Where is the luxury real estate market heading?
Introduction
After an extraordinary run, luxury real estate is entering a more discerning phase: liquidity is bifurcating, rents are doing more of the heavy lifting, and policy signals matter more than headlines. In this outlook, I cut through the noise – pinpointing where the market is cooling, where momentum is merely moderating, and where new opportunity is quietly taking shape, with a special focus on Dubai and Switzerland.
Are there signs of cooling – and in which property types?
Yes, but it’s selective.
- Ultra-luxury trophy listings (think $10m–$50m+) are seeing longer marketing times and more price discipline from buyers. In the U.S., properties at the very top end took ~4x longer to sell than the average home in 2024, with many initially over-listed by up to 25% – a classic sign of aspirational pricing meeting thinner depth of demand.
- Prime city condos have broadly held value, but capital value growth has lost momentum while prime rents are doing more of the heavy lifting (investor yields matter again). In H1 2025, Savills tracked +0.7% prime capital growth versus +2% prime rent growth across world cities.
- Tax and policy uncertainty is a headwind at the top end. In the UK, speculation about reforming property taxes has dampened demand for homes £1m+, even as mainstream segments prove more resilient.
Bottom line: liquidity is bifurcating. Best-in-class assets (A+ locations, new or newly refurbished, scarcity value) still find bidders; “B” quality at “A” prices is where the cooling shows up first.
Where is price momentum fading – or even turning negative?
- Global prime growth is modest and uneven. Knight Frank’s Prime Global Cities Index shows +2.8% y/y prime growth to March 2025 – positive, but below long-run trends, and with a material share of markets flat or falling.
- Hong Kong is the standout decliner in 2025’s prime league tables, with prime prices down ~14% y/y to Q2 – reflecting higher rates, policy shifts, and weak sentiment – alongside a broader multi-year housing slump.
- Selective cooling in the U.S. Sun Belt and coastal “pandemic winners”. Broader U.S. indices show decelerating price growth in mid-2025, with some metros like Miami and Tampa posting outright declines – a contrast to still-firm New York/Chicago.
Which regions are still emerging?
- Southern Europe’s prime cities continue to rise on lifestyle, relative value in € terms, and easier residency/tax regimes: Madrid, Barcelona, Lisbon are all forecast for further prime price gains into 2025.
- Milan is having a moment as Europe’s post-Brexit, post-non-dom beneficiary – flat-tax incentives are attracting capital and executives, lifting top-end values in core districts.
- Stockholm and parts of Nordics show improving prime forecasts after earlier corrections, with expectations of renewed growth into 2025.
What’s special about Dubai and Switzerland?
Dubai: depth of end-user demand + constrained prime supply
Dubai remains the clearest growth outlier in global prime. After a powerful 2020–2024 upcycle (prime values and transaction volumes surging), the 2025 outlook is for continued, if more modest, price growth (~+5%). Two structural drivers stand out: (1) a bigger share of genuine end-users (less speculative churn), and (2) limited new prime stock in the city’s most coveted neighborhoods. Survey work also shows extraordinary HNWI intent to buy or even acquire land to build in Dubai.
Switzerland: scarcity, stability – and legal constraints that protect value
Switzerland’s luxury market is defined by hard scarcity (tight vacancy, limited buildable land), a safe-haven currency, and clear legal guardrails (Lex Koller) that cap foreign demand and help preserve pricing power in the most desirable areas. That said, data show the luxury segment cooled to ~+1.2% price growth in 2024 before stabilizing in spring 2025 – so the story is resilience, not exuberance. For non-residents, Lex Koller restrictions (federal law) require permits and limit where and what you can buy, especially for second homes – another reason why prime Swiss assets hold value over time.
So, where are we headed?
Our read for 2025–26:
- Soft-landing, not free-fall in global prime: slower capital growth, firmer rents, and longer sales cycles at the very top.
- Policy and tax regimes matter more than ever (UK and parts of Asia illustrate the sensitivity of prime demand to fiscal signals and cooling measures).
- Winners: Dubai; core Swiss prime (Geneva/Zurich and tier-one Alpine/lake markets); Southern European capitals offering lifestyle + value; select Nordic rebounds.
- Watch-list: Markets where ultra-prime sellers still test pandemic-era pricing; cities with rising inventory and fading in-migration narratives; Hong Kong until macro and policy tailwinds firm up.
How we’re advising clients at Luxcenture
- Buy quality, not beta. Focus on irreplaceable locations, turnkey condition, and supply-constrained micro-markets.
- Lean into rental resilience. In cities where yields are improving faster than prices, high-spec buy-to-let can outperform total-return.
- Navigate policy smartly. In Switzerland, plan purchases around Lex Koller pathways (residency status, cantonal rules). In Southern Europe, evaluate tax regimes that legitimately improve after-tax returns (e.g., Italy’s flat-tax).
- In Dubai, favor end-user districts with real scarcity (beachfront prime, established villa communities) and be realistic on mid-cycle pricing—growth is still there, but it’s no longer a one-way trade