House sale prices listed on Immotop.lu have fallen nearly 12% as of August 2024 compared to two years ago, when asking prices were around €9,500 per square metre. This decline is mainly driven by reduced demand for home purchases due to rising monthly mortgage payments.

Mortgage rates

The cost of borrowing for home purchases in Luxembourg, which includes mortgage rates, has surged since 2022. By July 2024, it had risen to 4.02%, nearly double the 2.12% seen in July 2022. This sharp increase reflects a broader trend of rising interest rates as central banks responded to inflation and economic uncertainty.

The higher borrowing costs have significantly impacted the housing market, as household incomes have not kept pace, causing many potential buyers to abandon plans to purchase homes. This has dampened demand for new home purchases and negatively affected the rental market, with more households competing for limited housing, driving rental prices up.

Average sale asking prices

The average sale asking prices for properties in Luxembourg have fluctuated, showing significant volatility. In January 2016, the average sale price was €4,796 per square metre. By August 2024, it had increased to €8,382 per square metre, though this is down from the peaks recorded between April and August 2022, when prices hovered around €9,500 per square metre.

Recent trends reveal a decline in asking prices, with a notable drop of nearly 12% from the peak rates and 3.9% this year alone. This decrease primarily stems from the higher cost of borrowing, reducing buyers’ purchasing power and cooling the housing market.

Average rent asking prices

In contrast, rental prices in Luxembourg have experienced a steady increase over the past several years. In January 2016, the average rental price was €18.21 per square metre. By August 2024, this figure had risen to €28.10, marking a nearly 54% rise over eight years. Year to date, rental prices are up 5.4%, far outstripping household consumption rates.

The data shows a consistent rise in rental prices, with a notable acceleration since 2023. For instance, rental prices rose from €24.93 per square metre in January 2023 to €28.10 per square metre by August 2024. This increase in rental costs reflects growing demand in the rental market and could be attributed to limited housing supply coupled with a rising population. It is likely that, without fiscal intervention, the rental market will continue to deteriorate in the foreseeable future.