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

- 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
- 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.
- 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

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

- 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)
- The financial volume of sales fell by the same amount (-25.8%), indicating a stabilization of prices
- For building land, there was also a sharp drop in the number of sales (429 sales in Q4 2022, -29% vs. Q4 2021).
- 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

- 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
- Prices also increased structurally faster in the Centre (+7% between 2009 and 2018) than in the periphery (+3% in the North)
- However, the increase in prices was more homogeneous over the period 2018-2021 (+10%)
- The price difference between existing and new is between +2% to +15% in favor of new for comparable objects
- 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

- 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.
- The decline in rental yields has historically been more than offset by the prospect of capital gains and tax benefits.
- Rents announced for new apartment rental contracts increased significantly in Q4 2022 (+2.1% in one quarter and +8% in twelve months).
- This increase in rent prices is higher than the selling price of housing (+5.8% vs Q4 2021) and consumer prices (+6%)
- For houses, rent increases for new contracts were +4.8% in one quarter and +6.9% year-on-year.
- Statec recalls that only 13% of rentals concern houses in Luxembourg since 2010. Variations are therefore statistically more volatile
- 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


