Rudolphe Aben, founder and managing director of Nextimmo.lu, in a recent interview with Delano, discussed the rising importance of energy-class classification in determining property value and negotiation leverage. He predicted a market rebalance driven by supply adjustments and government intervention, and he highlighted the significant effect of mortgage rates on affordability. Despite current market volatility, he continued to advocate for the attractiveness of real estate investment, especially for first-time homeowners.
Kangkan Halder: Do you think the energy-class classification impacts a potential buyer’s ability to negotiate prices, and if so, how?
Rudolphe Aben: The energy efficiency class of a property will play an increasingly important role in its attractiveness. As a result, the price of a property with a low energy rating will fall faster than that of a property with a high energy rating. As a result, price negotiations will be more open for properties with high energy costs than for properties that offer long-term energy savings. It can therefore be assumed that the value of high energy performance properties will be maintained despite the overall decline in older properties.
How is the imbalance between supply and demand affecting both buyers and sellers, and what solutions would you propose?
Since the start of 2022, the number of properties available for sale has continued to rise, reaching historic highs across a range of platforms. Just two years ago, choice in the market was limited and almost any property was easy to sell. Today, however, well-funded buyers have a wide range of options, enabling them to find a property that perfectly suits their needs.
Nevertheless, I expect supply to decrease in the short to medium term as some developers may not be able to cope with the lower prices and postpone their projects. This rebalancing of the market could play a role in stabilising prices in the future. Government intervention through the implementation of measures in favour of future homeowners, especially first-time buyers, such as interest subsidies and/or government guarantees, could be a short-term solution to stimulate the market.
Could you discuss how the current mortgage rates of 4%-5% are impacting potential homebuyers?
Let’s take the example of a property costing €1m. With an initial payment of €100,000, repaying a loan at 1.2% over 30 years would require monthly payments of around €3,000. The same property financed with the same down payment and for the same duration, but at the current rate of 4.5%, would require monthly payments of €4,500, 1.5 times higher than before.
Now let’s imagine that the price of the property falls by 30% and it is financed at 4.5%, we would be back to a monthly payment of €3,000! The interest rate therefore has a significant impact on buyers, but the price is also a crucial factor to consider. Financial professionals unanimously agree that the era of low-interest rates will no longer be applicable in the coming years, and the market will need to adjust to an optimal rate ranging between 3% and 4%, which may become prevalent once inflation is under control.
If your borrowing capacity allows you to secure a mortgage, buying a property remains a more attractive option than renting.
What key strategies or considerations should buyers and sellers in Luxembourg’s real estate market bear in mind, given the current market uncertainty?
The Luxembourg property market has always been considered to be prosperous and will remain so. The correction that our market is currently undergoing is linked to external factors such as geopolitical uncertainty, rising material costs and inflation in the eurozone. Like any crisis, the current one is affecting the liquidity of the middle class.
However, if your borrowing capacity allows you to secure a mortgage, buying a property remains a more attractive option than renting. It’s important to remember that a loan with a higher interest rate can be refinanced when interest rates fall, and sooner or later property prices will rise again. Luxembourg is and will continue to be in need of new housing after the crisis. Therefore, investing in real estate, especially for your primary residence, is and will remain attractive in the years to come.