Luxembourg housing: market revitalised, prices starting to rise - but not everywhere
Maria Ziegler, Unsplash
After two years of decline, the property market in Luxembourg is showing clear signs of recovery. According to the 17th report of the Housing Observatory and the statistical institute Statec, the 4th quarter of 2024 saw a surge in activity and the first positive price trend in two years. But as the details of the report show, the recovery is uneven and far from returning to pre-crisis levels.
The number of transactions for secondary flats increased by 108.2 per cent and for houses by 77.2 per cent compared to the end of 2023. By many measures, the market has approached the levels of the pre-completion years (2017-2021). However, in the new-build segment (sales in a state of future completion, VEFA), despite growth of +272.6%, volumes are still only half of pre-crisis averages.
Amid a massive recovery and stabilising interest rates, overall house prices rose 1.4% year-on-year, the first annual increase since the end of 2022. But a breakdown by segment shows a contrasting picture:
- -2.4% on new buildings (VEFA),
- +1.8% for secondary flats,
- +3.0% for secondary homes.
Most of these deals were agreed before the end of November 2024, so the effect of real demand may be even higher.
Between 2022 and 2024, the market went through a significant decline - especially due to increases in key central bank rates. On average, prices fell by 16.3 per cent, returning to the level of late 2020.
The sharpest decline was seen in the secondary house market: -21.5 per cent from mid-2022 to end-2023. Flats lost slightly less -15.9%. New buildings showed volatility and a sharp decline in activity.
Geographically, the fall was relatively even (-16.6% to -19.3% by region), but started in the canton of Luxembourg, later spreading to Esch-sur-Alzette and then to the rest of the country. In the capital, prices fell by around 15%.
Today, the consumer price index (IPCN) does not take into account expenditure on owner-occupied housing, although it is a significant part of household spending. Therefore, the Statec and the European Central Bank are testing the inclusion of the owner-occupied housing price index (OOHPI) in inflation statistics. If it had been included since 2011, inflation would have been higher by 0.4 percentage points per year on average, the authors of the report argue.
Against a background of moderate inflation (+0.8% over the year), rental rates on adverts rose by +2.6% and on existing contracts by +1.7%. This means that new tenants are increasingly facing noticeably higher starting prices than old-timers.
