(MENAFN- Swissinfo) Multimillionaires around the world could see some bargain prices for luxury Alpine chalets in Switzerland this year, according to UBS bank.
This content was published on April 17, 2024 - 10:48 5 minutes
When not covering fintech, cryptocurrencies, blockchain, banks and trade, swissinfo's business correspondent can be found playing cricket on various grounds in Switzerland - including the frozen lake of St Moritz.
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“We expect a slight decline in prices in the luxury segment, in the low single-digit percentage range,” UBS says in its Luxury Property Focus 2024 report.
The reasons behind this are a flagging global economy, the rise in value of the Swiss franc against other currencies and an increase in domestic mortgage interest rates, following central bank rate hikes from -0.25% to a high of 1.75% since 2022.
“Advertised properties are garnering less interest, and asking prices are being increasingly challenged by prospective buyers. If sellers are pressed for time, they may have to accept price reductions,” says UBS real estate economist Katharina Hofer.
High-end property in idyllic Swiss beauty spots has demanded higher prices in the past few years, during a period of rock bottom interest rates. But price momentum is slowing.
Interest rate impact
A year ago, real estate experts were boasting that demand for properties in the luxury segment was at an all-time high . But by the end of 2023, prices had risen by just 2%, compared to 10% in 2022, according to UBS research.
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In September 2022, Swiss interest rates awoke form a period of hibernation to enter positive territory for the first time in seven years . Since then, they rose to 1.75% before dropping to 1.5% in March of this year.
Billionaires are able to brush off rising interest rates as a minor irritation, states the UBS Luxury Property Focus report. The number of billionaires in Switzerland increased 10% last year, the bank calculates.
This means that properties priced above CHF10 million ($11 million), which billionaires can afford, should continue to hold their value. Properties most vulnerable to rising interest rates are those priced at around CHF5 million.
Relief for locals
Rising geopolitical tensions and increasingly uncertain economic conditions throughout the world have made some investors more cautious, according to British luxury real estate agency Knight Frank.
Poor economic conditions have dampened appetite among the rich for making a large property investment. Half of the respondents to the Knight Frank Ski Property Report say the economic downturn has dented their enthusiasm for buying a new Alpine chalet.
This might come as a relief to some Swiss Alpine towns and villages, such as Pontresina, near St Moritz, which has seen locals priced out of the property market by wealthy foreigners.
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