According to AtHome, a specialist in real estate advertising, the growth of real estate prices on the Luxembourg market should continue to slow down. The factors are multiple, including the rise in interest rates on real estate loans from 1.9% in January 2022 to over 4% last December, reducing the borrowing capacity of potential buyers.
Françoise Thoma, CEO of Spuerkeess, on Wednesday told RTL that in December last year, applications for property loans were down by 45% compared to December 2021.
Looking at the figures, AtHome notes an increase, at national level, of 5.6% in advertised prices in 2022 compared to 2021 in Luxembourg.
In detail, AtHome indicates that flat prices have increased by 5.3% and house prices by 6.2% across the country.
Last year, the northern region experienced the strongest growth, with an increase in prices of 8.2% for flats and 12.8% for houses, and an average price of €807,261. In the south, prices averaged at €774,976 and a price growth of 6.3% for flats and 6.4% for houses in 2022.
The centre remains the most expensive area of the country, with an average advertised price of €1,090,887. According to AtHome, flat prices will have increased by 4.3% and house prices by 4.6% in 2022.
Buyers have more room to manoeuvre
Julien Licheron, a researcher at the Luxembourg Institute of Socio-Economic Research (Liser) and a specialist in real estate, sees two scenarios for future trends in the real estate market: falling prices and falling volumes.
“A first scenario could be close to the one observed in 2008-2009, with a very strong decrease in volumes, where there was a 50% decrease in volumes during one semester compared to the previous semester. But prices had fallen by only 5%. This is a situation where sellers do not want to lower their prices and developers prefer to keep prices high in the hope that the market will recover and take off again a few months later,” explained the researcher during a recent AtHome webinar.
“A second, totally different scenario could see sellers and developers forced to sell. In this case, there would be a much more significant fall in prices, with sales volumes that could recover fairly quickly. But this will depend on the expectations of sellers and developers, particularly in the second half of 2023,” Licheron said.
The market, AtHome says, is slowly tipping in favour of buyers. “Fewer buyers could be more demanding on new criteria, such as the energy passport, and be more inclined to negotiate prices,” AtHome states in its analysis. The room for manoeuvre for the buyer is totally different today.
“Previously, buyers had very little room for negotiation in a closed market where they had to position themselves very quickly. Today, it is very different. I think you have to get informed, take the steps to obtain the cheapest possible loan and take the time to go and see the sellers, discuss and negotiate. The situation is much more favourable for buyers in a market where there is more and more competition between sellers, something that didn't exist before,” confirmed Licheron.
This story was first published on Paperjam. It has been translated and edited for Delano.