Impact of remote and hybrid working on the rental market in Luxembourg in 2025

The beginning of change: pandemic and remote.

In the spring of 2020, Luxembourg, like other European countries, introduced strict sanitary measures. A significant part of employees were transferred to work from home, and the government simultaneously froze the growth of rental rates to support the population. This decision was in effect until mid-2021 and temporarily kept the market from spiking.

Remote working is proving to be surprisingly effective. Before the pandemic, only a small percentage of workers used it, but by the summer of 2020, up to 40% of all employees in the country were working from home. It turned out that many professions, especially in the financial and service sectors, do not require daily presence in the office. As a result, housing is no longer perceived only as a place to relax, and interest in flats with an extra room, spacious houses and properties with balconies or gardens has grown.

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In 2021, as strict restrictions began to be relaxed, it became clear that telecommuting wasn't going away. Companies began implementing hybrid schedules, allowing employees to work from home several days a week. Thus, the pandemic didn't just change short-term habits, but laid the foundation for long-term shifts in tenant preferences.

Fixing the hybrid model

By 2022, most companies had adopted a hybrid work format. There were fewer fully remote employees, but more than half of employees wanted to stay at home at least one day a week, and a third preferred to work remotely most of the time. This has changed the value of housing: workplace is no longer the deciding factor, giving way to quality of life and convenience.

Housing with a separate office or the possibility to set up a workplace has become particularly popular. There was a growing interest in houses with gardens and flats with spacious terraces. At the same time, house purchase prices continued to rise and mortgage rates increased, forcing many people to postpone buying and stay as tenants. Thus, the demand for rentals did not diminish, even when some employees could work outside the capital.

Cross-border specificity has had a particular impact. Half of Luxembourg's workforce is from neighbouring countries and commutes to work every day. After the pandemic, agreements were made that allowed them to work from home part of the time without travelling to the country. This reduced the number of people who needed to rent permanently in Luxembourg, but did not lead to a sharp decline in demand: new professionals still entered the market and preferred to rent.

Remote working has also increased interest in short-term contracts and flexible rental formats. Some tenants, especially so-called digital nomads, prefer flats equipped with furniture and internet that can be rented for several months. This has spawned a niche of serviced apartments, which were not previously common in Luxembourg.

Geography of demand and redistribution of tenants

Traditionally, the rental market has been centred in Luxembourg City and the surrounding areas. However, hybridisation has allowed tenants to take a broader view. Many have moved to the suburbs and rural communes, where housing is more spacious and cheaper. The southern and northern cantons of the country have started to record an increase in demand, and with it, an increase in prices.

In the capital, on the contrary, the demand has slightly decreased. The data shows that the number of flat rental announcements has increased, which indicates a calmer market. Rental rates in the centre stopped growing so fast, and in some quarters even decreased slightly. This contrasted with the situation in the suburbs, where prices continued to rise steadily.

In general, the market has become more balanced. The centre is still the most expensive and prestigious place, but now tenants are increasingly choosing alternatives outside the capital, which used to be much rarer.

Rental price dynamics

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Despite changes in demand patterns, overall rental rates in Luxembourg continued to rise. In 2020, the average rate was around €22-23 per square metre and reached almost €29 by the beginning of 2025. The average rent for a flat by this time was around €1,779 per month and for a house over €3,100.

The pandemic slowed growth for a short time: in 2020-2021 rental rates remained almost unchanged, largely due to the freeze. But already in 2022 a gradual rise in prices began, and by 2023-2024 the growth became double-digit. In some segments, rents rose by 10-12% per year. This was due to both the influx of new tenants and limited supply.

Regional differences have become more noticeable. In the capital and surrounding areas, prices have stabilised, and in the western cantons they even decreased by almost 10%. At the same time, the northern and southern regions recorded growth, indicating a redistribution of demand in favour of more affordable and quieter locations.

Impact on landlords

For landlords, the changes were ambiguous. Owners of small flats in the centre faced difficulties: the demand for such properties decreased, and sometimes it was necessary to make concessions to tenants. At the same time, the owners of spacious flats and houses benefited. Their housing became especially in demand, and the rates for it grew faster.

Rental yields in Luxembourg have traditionally been low, around 2.5-3% per annum. However, it increased slightly in 2023-2025, as rental rates rose faster than selling prices. Property owners in the suburbs have particularly benefited, where demand has strengthened and purchase prices have so far remained lower than in the capital.

The state has been increasing the supply of social housing in the meantime. Between 2021 and 2024, the number of affordable rent-regulated flats doubled. This partly relieved some of the pressure, but did not change the overall picture: demand in the market still exceeds supply and tenants compete for every unit.

Housing types and new preferences

Remote working has changed the balance between different types of rentals. Flats still make up the majority of the market, but two- and three-bedroom flats have become the leaders. Studios have lost some of their appeal. Houses for rent remain rare, but the demand for them has increased significantly. The average cost of renting a house has exceeded three thousand euros, and many families are willing to pay these sums for the sake of comfort.

New buildings also turned out to be in favour. Their layouts and infrastructure are better suited to the needs of remote workers. Some developers, unable to sell their flats due to high mortgage rates, brought them to the rental market, which increased the supply of quality housing. Now the owners of the old stock have to invest in renovation to compete with new buildings.