Real estate market 2019-2024

The real estate market in Luxembourg has experienced significant fluctuations and transformations from 2019 to 2024. This period has been marked by varying trends in property transactions, price per square meter, land prices, interest rates, and inflation. This article aims to provide a comprehensive analysis of these changes, highlighting key data points and identifying the best areas to invest in real estate within Luxembourg.

Overview of the Real Estate Market (2019-2024)

Transactions and Market Trends

The Luxembourg real estate market has seen a rollercoaster of activity over the past five years. The number of transactions and the financial volume of these transactions have been influenced by several factors, including economic conditions, interest rates, and global events such as the COVID-19 pandemic.

2019-2020: The market was thriving, with a significant increase in property prices and transaction volumes. The average house price in the Grand Duchy was approximately €1.35 million, with older houses and apartments seeing substantial price hikes.
2021-2022: The market continued to grow, albeit at a slower pace. The average price per square meter for older apartments ranged from €5,338 to €13,162, and new-build apartments saw prices between €5,521 and €15,348 per square meter.
2023: This year marked a downturn, often referred to as the “annus horribilis” for the Luxembourg real estate market. The number of transactions decreased by 43% compared to 2022, and the financial volume dropped by 48%. The average price per square meter for properties remained relatively stable, with minor variations across different regions.
2024: The market is expected to begin a recovery phase. The projected transaction value for residential real estate transactions is estimated to reach US$0.51 billion. The market is also forecasted to grow by 5.20% annually from 2024 to 2028.

Price Per Square Meter

The price per square meter for residential properties has varied significantly across different regions and property types.

2019-2020: Prices were on the rise, with older apartments averaging €8,734 per square meter by the end of 2022.
2021-2022: The average price for new-build apartments was €9,347 per square meter, with a range from €5,521 to €15,348.
2023: The average price per square meter for properties in Luxembourg City was €12,313, with the highest prices in the Belair area (€14,515 per square meter) and the lowest in Dommeldange (€9,502 per square meter).
2024: The average asking price for residential properties for sale in May 2024 was €8,464 per square meter, a decrease of 1.88% compared to May 2023.

The commune of Hesperange has experienced similar trends to the overall Luxembourg market, with some notable variations. In April 2024, the average asking price for residential properties for sale in Hesperange was €9,162 per square meter, a 15.74% decrease compared to April 2023. However, prices varied significantly across different areas within the commune. Fentange had the highest average price at €9,774 per square meter, while Itzig had the lowest at €8,535 per square meter.For rental properties in Hesperange, the average asking price in April 2024 was €25.17 per month per square meter, a 3.11% increase from the previous year. Alzingen commanded the highest rents at €27.93 per month per square meter, whereas Itzig had the lowest at €19.25 per month per square meter. The Hesperange Localité area saw an average sale price of €9,237 per square meter and an average rental price of €26.96 per month per square meter in April 2024.

Land Prices

Land prices have been a significant driver of housing costs in Luxembourg. The cost of building land has more than doubled over the last decade, with an average annual increase of 8% between 2010 and 2021.

2019-2021: Land prices increased by 136.5% over the decade, with a sharp rise of 17% between 2019 and 2020.
2022-2023: The price of land continued to rise, albeit at a slower rate. The concentration of land ownership among a few private investors and developers has also influenced market dynamics.
2024: The high cost of land remains a primary factor in the overall housing price increases. The government has introduced measures to bolster the construction sector, but challenges remain.

Interest Rates and Inflation

Interest rates and inflation have played crucial roles in shaping the real estate market.

2019-2021: Interest rates were relatively low, encouraging borrowing and investment in real estate. However, inflation rates began to rise, reaching 6.34% in 2022.
2022-2023: The European Central Bank’s interest rate hikes led to higher borrowing costs. Mortgage interest rates tripled, and consumer loan rates doubled, dampening demand for loans.
2024: Interest rates have stabilized at historically high levels, but there is an expectation of a gradual reduction in key rates. Inflation is forecasted to be around 2% for the year.

Best Areas to Buy Properties

Investing in real estate in Luxembourg requires careful consideration of various factors, including location, price trends, and potential for appreciation. Here are some of the best areas to consider:

Luxembourg City

Luxembourg City remains one of the most sought-after locations for real estate investment. The city offers a high quality of life, excellent infrastructure, and proximity to major business hubs.

Belair: Known for its upscale properties, Belair has the highest average price per square meter (€14,515).
Gasperich: This area is experiencing rapid development and offers a mix of residential and commercial properties. The average price per square meter is €12,503.
Kirchberg: Home to many EU institutions and financial companies, Kirchberg is a prime location with an average price of €12,400 per square meter.

Suburban Areas

The suburbs around Luxembourg City offer a balance of affordability and quality of life. These areas are popular among families and professionals.

Bertrange: Known for its excellent amenities and schools, Bertrange had an average house price of €1,885,041 in Q3 2023.
Niederanven: This area offers a mix of residential properties and green spaces, with an average house price of €1,969,478 in Q3 2023.
Strassen: Close to Luxembourg City, Strassen is a desirable location with an average house price of €2,157,143 in Q3 2023.

Regional Areas

For those looking for more affordable options, the northern and eastern regions of Luxembourg offer lower prices and a quieter lifestyle.

Esch-sur-Alzette: The second-largest city in Luxembourg, Esch-sur-Alzette, had an average house price of €618,631 in Q3 2023.
Clervaux and Wiltz: These northern municipalities offer some of the lowest land prices, making them attractive for long-term investments.

Conclusion

The Luxembourg real estate market has undergone significant changes from 2019 to 2024. While the market faced challenges in 2023, the outlook for 2024 and beyond appears positive, with expected growth and stabilization. Investors should consider the varying trends in different regions and the impact of factors such as land prices, interest rates, and inflation when making investment decisions. Luxembourg City and its suburbs remain prime locations for investment, while regional areas offer more affordable options with potential for appreciation.