“Initially, bridging loans were not a speculative instrument. But given the very sharp rise in prices, they had in fact become just that. Obviously, in 2022-2023, this strategy collapsed because prices no longer continued to rise but, on the contrary, fell quite significantly and the situation deteriorated.” This is how Liser researcher Julien Licheron analyses the latest parliamentary response on bridging loans, published on Thursday, 10 April 2025.
Asked by MP (Pirate Party), finance minister (CSV) explained that “in terms of new mortgage loans, the flow of new bridging loans peaked in the second half of 2022 at €593m. They then fell until the second half of 2023, when they reached a low point of €170m. In the first half of 2024, they began to rise again, reaching €186m. Their volume therefore remains below their historical values.” The fall between 2022 and 2023 was therefore around 70%.
Instrument of speculation
But how had the country been able to reach such high volumes of bridging loans? “It had become a financing instrument--somewhat of a classic move in Luxembourg--for the purchase of a new property, i.e. betting on price increases,” Licheron explains “In plain language, this means buying a property on a date t and selling the other property, the one you already owned, on a date t+1, after a year for example. So the idea was to anticipate a price rise for a year, and cover or cushion the extra cost of the new property to some extent. The advantage was that we had an instrument that allowed us to speculate a little when we had a market in which prices were rising by 10% a year.”
The bridging loan is generally used in two cases: either when buying a more expensive home when you already own one, or when selling off-plan. “When you buy off-plan, by definition you are not the immediate owner, or at least not the owner of the keys to the new home,” explains the researcher. “So unless you’re a tenant in the meantime, it’s almost essential to take out a bridging loan, because you’ll be staying in the home you currently occupy until the new one is delivered. This had become standard practice in the country. This had the dual advantage of allowing people to buy off-plan without having to move house, and to benefit from a price increase that could act as a buffer and reduce the extra cost of buying a new home.”
A 20% fall in the price of older homes
Roth’s parliamentary response shows the glaring drop in new bridging loans from the second half of 2023. “There were hardly any more being granted,” Licheron explains. “People no longer had any certainty about future price trends, so buying today and selling the other property tomorrow was risky because it meant potentially making a loss on the property you were going to resell. Take-up has also collapsed, leading to a fall in new bridging loans--it’s all linked. We also had a problem with prices, because it was a market that needed to be corrected. Prices were undoubtedly too high in relation to the new purchasing power generated by the rise in interest rates. Not to mention a problem of confidence in the market and in the players, with concerns about whether the developer was going to be able to deliver on time and on budget. All this generated a great deal of uncertainty.”
In recent months, the trend has been reversed, with a remarkable rebound in the fourth quarter of 2024 in the property market, driven by lower mortgage rates and increased government support. As proof, the total volume of property loans disbursed in the fourth quarter of 2024 reached €1.6bn, up 31% on the third quarter. “This can be explained in two ways,” says Licheron. “Firstly, there is the volume effect on all loans and, secondly, there is the specific case of bridging loans. There is less uncertainty about the future trend in interest rates. And we mustn’t forget that prices have fallen quite sharply in the resale market, by around 15% for flats and 20% for houses. Households have therefore regained purchasing power as a result of the fall in prices.”
We will see prices rise again, but more in the region of 3-4% a year, rather than 10 or 15%.
With regard to bridging loans specifically, buying on Vefa (i.e. the notarial deed comprising the future sale as provided for in the sales agreement) is coming back to life, and there is less uncertainty about price trends. “At the moment, there hasn’t been a significant fall in prices for four quarters in a row, so we seem to be coming out of the crisis to some extent. But we mustn’t forget that prices rose considerably up until 2022. The value for the first quarter of 2024 is the value for mid-2020. After a very sharp rise in prices, the subsequent fall only served to erase this very sharp increase. Those who bought in 2019-2020 are not losing out. Those who had bought at the height of the crisis, in 2022, with low but variable rates, are unfortunately really losing out.”
Could we get back to the levels of new bridging loans in 2022? “I think so,” says Licheron, “but it will take time, as the buy-to-let market has not yet recovered sufficiently. On the question of property prices, I think that this crisis has illustrated the limits of buying capacity. We will see prices rise again, but more in the region of 3-4% a year, rather than 10 or 15% as was the case at the height of the price boom.”
And the stronger the rise had been, the stronger the fall, because, according to Eurostat, Luxembourg saw the biggest fall in property prices in the second quarter of 2024 of all EU countries.
This article in French.