Luxembourg's housing crisis is far from over, as just 92 new-build apartments under construction were sold in the first quarter of 2024 - reaching a historically low level.

Housing prices have fallen again year-on-year in the Grand Duchy, dropping 10.9%. But in spite of the seemingly-positive headlines, the real estate market has observed a sharp drop in activity, even in comparison to a disastrous 2023.

Although the low sales mostly concern new apartments, or VEFA ("sale in future state of completion"), sales of land marked for construction have also hit record lows, according to the latest report published by the Housing Observatory. The report notes a drop in activity of 47.7% in the new apartment segment and 44.4% on building land over the past year.

Just 92 apartments under VEFA were sold in the first quarter of 2024. The Housing Observatory recorded 170 transactions for land in the same period, a much lower level than the years preceding the housing crisis, and suggested several hypotheses to explain the drop in spite of the housing measures and the announcement of reduced interest rates.

New apartments are said to be less attractive for rental investors due to the high interest rates. The Observatory also highlighted a drop in purchasing capacity as well as a " carry-over effect " due to the fact that a certain number of new flats were marketed "with classic sales contracts".

The new-build market appears to be subjected to a wait-and-see attitude, says the Observatory. According to recent analysis on the housing market, the number of sales "is limited precisely because potential sellers are preferring to wait rather than drop their prices."

We were talking about it last week, a certain wait-and-see attitude seems to reign on the new-build market. After the Idea Foundation , the Observatoire de l'Habitat also agrees with this. You only have to read the latest analysis report on real estate . " The number of transactions remains limited precisely because some potential sellers prefer to wait rather than lower their prices. "

This is reflected in the slight recovery observed in the first quarter of 2024 for houses (+8.2%) and existing apartments (+25.5%), owed to a notable drop in prices for these properties. The Observatory suggests that some developers have chosen to wait longer by not reducing their prices.

It is likely these sellers are waiting for the announced drop in interest rates as it implies an increase in purchasing power on the housing market. In early June, the ECB confirmed the first cut in key rates since 2019.

If the economists' and bankers' forecasts are to be believed, Luxembourg could see two more declines this year, followed by further reductions next year, which will once again have an effect on the balance of power on Luxembourg's housing market. And regrettably, these effects could be detrimental to households.