Luxembourg’s residential property market slowed and prices fell in the third quarter of 2025 after a sharp, tax-incentive-driven rebound in the previous quarter, according to Analysis Report 20 from the Housing Observatory (Observatoire de l’habitat). The report says activity and pricing in Q2 were boosted by buyers rushing to complete transactions before temporary fiscal measures expired on 30 June, with a subsequent slowdown in Q3 as that deadline passed.
The hedonic house price index provide by the National Institute of Statistics and Economic Studies (STATEC), which covers both existing homes and properties under construction, fell by 3.1% quarter-on-quarter in Q3. Despite that drop, prices remained slightly higher over the year, with the aggregated index up 1.2% between Q3 2024 and Q3 2025.
The report also points to modest rent growth. Asking rents for apartments rose 1.2% year-on-year, while the index for rents in existing leases increased 1.4% over the same period. Both measures lagged consumer price inflation, which the report puts at 2.4% over 12 months.
The Observatory says market activity in Q2 surged as buyers and sellers anticipated the end of tax advantages, notably the 6% accelerated depreciation for off-plan sales (VEFA) and the taxation of capital gains at a quarter of the global rate. In Q3, activity slowed in response, though the report notes that some Q3 transactions still reflected the earlier incentives because the government extended the deadline for signing notarial deeds to 30 September 2025.
Even so, the Observatory argues the relatively strong level of Q3 activity was not only driven by tax measures and also reflected a broader market recovery.
In the existing-home segment, transaction volumes were described as close to pre-crisis norms. The report cites 1,052 sales of existing apartments in Q3 2025, compared with an average of 1,081 in Q3 across 2017–2021. Compared with Q3 2024, sales were up 5.6% for existing apartments and 27.7% for existing houses.
For apartments under construction, activity rose sharply, up 125% year-on-year. However, volumes remained well below pre-crisis levels, with 324 transactions in Q3 2025 compared with an average of 625 in Q3 across 2017–2021.
The Observatory links the Q3 price decline to an earlier “mechanical” uplift in Q2, when some buyers may have accepted higher prices to secure tax benefits before the June deadline. In Q2, the index had climbed 4.5% quarter-on-quarter, before reversing in Q3.
By segment, the hedonic index fell 2.6% quarter-on-quarter for existing apartments (up 0.7% year-on-year), and 4.1% for existing houses (up 1.1% year-on-year). Off-plan apartment prices also declined 2.5% over the quarter but were up 2.8% over 12 months, with the report noting heightened volatility in this segment over the past two years.
Asking rents for apartments increased 1.9% from Q2 to Q3 and 1.2% over the year, the report says. The furnished-room segment, which it estimates at about 18% of total rental supply, saw asking rents rise 2.3% year-on-year.
The Observatory stresses that asking-rent figures reflect prices sought for new leases, but adds that rents in ongoing contracts moved in similar proportions, citing STATEC data showing 1.4% annual growth in the rent index.
