© Maxime Gonzales/ RTL Luxembourg
After experiencing consecutive declines over the past 18 months, the price of existing homes in Luxembourg has stabilised, with hints of a potential uptick in the near future.
The Housing Observatory last week published a report analysing the property market in the first quarter of 2024, confirming that house prices are still lower compared to the previous year.
While recent headlines focused on a significant drop in new-build flat activity, there's a quieter trend emerging: stabilisation in prices on the existing property market.
This stabilisation is attributed to increased market activity, evident from the 1,259 property sales recorded in the first quarter of 2024. However, this figure remains below the average seen in pre-crisis years, according to the Housing Observatory.
Nevertheless, this uptick in activity has effectively halted the decline in prices for existing houses and flats, which had plummeted by 16% and 21%, respectively, over the past 18 months. Pierre Clément, director at Nexvia, believes that this downward trend has now come to an end.
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"Markets globally are rebounding, despite prevailing interest rates […] The drop in prices for existing properties is over," Clément told our colleagues from RTL Infos. The upwards momentum observed since late 2023 has solidified and is now considered a lasting trend. Clément anticipates the market returning to a more stable state.
"Prices have adjusted to align with the purchasing power of buyers and investors, leading to increased activity in existing properties," he explains. Looking ahead, there is even potential for a modest increase in prices.
Julien Licheron, PhD in economics and researcher at the Luxembourg Institute for Socio-Economic Research (LISER), shares a similar view: "Considering current inflation rates of 3.2%, envisioning a proportional rise in property prices over the coming years doesn't seem far-fetched."
A "sluggish" market
© Maxime Gonzales/ RTL Luxembourg
Conversely, the outlook for new-build properties remains grim. "New construction is really struggling," confirms Licheron, highlighting the stark contrast in sales figures for the first quarter of 2024 (92) and the significant decline in financial transactions. The market continues to face stagnation due to several factors.
"Buyers inevitably notice a considerable price gap when comparing existing flats with those under construction in the same area," Licheron explains.
Uncertainty surrounding delivery timelines for new properties and persistently high interest rates further exacerbate the challenges facing the new-build market. This despite recent legislative efforts such as the housing package and administrative simplification measures-which property developers had been demanding for years.
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"This represents a commitment for them. They will be judged on their ability to meet future housing demands," emphasises Julien Licheron. "We are providing them with the tools to increase production, and now they have to prove that they can do better and more," he added.
However, the industry still grapples with the critical issue of sourcing adequate manpower to fulfil upcoming project demands in the coming years—an obstacle that poses significant hurdles.
