The selling prices of houses listed on Immotop.lu fell by almost 12% in August 2024 compared to two years ago, when asking prices were around 9,500 euros per square meter. This decline is mainly due to the decrease in demand for home purchases due to the increase in monthly mortgage payments.
Mortgage Rates
The cost of borrowing to buy a home in Luxembourg, which includes mortgage rates, has soared since 2022. In July 2024, it reached 4.02%, almost double the 2.12% seen in July 2022. This sharp increase reflects a broader trend of rising interest rates as central banks have responded to inflation and economic uncertainty.
Rising borrowing costs have had a significant impact on the housing market as household incomes have not kept pace, leading many potential buyers to abandon their home purchase plans. This has dampened demand for new homes and had a negative impact on the rental market as more households compete for a limited number of homes, pushing up rental prices.
Average selling prices
Average selling prices for real estate in Luxembourg have fluctuated, showing great volatility. In January 2016, the average selling price was €4,796 per square meter. By August 2024, it had increased to €8,382 per square meter, although this figure is lower than the peaks recorded between April and August 2022, when prices hovered around €9,500 per square meter.
Recent trends show a decline in asking prices, with a notable drop of almost 12% from peak rates and 3.9% this year alone. This decline is mainly due to the increase in borrowing costs, which is reducing buyers’ purchasing power and cooling the housing market.
Average asking rental prices
In contrast, rental prices in Luxembourg have been steadily increasing in recent years. In January 2016, the average rental price was €18.21 per square metre. By August 2024, this figure had risen to €28.10, an increase of almost 54% in eight years. Since the beginning of the year, rental prices have increased by 5.4%, far exceeding the rates of of household consumption.
The data show a steady increase in rental prices, with a notable acceleration since 2023. For example, rental prices increased from €24.93 per square meter in January 2023 to €28.10 per square meter in August 2024. This increase in rental costs reflects increasing demand in the rental market and could be attributed to a limited supply of housing combined with a growing population. It is likely that, without fiscal intervention, the rental market will continue to deteriorate for the foreseeable future.
