Switzerland continues to attract the world’s super rich with its promises of stability and security. In the last two years, the price of this has risen substantially, and now the real estate market is expected to slow down.
While most real estate experts expect price developments to remain stable or to rise further for the broader real estate market as a result of the tightening supply shortage, UBS expects prices in the luxury real estate sector to fall this year.
The reasons for the expected slowdown are believed to be the falling international demand and the fact that the average wealth of Swiss households without real estate has stagnated in the last two years, as the bank stated in its study, «Luxury Property Focus 2024,» which was published on Tuesday. Moreover, the economy is performing below trend and thus not very supportive of demand for high-priced real estate.
High Prices and a Strong Franc
The strong Swiss franc has made investing in luxury real estate even more expensive for foreign buyers. In the Swiss luxury segment, the price boom peaked in 2022 with a rise of almost 10 percent.
This means that the luxury segment has already been separated from the broader market. Last year, the prices of luxury homes rose by an average of just over 2 percent, the study continues. At just over 1 percent, family homes gained considerably less than in the previous year, where they increased by 8 percent. In the case of apartments, the growth weakened from 9 percent to just 3 percent.
Weaker Than the Overall Market
In all, the luxury real estate market thus developed somewhat weaker than the overall market. The price level is currently 25 percent above the pre-pandemic level.
UBS real estate economist Katharina Hofer expects a slight decline in luxury real estate prices this year – a decline in the low single-digit percentage range. «There are fewer interested parties looking at advertised properties, and they are increasingly questioning their prices. If sellers are under time pressure, they may have to accept lower offers,» she said.
No Change in the Most Expensive Locations Ranking
It must be said that the more affordable locations for luxury real estate have caught up to some degree. However, the ranking of the most expensive places is unchanged. St. Moritz tops the list with prices per square meter of over 42,000 francs. The luxury segment in Gstaad starts slightly lower (39,000 francs per square meter). Cologny on Lake Geneva records prices of over 35,000 francs per square meter, similar to Verbier. In the Geneva region and on Lake Zurich, luxury real estate business begins at a price per square meter of CHF 25,000. In Ticino, luxury prices start at just under 20,000 francs per square meter.
«Generally speaking, luxury markets, especially traditional ones, show remarkable stability over a longer period of time,» according to Hofer. «Short-term cyclical price adjustments have mostly been offset over the last decade.»
Zug and Andermatt Making Progress
Zug’s communities are an exception, however. If you look at the prices over ten years, they would have increased by more than 30 ranks, on average. For a long time now, the low-tax strategy has made the location attractive for individuals with high incomes and assets. Andermatt also stands out. The creation of numerous high-priced properties means that the municipality is increasingly perceived as a luxury destination. Uri is the biggest winner of the past decade.
Ticino has not been able to keep up with the price development due to its oversupply of luxurious apartments.
