Amidst the backdrop of a booming population, Luxembourg's real estate market faces a conundrum: the construction of new homes is dwindling, intensifying the housing crunch in a nation where demand already outpaces supply.

The head of Luxembourg's Real Estate Chamber, Jean-Paul Scheuren, estimates that 1,000 fewer dwellings will be built in 2023 and expects a 50% decrease in construction of new flats in 2024 compared to 2022.

With Luxembourg's real estate market under pressure from soaring construction costs and difficulty obtaining suitable sites, additional strain is being placed on the already tight rental market.

Building costs in Luxembourg have increased by over 16% within a year, with the Covid pandemic and Ukraine war escalating energy and material prices. In 2022, building permits decreased by 28% from 2021, highlighting the persistent housing challenges in the Grand Duchy.

Let's take a look at the historical data, and consider what has happened with house building in Luxembourg over the last few decades.

Note for fellow data nerds: the data on new dwellings is sourced from Statec, Luxembourg's statistics agency, and population figures from UN World Population Prospects. Statec's data extends to 2019, providing a consistent comparison basis.

New dwellings peaked in 2008

While the number of building permits, which determines how many dwellings have the green light for construction, varies year on year, the actual number of new dwellings created peaked in 2008 at 4,444 units.

Still, numbers in recent years have been close, with 4,319 completed in 2017 and 3,663 in 2019.


If we look at the yearly change in new dwellings, below, we can see that 2008 was the exception rather than the rule. Aside from 2000, where constructions plummeted, there is generally modest variation in the number of new homes built each year. At the end of the period, however, construction numbers fell again.


Are enough homes being built?

To get an understanding of whether enough new homes are being created, it is helpful to compare the new dwellings statistics with population.

First, let's look at the new dwellings figures again, this time plotted against population growth (in absolute terms).


From this, we can see a marked uptick in population growth in the 2010s, going from around 7,000 new residents a year in the mid 2000s to close to double that by the mid 2010s.

However, the uptick in new dwellings was more modest, with some years seeing scarcely more than 2,000 new homes on the market.

A more systematic way of considering 'is this enough?' is to look at the ratio between new homes each year and population growth, as shown in the chart below.

The ratio helps us to visualise how housing availability has responded to changes in the population. A ratio greater than 1 indicates more new dwellings were added compared to the number of people added to the population.

Considering the average household size in Luxembourg of 2.2, according to Eurostat data, a ratio of 0.45 or above (the straight line in the chart) shows enough new homes are being built to accomodate the growing population.


As you can see from the chart, the ratio was consistently below this during the 2010s. In other words, population growth is outstripping the creation of new homes. Far from there being a surplus of properties available, there is an increasing property crunch.

So to answer the question, the data up to 2019 at least are unequivocal: not enough new homes are being built to accommodate Luxembourg's growing population.