2022 assessment of real estate prices in Luxembourg: the rise is fading

The year 2022 ended in Luxembourg with prices up 9.6% on average compared to 2021. However, if we compare Q4 2022 with Q2021, the increase is “only” +5.6%. For the record, the average increase was still double-digit the previous 3 years. This deceleration is certainly a harbinger of the sector’s difficulties since the beginning of 2023 (bankruptcies of promoters and cry of alarm of the profession in agency)

Price deceleration in 2022 affects all housing types

  1. The average price of apartments under construction (VEFA) has held up the best but hides a divergence between the still sustained demand for own needs versus investment
  2. For existing house, prices which had soared during the pandemic, have been decelerating sharply since mid-2022 after peaking at the beginning of the year.
  3. The deceleration in the prices of existing apartments has been structural since the pandemic but accelerated in mid-2022.

Sharp deceleration in apartment prices and collapsing volumes

  1. In Q4 2022, real estate activity is down sharply with volumes collapsing especially on the VEFA segment (389 sales, -48.3% vs Q4 2021)
  2. The shortness of breath on the VEFA began two years ago but really plunged in mid-2022 under the effect of
    1. Rising interest rates
    2. and therefore the decline in the borrowing capacity of first-time buyers
    3. uncertainty about the final bill for apartments indexed to the construction price index (+28% since 2020).
    4. Rising interest rates have made standard financial investments more profitable for investors with cash
  3. For existing apartments, sharp decline over one year and compared to the historical average (880 sales in Q4 2022, or -17.8% in one year).

Volumes that also collapse on houses

  1. In Q4 2022, the number of sales of existing homes is well below the historical average (639 sales in Q4 2022, -25.4% vs Q4 2021)
  2. The financial volume of sales fell by the same amount (-25.8%), indicating a stabilization of prices
  3. For building land, there was also a sharp drop in the number of sales (429 sales in Q4 2022, -29% vs. Q4 2021).
  4. The financial volume of building land is however only -4.9% but Statec does not prefer to deduce a high valuation of land as the nature and potential can be heterogeneous

Average selling prices

  1. The canton of Luxembourg remains unsurprisingly the most sought after in the country with strong price disparities for the most remote cantons and especially the least connected to the center
  2. Prices also increased structurally faster in the Centre (+7% between 2009 and 2018) than in the periphery (+3% in the North)
  3. However, the increase in prices was more homogeneous over the period 2018-2021 (+10%)
  4. The price difference between existing and new is between +2% to +15% in favor of new for comparable objects
  5. For houses, the average price in the canton of Luxembourg is €1,591,000 (median at €1,460,000) while they are less than €1.2M in the East or Capellen-Mersch and well below the million euro mark in the canton of Esch and in the North.

Rents announced to rise sharply

  1. Rents increased on average by +3.4%/year over the period 2017-2022 for apartments (+20.3% cumulatively) versus a cumulative increase of +76.9% for the prices of existing apartments.
  2. The decline in rental yields has historically been more than offset by the prospect of capital gains and tax benefits.
  3. Rents announced for new apartment rental contracts increased significantly in Q4 2022 (+2.1% in one quarter and +8% in twelve months).
  4. This increase in rent prices is higher than the selling price of housing (+5.8% vs Q4 2021) and consumer prices (+6%)
  5. For houses, rent increases for new contracts were +4.8% in one quarter and +6.9% year-on-year.
  6. Statec recalls that only 13% of rentals concern houses in Luxembourg since 2010. Variations are therefore statistically more volatile
  7. However, if a catch-up effect is observed on new leases, existing leases increase less quickly than consumer prices (+2% vs. +6% inflation)

Infographics in brief and full report

France – Notary Real Estate Economic Note (April 2022)

Summary

  1. From February 2021 to February 2022, 1.187 million transactions for existing buildings, slightly down from the peak of August 2021 (1.212 millions) which shows that volumes are stabilizing.
  2. However, it is especially the year 2021 that was abnormal where the French accelerated or even anticipated their real estate projects
  3. The high inflation expected in 2022, especially on the energy side, could alter demand and thus lower volumes with “a rest to live” at half-mast for prospective buyers while wages have not increased correspondingly.
  4. The rise in interest rates – modest so far compared to financial market developments – could also exclude some candidates who have to face higher required down-payments.
  5. The rate of loan denials has not soared but banks are more demanding following government recommendations and as the economic outlook is more uncertain.
  6. Credit production remained at a high level at 23.8 billion euros in February.
  7. Credit rates, at 1.14% on average in February, remain significantly below the inflation rate.
  8. The prices of old housing are up everywhere, to +7.2% on average over the year 2021. Over the past year, the increase has been much more visible for houses than for apartments.
  9. Geographically, the increase is the strongest outside Paris’ region (+9%) while it slows down in the capital’s region Ile-de-France (+2.7% and even -1.6% in Paris over one year).
  10. Pre-contracts in mainlandFrance show a continuation of the rise in prices in 2022. From May 2021 to May 2022, the price of houses would increase twice as fast as existing apartments (+9.9% versus +4.1%).
  11. On the coast, the year 2021 was marked by significant increases (+8% for apartments, +16% for houses) but heterogeneous with more than 20% for residential buildings in Le Touquet, Saint-Hillaire-de-Riez and Les Sables d’Olonne and more than 20% for existing houses in Biscarosse, Saint-Pierre d’Oléron, La Baule, Saint-Malo, La Rochelle.

Lien to the full report

Prices and evolution for existing apartments and houses in France, at the end of 2021

Evolution of transactions volumes for existing buildings in France

Success for the first edition of the RE SMART exhibition in Luxembourg

On Thursday 9 June, the first edition of the RE SMART “prop tech” exhibition was held at Parc Alvisse in Luxembourg. A great success for the organizers with more than 300 participants and more than thirty exhibitors who came to exchange for the day between professionals and discover the technological advances applied to the world of real estate.

Numerous conferences were also offered throughout the day, in particular on the theme of the ecological transition, innovations for real estate agencies, major projects in Luxembourg, or major trends in the residential sector.

On the exhibitors’ side, many stands were intended for promoters (project management and monitoring, 3D animations), other stands more on energy savings, software for agencies, professional associations (Luxembourg Real Estate Chamber, LuxPropTech …), crowdfunding (crowdlending, tokenization) or space management and interior layouts.

In addition to interesting exchanges throughout the day, many contacts have been made with the aim of offering you more and more investment solutions without the slightest hitch.