Real estate in Luxembourg: the calm before the fiscal storm

Luxembourg's property market slowed down noticeably in the first quarter of 2025. The reason is the uncertainty surrounding the tax incentives, which were initially due to expire on 1 January but were extended until 30 June 2025. This has put the market in "wait-and-see mode" between the two fiscal deadlines, slowing activity after a sharp upturn at the end of 2024.

The number of residential sales transactions decreased compared to the fourth quarter of 2024. However, in annual terms there is an increase compared to the first quarter of 2024:

• there was a 9% increase in the number of transactions with existing flats,
• by 28.8 per cent - with houses on the secondary market.

Still, the market remains weaker than pre-pandemic levels. For example, there were 582 home transactions in the first quarter of 2025, compared to the 2017-2021 average of 773.

The new-build segment (VEFA - vente en l'état futur d'achèvement) showed a sharp increase: the number of transactions rose by 163.5% compared to the catastrophically low level of early 2024. But even with this increase, sales volume - just 253 transactions - is 2.5 times lower than the average for the pre-pandemic years (673 transactions per quarter).

A peculiarity of the new buildings segment is high volatility due to low number of transactions and strong influence of the sample composition.

Announced flat rents fell 0.8% over the quarter but rose 1.5% year-on-year. The increase is almost in line with consumer price inflation (+1.6% according to IPCN), which has returned to its long-term average after a period of persistently high values (+3% and above).

The segment of renting furnished rooms stands apart - about 18% of all offers. Here the annual price growth was +2.2%.

As for existing leases, their index increased by 1.7 per cent - also within inflation. This suggests that real rental rates are not exerting pressure above inflation expectations.

The current market condition is the result of a temporary halt before the end of the tax relief. In Q4 2024, buyers accelerated transactions in anticipation of the end of the incentives. But after the measures were extended until 30 June 2025, market activity slowed down again.

The annual dynamics still shows signs of recovery, especially in the segment of new buildings. However, sales volumes and price levels remain unstable and significantly below pre-crisis levels. The market continues to adapt to the changing macroeconomic and fiscal environment.