The Luxembourg housing market continues to experience significant price declines, with the latest report from the Housing Observatory revealing an 8.3% drop over the past year.

Housing prices in Luxembourg continue to drop, according to the latest report from the Housing Observatory, which confirmed the trend mid-week.

RTL

© Housing Observatory

On Wednesday, the Housing Observatory announced a further general decline in property prices, estimating an 8.3% drop over the past year. This applies across various categories, including existing flats (-9.5%), properties under construction or sold off-plan (-4.3%), known as VEFA, and older houses (-9.9%). The trends remain consistent.

While prices for existing properties are adjusting downward, the new-build market remains sluggish. This divergence is reflected in transaction volumes, with a significant increase in sales of existing flats (+30.5%), contrasted by a continued decline in activity in the new-build sector (-10.5%).

The Observatory noted that the price drop in existing properties has partially mitigated the loss of purchasing power caused by rising interest rates. However, the new-build market has seen only a modest decline in prices (-7.7% between Q3 2022 and Q2 2024), with additional uncertainties surrounding final costs and delivery dates for these projects.

The report also highlighted what the Housing Observatory terms "technical carryover effects." This refers to properties initially marketed as VEFA but later sold as existing flats after completion, a tactic many developers have employed over the past 18 months.

What about house prices? 

Despite a significant rise in house sales during the second quarter of 2024 (+33.8% year-on-year), prices have continued to decline, with a drop of 9.9%. According to the Housing Observatory's latest data, the average price of a house in the Canton of Luxembourg City now stands at €1.26 million.

Source: Land registration, STATEC calculation - Housing Observatory, transactions between 1 July 2023 and 30 June 2024. Note: the Capellen-Mersch zone comprises the cantons of Capellen and Mersch. The East zone comprises the cantons of Echternach, Grevenmacher, and Remich. Finally, the North zone covers the cantons of Clervaux, Diekirch, Redange, Vianden, and Wiltz. / © Housing Observatory
Source: Land registration, STATEC calculation - Housing Observatory, transactions between 1 July 2023 and 30 June 2024. Note: the Capellen-Mersch zone comprises the cantons of Capellen and Mersch. The East zone comprises the cantons of Echternach, Grevenmacher, and Remich. Finally, the North zone covers the cantons of Clervaux, Diekirch, Redange, Vianden, and Wiltz.
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However, this average varies considerably depending on the property's location, with distance from the capital being a key factor. For instance, the average price of a house in southern Luxembourg is €741,620, while in the eastern part of the Grand Duchy, the average is €966,446.

Currently, homebuyers opting for a 30-year fixed-rate mortgage would face monthly payments ranging from €3,300 to €5,500, depending on the property's location. These figures say a lot about the kind of salary required to achieve the "Luxembourg dream".