Most newcomers to Luxembourg will share the same the spirit if the discussion goes around real estate prices: they are too high. But are they?
The Observatoire de l’Habitat last report indicates a growth of existing property prices between 4.1% and 4.7% (respectively for houses and apartments). Scoring above 4% during the last year became almost something common, a phenomenon observed by both the Observatoire de l’Habitat and Eurostat..
This sustained growth is explained by three key reasons:
- Economics. The growth domestic product (GDP) in Luxembourg has been strongly increasing, supported by a healthy growth of the private sector. While the Eurozone growth clocked a 21% increase since 2006, Luxembourg shot up at 29%.
- Demographics. Thanks to the attractiveness of the economy, the country’s population increased by 20% since 2010. This year, the barrier of 600,000 inhabitants was broken. With such a strong influx, there is an annual deficit of minimum 2,500 properties. An increasing tension on the market is continuously building up.
- Taxes. Contrary to neighbouring countries for example, property tax is extremely low and housing tax is non-existent. As an example, a cross-border worker in Thionville will pay more than € 3,000 in local taxes per year, whereas in Luxembourg he would only pay € 150.
With increasing prices, housing is becoming less and less affordable. This problem has got the interest of the government with initiatives helping homeownership like the Société Nationale des Habitations à Bon Marché which is offering emphyteusis leases, more affordable than full property ownership.
While prices are constantly getting higher, we observe more than speculation behind them. While this has never fully preserved from crisis, the Luxembourgish market is in good health and the capital is less expensive as some of its European counterparts. How does the Luxembourg real estate market compare to its neighbouring capitals
Second quarter 2017 http://observatoire.liser.lu/pdfs/Logement_chiffres_2017T2.pdf
Eurostat HPI http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tipsho10&plugin=1
Eurostat GDP (in pricing power) http://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=tec00001&language=fr