It's a good time to buy a home in Luxembourg, says ABBL CEO

With falling prices and interest rates, extended tax breaks, and banks being prepared to lend "more," Jerry Grbic, the CEO of the Luxembourg Banker's Association (ABBL) believes it's "a good time to buy".

With falling prices and interest rates, extended tax breaks, and banks eager to lend, he believes the current conditions present a unique opportunity for homebuyers.

While off-plan sales (VEFA) continue to struggle, the existing property market has experienced a notable revival, driven by favourable conditions for homebuyers in Luxembourg.

Between the fall in interest rates, the fall in market prices, and the extension of tax breaks, many buyers have been able to make the most of the past six months. This trend is confirmed by Jerry Grbic, CEO of the ABBL, who says that "these factors have boosted purchasing power".

According to the head of the association, which brings together 122 banks based in Luxembourg, both demand and lending agreements have increased by the end of the year. The reason for this is that the price of existing homes has fallen by an average of 20%, and the ECB recently lowered its interest rates to 3%.

The new-build market still at a standstill

"We've reached the end of the line of the existing housing markets," Grbic comments. However, the situation is far from resolved for the new-build market, which remains "virtually at a standstill", he confirms.

But all hope is not lost, as Grbic believes that interest is still there. However, he emphasises that "buyers need to be in a position to buy."

Jerry Grbic / © Archives RTL

And this will inevitably involve a fall in prices or ...a further cut to interest rates. A majority of economists believe that another cut to interests rates is on the horizon for the year 2025. "By nearly one percentage point," confirms the CEO of the ABBL, in agreement with other economists. This would take the ECB's main key rate to 2%, and would have a major impact on the borrowing capacity of buyers in Luxembourg.

Would this allow developers to keep prices high? Possibly. Grbic believes that "there is still room for improvement on the VEFA market". In other words, prices could still be further adjusted. Whether or not this happens, the extension of the tax incentives that were due to be revoked on 31 December could play a major role in the months ahead.

Good time to buy?

Renewed interest in the Luxembourgish property market in recent months has prompted the government to grant an extension of the 2024 housing package. "The government has clearly understood that this momentum must not be 'broken'," says Grbic. And with prices stabilising for existing apartments and rising for existing houses, he believes that this is "objectively the right time to buy".

"It's a good time for those interested in buying," continued Grbic. Especially as the banks are eager to grant loans, "that's their business," reminds Grbic. With interest rates on a downward trend, now would be a good time to play the competition off against each other, he suggested. Although interest rates are not what they used to be, "historically, 3-4% is not very high."

After a decade of low rates, a whole generation (up to 35 to 38 year-olds) has not experienced high interest-rate financial conditions’. The fall in prices is "a consequence" of the adjustment to what he describes as a "new reality."

Like many other experts in the sector, he does not believe there will be a return to the rate levels seen before 2020.

Alongside these discussions, the podcast episode with Jerry Grbic also dived into the financial results of banks in Luxembourg in 2024, Prolog Luxembourg SA and the Aides.lu platform. Listeners can tune in to the full episode (in French) on RTL Play. Alternatively, the podcast is available for your listening pleasure on Apple Podcasts, and Spotify.