Luxembourg Housing Prices Hit Three-Year Low

Discover the latest trends in Luxembourg's housing market as prices continue to plummet, reaching a three-year low in 2023.

Property prices in Luxembourg have hit their lowest level since the end of 2020, according to a recent report by the national statistics agency and the Housing Observatory. The downward trend in housing prices has continued for the fifth consecutive quarter, with the average price for houses and flats dropping by 14.4% year-on-year in the last quarter of 2023. Existing homes saw the most significant decline, with prices down by 18.8% compared to the same period in 2022. In contrast, apartments under construction experienced the least significant annual decline, with prices falling by just 7.6%. Existing apartment prices also fell by 14.5%. Overall, housing prices in 2023 fell by 9.1%, reversing the 9.6% increase seen in 2022.

The decline in property prices can be attributed to a significant decrease in housing market transactions across all segments. Only 749 apartments, whether new or existing, were sold in the last quarter of 2023, marking a 42% drop compared to the same period in 2022. This represents the lowest number of transactions recorded in a quarter since the Land Registry was established in 2007. The total value of real estate sold in the fourth quarter of 2023 was around €435 million, a 48.8% decrease year-on-year.

One of the factors contributing to the decline in the apartment market is the rise in interest rates, which has made new homes less attractive to rental investors. High interest rates have also impacted the purchasing power of first-time homebuyers. Additionally, uncertainties surrounding the future price of off-plan homes due to construction price indexation may have prompted some buyers to shift towards existing homes.

While the sale of existing homes showed a slight increase in activity in the fourth quarter of 2023 compared to the previous quarter, it remained 21.2% lower than in the same period in 2022. The sale of building land also saw a significant decline, dropping by 64.2% year-on-year. Advertised rents rose by 3.9% in the last quarter of 2023, with rents in Luxembourg City, Strassen, and Bertrange averaging nearly 40% higher than the national average.

On a positive note, the report highlighted a rapid growth in the supply of single furnished rooms for rent in Luxembourg in recent years. Furnished room rentals, which accounted for less than 3% of the total rental supply between 2010 and 2012, now make up around 13.5% of the rental market. This increase is partly attributed to the greater use of property portals since 2013. The majority of furnished room rental advertisements in 2023 were in Luxembourg City, with the canton of Esch-sur-Alzette also contributing significantly to the supply.

The property market in Luxembourg continues to face challenges, with declining prices and transaction volumes. The rise in interest rates and uncertainties surrounding off-plan home purchases have impacted buyer behavior. However, the growth in furnished room rentals presents a new opportunity in the rental market.