Swiss luxury real estate has passed the growth threshold

In the Upper Engadine, prices for luxury real estate are shooting through the roof. (Image:

Prices in the luxury real estate segment continue to rise. In and around the major centers of Geneva and Zurich, prices climbed by around 10% and 12% respectively on average. But the market for luxury properties is likely to lose considerable momentum, predicts UBS.

The upward spiral in the luxury real estate market also continued in 2021. Properties in luxury locations in Switzerland were offered at prices around 10% higher than in the previous year. The increase was thus three times as high as the average for the last decade. Compared to the market as a whole, real estate prices in the luxury segment increased about twice as much in 2021, according to the annual study "UBS Luxury Property Focus 2022" shows.

Front-runner Upper Engadine

Accordingly, luxury real estate is becoming more expensive in all the regions analyzed. Above-average price increases were recorded in the top locations of central Switzerland. In and around the major centers of Geneva and Zurich, prices climbed by an average of around 10 and 12% respectively. In the luxury mountain destinations, however, the development was mixed. In the Upper Engadine, strong price increases in the low double-digit percentage range continued for the second year in a row. In Ticino, prices rose only for condominiums, but fell slightly for single-family homes. In the Valais Alps, prices developed partly below average.

Thus, according to the study, the Upper Engadine records the highest prices for luxury properties. For prime properties, they are above the CHF 31,000 per square meter mark. In the primary residence markets in and around the cities of Geneva and Zurich, as well as in central Switzerland, the luxury segment starts at a level of just under 24,000 Swiss francs. Only in Ticino are luxury properties changing hands from around CHF 19,000 per square meter upwards.

According to UBS real estate economist Katharina Hofer, the strong market development in the luxury segment was largely due to the considerable increase in assets as a result of a very good year on the stock market. This allowed for an increase in the number of interested parties in the mid- to high-single-digit million price category. This increased demand met with a fundamentally limited supply in the prime locations. As a result, many properties found a buyer relatively quickly and did not need to be advertised online. As a result, the number of advertised properties in some of the prime locations slumped by between a third and a half compared to pre-Corona levels.

Reversed signs for leading indicators

UBS expects domestic demand for luxury real estate to experience a damper in the current year. First, a turbulent year on the stock market so far is unlikely to allow for asset gains of the same magnitude as the previous year. Swiss economic growth – a key driver of demand for luxury properties – is also expected to slow year-on-year in 2022. At the same time, demand from the euro zone will be less strong due to the loss of purchasing power caused by the weaker euro against the Swiss franc.

Another finding: the Corona pandemic permanently changed some determinants of demand for luxury real estate in favor of the federal destinations. Especially in times of geopolitical uncertainty, Switzerland with its stable institutions offers a sought-after retreat, according to the real estate economist. In their view, this is likely to maintain interest in properties in prime locations in general.

Nevertheless, rising financing costs, asset losses and economic uncertainty are likely to moderate willingness to pay for luxury properties. Thanks to a strong first quarter, UBS expects prices to rise again in the mid-single digits this year, but the upward trend in the Swiss luxury market, which has now lasted four years, is likely to lose considerable momentum.

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