                                                                                                                                                                          • Fees from homeowners
                                                                                                                                                                                                                                                                                                            • Rental programmes and restrictions
                                                                                                                                                                                                                                                                                                              • HOA budgeting, included services and à la carte services
                                                                                                                                                                                                                                                                                                                • Brand perks to homeowners
                                                                                                                                                                                                                                                                                                                  • Division of common management and capital expenditures
                                                                                                                                                                                                                                                                                                                    • Agreement terms and termination rights
                                                                                                                                                                                                                                                                                                                      • Little uniformity with regard to term
                                                                                                                                                                                                                                                                                                                        • Termination provisions for hotel owners
                                                                                                                                                                                                                                                                                                                          • Termination by hotel brand
                                                                                                                                                                                                                                                                                                                            • Disclosure of agreement termination rights
                                                                                                                                                                                                                                                                                                                              • Benefits and risks
                                                                                                                                                                                                                                                                                                                                • Recommendations for hotel brands
                                                                                                                                                                                                                                                                                                                                  • Current outlook
                                                                                                                                                                                                                                                                                                                                    • Four Seasons project in Toronto attains high price points
                                                                                                                                                                                                                                                                                                                                      • Good future in emerging markets
                                                                                                                                                                                                                                                                                                                                        • The Residences at St Regis Bangkok
                                                                                                                                                                                                                                                                                                                                        • Destination Clubs

                                                                                                                                                                                                                                                                                                                                            • Services offered
                                                                                                                                                                                                                                                                                                                                              • Property types
                                                                                                                                                                                                                                                                                                                                                • Cost varies according to value of properties in portfolio
                                                                                                                                                                                                                                                                                                                                                  • Figure 51: Fees, home values and cost per night for elite and luxury destination clubs, 2012
                                                                                                                                                                                                                                                                                                                                                • Comparing three market leaders
                                                                                                                                                                                                                                                                                                                                                  • Figure 52: Property portfolios of the three leading destination clubs, by type of location, 2012
                                                                                                                                                                                                                                                                                                                                                • Other clubs
                                                                                                                                                                                                                                                                                                                                                  • Hotel partners
                                                                                                                                                                                                                                                                                                                                                    • Quintess is allied with Leading Hotels of the world
                                                                                                                                                                                                                                                                                                                                                      • The residences
                                                                                                                                                                                                                                                                                                                                                        • Membership plans
                                                                                                                                                                                                                                                                                                                                                          • Figure 53: Quintess’ fee structure, 2012
                                                                                                                                                                                                                                                                                                                                                          • Figure 54: Exclusive Resorts’ fee structure, 2012
                                                                                                                                                                                                                                                                                                                                                          • Figure 55: Ultimate Escapes’ fee structure, 2012
                                                                                                                                                                                                                                                                                                                                                        • Resort facilities and access
                                                                                                                                                                                                                                                                                                                                                          • Flexible membership
                                                                                                                                                                                                                                                                                                                                                            • Travel planners and local concierges
                                                                                                                                                                                                                                                                                                                                                              • Occupancy rates
                                                                                                                                                                                                                                                                                                                                                              • Holiday Rental Distribution Platforms

                                                                                                                                                                                                                                                                                                                                                                  • Two types of intermediaries
                                                                                                                                                                                                                                                                                                                                                                    • Supply highly fragmented
                                                                                                                                                                                                                                                                                                                                                                      • Both supply and demand growing
                                                                                                                                                                                                                                                                                                                                                                        • Destinations
                                                                                                                                                                                                                                                                                                                                                                          • HomeAway
                                                                                                                                                                                                                                                                                                                                                                            • Website portfolio
                                                                                                                                                                                                                                                                                                                                                                              • Two client bases
                                                                                                                                                                                                                                                                                                                                                                                • Most revenue comes from paid listings
                                                                                                                                                                                                                                                                                                                                                                                  • Enhanced listing features
                                                                                                                                                                                                                                                                                                                                                                                    • Competition
                                                                                                                                                                                                                                                                                                                                                                                      • Interhome
                                                                                                                                                                                                                                                                                                                                                                                        • Partnership with Orascom Development
                                                                                                                                                                                                                                                                                                                                                                                          • El Gouna on the Red Sea
                                                                                                                                                                                                                                                                                                                                                                                            • Interhome teams up with Center Parcs
                                                                                                                                                                                                                                                                                                                                                                                              • Hotelplan acquires Inter Chalet
                                                                                                                                                                                                                                                                                                                                                                                                • Wyndham Worldwide
                                                                                                                                                                                                                                                                                                                                                                                                  • 1.2 million bookings annually
                                                                                                                                                                                                                                                                                                                                                                                                    • Wyndham’s holiday-rental brands
                                                                                                                                                                                                                                                                                                                                                                                                      • Rental properties available in 100 countries
                                                                                                                                                                                                                                                                                                                                                                                                        • Structure of property relationships
                                                                                                                                                                                                                                                                                                                                                                                                        • What Next?

                                                                                                                                                                                                                                                                                                                                                                                                            • Restrictions on development
                                                                                                                                                                                                                                                                                                                                                                                                              • Swiss vote creates uncertain outlook
                                                                                                                                                                                                                                                                                                                                                                                                                • Limit on ‘cold beds’
                                                                                                                                                                                                                                                                                                                                                                                                                  • Local residents often squeezed out
                                                                                                                                                                                                                                                                                                                                                                                                                    • 500 communities affected
                                                                                                                                                                                                                                                                                                                                                                                                                      • Some resorts have already limited construction
                                                                                                                                                                                                                                                                                                                                                                                                                        • Andermatt to go forward
                                                                                                                                                                                                                                                                                                                                                                                                                          • Figure 56: Timeline and investment for Orascom’s Andermatt development, 2011
                                                                                                                                                                                                                                                                                                                                                                                                                        • Interpretation of new law to be determined
                                                                                                                                                                                                                                                                                                                                                                                                                          • Existing homes should rise in value
                                                                                                                                                                                                                                                                                                                                                                                                                            • Hotels should also benefit – at least in long run
                                                                                                                                                                                                                                                                                                                                                                                                                              • More restrictive in Austria
                                                                                                                                                                                                                                                                                                                                                                                                                                • Holiday rental intermediaries could have bright future
                                                                                                                                                                                                                                                                                                                                                                                                                                  • Favourable supply/demand outlook
                                                                                                                                                                                                                                                                                                                                                                                                                                  • Index to Travel and Tourism Analyst

                                                                                                                                                                                                                                                                                                                                                                                                                                      • Index grouped by geographic area
                                                                                                                                                                                                                                                                                                                                                                                                                                      • Index to TTI Destination Reports

                                                                                                                                                                                                                                                                                                                                                                                                                                        • Country reports
                                                                                                                                                                                                                                                                                                                                                                                                                                          • City Reports
                                                                                                                                                                                                                                                                                                                                                                                                                                          • Special Reports Index

                                                                                                                                                                                                                                                                                                                                                                                                                                            Companies Covered

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                                                                                                                                                                                                                                                                                                                                                                                                                                            Secondary Residences Worldwide - International - June 2012

                                                                                                                                                                                                                                                                                                                                                                                                                                            US $1,984.91 (Excl.Tax)