Since the sharp increase in real estate loan interest rates and the uncertainty surrounding inflation due to the war in Ukraine, Luxembourg has experienced a decline in building permits. Property website atHome.lu has also reported a drop in sales prices for the first time in 15 years.
In recent years, a shortage of housing in Luxembourg has led to significant price fluctuations and market strain, with increases of 14.5% in 2020, 14% in 2021, and 9.6% in 2022.
However, an unusual trend has emerged over the past few months. Between January and March, average price listings across the Grand Duchy fell by 5%, the first decline since 2008, according to atHome CEO Saadi Soufiane. He noted that existing flats have become 4% cheaper, while new ones have seen an even greater drop of 8%.
Despite the current decrease, Soufiane warns that it may only be temporary. If interest rates decrease or people adapt to the high rates, demand could be reignited, potentially reversing the current trend: “There is a structural delay between offer and demand,” he explains.
Soufiane said now may be the ideal time for those who can afford it to buy property, a sentiment shared by Julien Licheron from the Housing Observatory. With the upper hand in negotiations, buyers can take their time to compare offers. Soufiane adds that some buyers are even being offered incentives, such as a free kitchen or parking spot, to encourage purchases. However, increased interest rates may render investment impossible for many.
In contrast, the rental market in Luxembourg is experiencing an opposing trend, with rents rising by 8.7% during the first three months of the year. This has led non-profit tenant’s organisation Mieterschutz to call for urgent government intervention.
Read also: ‘the peak has been reached’ - housing prices down across Luxembourg
