“We have no properties for rent at the moment,” a sign in the window of a real estate agency in Luxembourg City reads. It says a lot about the state of the property market at the moment. Would you like to rent? Move along then, there’s nothing to see here.
“Demand is extremely high for entry-level and mid-range properties,” confirms , president of the real estate chamber (Chambre immobilière).
A quick look at a real estate portal shows a 42m2 studio for rent in Bonnevoie for €1,500 per month. A little further down the page, a 4-bedroom house is available for the same rent... in Arlon.
Expensive rate hike
Traditionally a homeowners’ market (they account for 70% of the market), Luxembourg was exposed to soaring construction prices and rising interest rates in 2022--from 1.9% in January to over 4% in December.
The real estate website atHome.lu saw a surge in demand for rental accommodation last year: 73% more searches than in 2021. “Users with too little borrowing capacity to become homeowners are forced to turn to renting, which explains the sharp drop in the number of online ads for rentals. Rental properties are finding takers more quickly,” the portal says.
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While the volume of online advertisements for property for sale in Luxembourg grew by 52% in 2022, it fell by 32% for rentals. Taking into account the average rate charged by the partner banks of its brokerage service atHomeFinance, the portal even estimates that the borrowing capacity of a candidate-buyer has fallen from €887,083 in January 2022 to €635,125 in December of the same year, for a borrowing capacity of 30 years on a fixed rate.
Reduced income
Clearly, candidates for life as a resident in Luxembourg are falling back on renting. But this is not without constraints. Theoretically, the rent cannot exceed one third of the lessor’s income. “This is very often not feasible,” admits Scheuren. “In below-median incomes, we are more likely to have 45% or even 50% of income dedicated to rent.”
In 2021, the average price of a house in Luxembourg was just over €1m. For flats, it was necessary to count between €8,105 and €8,902 per square meters .
For the current year, the Federation of Craftsmen forecasts a drop in new construction of around 1,500 homes, while real estate transactions are slowing down. These two movements suggest a new balance where the price to pay to become a resident would find a new equilibrium point still high, or even too high for many candidates.
This story was first published in French on . It has been translated and edited for Delano.