The Luxury Real Estate Market in Ticino
The luxury real estate market has developed over the past decades into an important segment of the Ticino real estate market. Price levels of luxury apartments, villas and estates start at CHF 1 million and go up to CHF 10 million. The ultra-luxury segment includes villas and estates priced from CHF 10 million up to CHF 60 million for the largest and most important estates. Buyers are not only local Ticino residents, but increasingly also come from other parts of Switzerland or from a large amount of other countries.
Ticino offers an ideal mix of the Swiss political and financial-economic stability combined with an Italian flair of la dolce vita. Its agreeable Mediterranean climate, its lush green nature, the lakes Lago di Lugano and the Lago Maggiore and the surrounding mountains have attracted tourists and buyers from Northern Europe for many decades. Political, legal and financial stability as well as low crime, excellent health, school and public facilities and services further add to the attractiveness of Ticino as a place to live. The fact that Ticino also offers an attractive tax environment, with the specific lump sum tax agreement for foreigners, puts Ticino on the radar of wealthy national and international buyers that are looking for the ideal place to settle.
The opening of the new 57 km Gotthard tunnel in 2016 with train speeds of 250km/hour towards Zurich have positively impact the North-south connection reducing time to 2h only between Lugano and Zürich. Real estate markets tend in general to benefit from improved accessibility and infrastructures and the luxury segment is no exception to this trend.
The demand for luxury property in Ticino is mainly focused on two areas:
For business people, Lugano offers an additional attraction by being Switzerland’s third largest financial centre, and as such Lugano offers excellent business infrastructures. The nearby airports of Lugano (LUG) and Malpensa (MXP) in Milan provide easy accessibility to almost all important national and international destinations. Families with children are attracted to the Lugano area due to its excellent local and international private schools and safe environment.
The Lago Maggiore area is more a touristic destination. The region attracts typically more the holiday home buyer, the majority coming from the German speaking parts of Switzerland, or buyers that are retired and do not need all the facilities that Lugano offers, but want to enjoy a more touristic and relaxed environment as their permanent address
Demand from international HNWI’s and UHNWI’s
On a worldwide level, alternative high quality locations for wealthy persons and HNWI’s to settle and take up permanent residence are becoming less, and many of these alternative locations do not offer the combination of all the advantages that Ticino can offer.
This explains why over the past decades demand from HNWI’s and UHNWI’s has grown and today Ticino is for example the canton in Switzerland with the third highest number of foreigners with a special lump sum taxation agreement. These HNWI’s and UHNWI’s have an important financial impact on the canton and its communities through direct tax payments, but also through their general consumption, purchasing power and charitable donations. This important group of clients also forms the foundation below the demand in the luxury and ultra luxury segment of the real estate market in Ticino.
Main characteristics of demand
Local buyers, meaning persons living and working in Ticino, are active in the luxury real estate market, and they typically buy properties from CHF 1million up to CHF 3 million. They buy to live in these homes.
For the luxury segment above CHF 3 million, buyers are very often coming from the Swiss German part or are international. International buyers are looking to set up their permanent residence in Ticino.
The Ultra Luxury Segment
The Ultra Luxury Market in Ticino comprises of penthouses and estates priced over CHF 10 million. These penthouses and estates are often located in best position and offer lake views. Large living areas, luxury finishes, high tech features, historical or special architecture and features such as swimming pools, wellness areas, home cinema’s, wine cellars, big garages, staff apartments and guest houses are offered by these estates, which are often set in big plots with complete privacy. Prices of the most prestigious homes can go up to CHF 60 million in this segment. The offer is in general limited to around an estimated 30 homes at one given time being available for sale in Ticino. The majority of these estates are located in the Lugano area. The Lago Maggiore area has a much smaller number of homes for sale in this segment, prices do not often exceed CHF 10 million in this area.
Second Homes in Ticino
Second homes, or holiday homes, also form a part of the luxury real estate market in Ticino. They are bought by Swiss buyers (mainly from the German speaking part) and international buyers. Price levels for second homes are typically between CHF 1 million and CHF 3,5 million. This is partly due to the Lex Koller-Friedrich law, which restricts ownership of Swiss homes by non-residents up to a maximum of 200 m2 of net living space.
Since mid-2013 there is increased demand for holiday homes from Swiss German clients, especially for the Lago Maggiore area. It seems that these clients are clear now with the new proposed law (Lex Weber) and are understanding that offer in Ticino is limited. Indeed, strict planning regulations such as the new Lex Weber law will limit new development.
Old and new dynamics in the demand and supply side
Since 2007, tendency of vendors of luxury homes has been to increase asking prices up to levels that are no longer realistic in some cases. These properties have been on the market for a long time, in some cases up to 5 years, without being sold. Since 2013 there is a clear trend noticeable that vendors are reducing their asking prices to more realistic levels and they are willing to negotiate the asking prices to close a sale. Properties that offer a good balance between a good location, a quality home and a realistic price, normally sell within a reasonable amount of time. Since 2020 prices are back on the rise also thanks to the pandemic and the need for bigger spaces, luxury items with garden and swim pools are in great demand in the Locarno and Lugano areas especially.
A specific trend amongst buyers in the luxury market is the strong attention to value. Today’s buyer, above all when coming from abroad, survived the crisis of the last years. They have seen many people lose their assets and real estate markets losing their value dramatically. The focus is very strongly on value. Buyers check realistic values in order not to over pay and take risks of not being able to resell in the future. In most cases, buyers ask third parties (valuation companies, banks, architects) for independent valuations of the property they are thinking of buying and will stay close to these values when they negotiate a purchase. If a property is priced unrealistically high, it has no chance to be sold to these clients.
The aggregation of small villages especially around the most important cities of Lugano and Bellinzona are generating very interesting potential adjustments in value increase for some properties in the medium term.
Demand looks set to remain strong and supply tight in the mid-long run. A significant price increase is to be expected over the next 5 years.