The latest data from the Housing Observatory, published on Tuesday, shed light on these ongoing trends.
Notably, the most substantial decline in prices has been observed in the existing homes category. During the second quarter of 2023, the Housing Observatory reported a notable 13.6% decrease in the prices of existing homes.
Conversely, existing flats experienced a milder decline, with prices falling by 4.5%.
A surprising turn of events was noted in the new flats category, where prices managed to rise despite a sharp drop in activity (-63.2%), amounting to a 2.2% increase.
According to the Housing Observatory, “a majority of developers prefer to wait and not sell their planned properties rather than lower prices.” This strategic approach has contributed to price hikes in the new-build market. Nonetheless, the overall hedonic index of house sale prices in the Grand Duchy experienced a decline of 6.4%.
It should be noted that these price trends pertain to notarised deeds recorded in the second quarter of 2023, with most of them signed before the end of April 2023. As a result, these figures may not necessarily reflect the current state of prices in the property market.
Between May and August, a total of 869 flats were sold, marking a noteworthy decline in sales volume. When considering transactions for all flats, encompassing both existing properties and those currently under construction, the volume witnessed a substantial drop of 43.4%. This trend, as outlined in the report, has been ongoing for the past two years but has intensified since early 2023.
Several factors may be contributing to this decline, with high interest rates at the forefront. Investors appear to be scaling back their investments in new flats due to the impact of elevated interest rates. Simultaneously, high interest rates also pose challenges for property owners. Additionally, there persists a sense of uncertainty regarding construction costs, which further influences market dynamics.
The downward trajectory in sales extends beyond flats, affecting houses as well. Specifically, there was a sharp decrease of 46.8% in house sales compared to the second quarter of 2022. Over these four months, a total of 421 houses changed hands. In contrast, prior to the Covid-19 pandemic, the average number of house sales during this period stood at 942, i.e., more than twice as high.
The decline in sales figures also extends to building land, with only half as many transactions recorded in the second quarter of 2023 compared to the same period in 2022.
Following a series of consecutive hikes, the rental market appears to have found some stability in the second quarter of 2023. According to the Housing Observatory’s calculations, there was a modest uptick of 0.2% when compared to the preceding quarter.
However, the broader perspective over a year reveals a different story. When contrasting current rents with those of the previous year, the increase transitions from nearly stagnant to a more significant +6.7%.
This naturally may pose challenges for anyone planning to rent a flat or house in the Grand Duchy in the coming months, especially as the situation is unlikely to change until the sales market improves.
