Luxembourg Real Estate Market in 2025: Current State and Future Perspectives

Last updated: December 2025 | Originally published Q1 2025. Key updates: Full 2025 market performance data added; transaction volumes surged 49% in 2024; registration fees returned to 7% July 2025; Bëllegen Akt now permanent at €40,000/person; construction activity declined sharply.

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The Luxembourg real estate market has undergone significant transformations in recent years, transitioning from a period of sustained growth to a correction phase followed by strong recovery. Throughout 2025, after several quarters of decline, a robust market recovery has emerged, marked by surging transaction volumes and stabilizing prices. This article provides an in-depth analysis of the current Luxembourg real estate market situation and its future evolution prospects.

A Market in Recovery After Correction Period

From Overheating to Stabilization

The Luxembourg real estate market experienced exceptional growth between 2010 and 2022, with an average price increase of 5.7% per year between 2010 and 2017, followed by marked acceleration: +7.1% in 2018, +10.1% in 2019, and up to +14.5% in 2020. This spectacular rise was mainly explained by structural imbalance between supply and demand, fueled by strong demographic and economic growth.

However, from 2022 onwards, several factors caused significant slowdown in the Luxembourg real estate market. Rising interest rates, inflation, increasing construction costs, and geopolitical uncertainties led to the first price decrease since 2009. In 2023, the market recorded a 1.5% drop in the first quarter compared to the same period in 2022, with significant disparities depending on property types: +0.4% for existing apartments, -0.4% for off-plan sales (VEFA), and -4.3% for existing houses.

This downward trend intensified in the second quarter of 2023, with a dramatic 13.5% fall for existing houses and 4.5% for older apartments. Only new apartments saw a slight increase of 2.2% after two quarters of decline.

Strong Recovery Throughout 2025

After five consecutive quarters of decline, the Luxembourg real estate market has shown remarkable recovery throughout 2025. Transaction volumes surged 49% in 2024 compared to 2023, signaling renewed buyer confidence after the interest rate slowdown of 2022-2023.​

As of Q2 2025, average sale prices stood at €8,670/m², up 1.9% quarter-on-quarter but down 1.5% year-on-year, indicating market stabilization. This positive trend is explained particularly by falling interest rates, better inflation control, and gradual return of investor and buyer confidence.​

However, the Luxembourg real estate market faces supply challenges, with construction activity declining sharply since 2021—output nearly halved by 2025. This supply constraint, combined with sustained demand, suggests continued upward price pressure in the medium term.​

Structure of the Luxembourg Real Estate Market

Demographics and Housing Needs

Luxembourg continues to experience sustained demographic growth. The country’s population growth, characterized by diversity with foreign residents representing more than 195 different nationalities, generates significant housing needs.

This demographic growth, combined with evolving lifestyles (decreasing household size, increasing divorces, aging population), creates persistent demand. According to estimates, Luxembourg needs 5,600 to 7,500 new housing units per year until 2060, depending on economic growth rate. However, current production remains insufficient, with construction output significantly reduced in 2024-2025.​

For those considering buying property in Luxembourg, understanding the complete acquisition process is essential in this competitive environment.

Residential Market Prices (Q2 2025 Data)

The Luxembourg real estate market shows significant regional price variations. As of Q2 2025, average prices reached €8,670/m² nationally, with substantial gaps between regions.​

The price differential between high-efficiency properties (energy classes A-C) and low-efficiency homes (F-G) varies by region:

• Centre Luxembourg: €1,358/m² premium
• South: €1,112/m²
• West: €958/m²
• East: €938/m²
• North: €743/m²

Notably, 65% of new listings in the Luxembourg real estate market carry Class A energy ratings, demonstrating strong market commitment to sustainability. Understanding energy efficiency in real estate has become crucial for both buyers and sellers.​

Rental Market Evolution

The rental market has experienced significant developments through 2025. Between 2010 and 2022, apartment rents increased by an average of 4% per year, a cumulative increase of 53.2%. For houses, the increase was 3.2% per year, or +41.4% over the period.

After strong increases in 2023 and early 2024, the rental market showed signs of rebalancing in late 2024 and through 2025, with varying trends across different areas. For specific regional insights, our guide to rental costs in Hesperange provides detailed local market analysis.​

Understanding lease contracts and tenant rights is essential for both landlords and tenants navigating the Luxembourg real estate market, particularly following recent legal reforms effective August 1, 2024.

Factors Influencing the Luxembourg Real Estate Market

Land Potential and Construction

Land potential remains a major issue for the Luxembourg real estate market. About one-fifth of land is still available for construction, with 793 hectares available for housing. However, this potential is largely concentrated in private hands (89%), with public actors holding only 11%.

Land prices have increased steadily since 2010, with an average annual increase of 8.5% between 2010 and 2022, a cumulative increase of 150.4%. This increase was particularly marked between 2017 and 2020, before slowing in recent years.

The Luxembourg real estate market shows a clear trend toward densification, with growing preference for apartment building construction rather than individual houses. Between 2010 and 2016, 60% of housing units built were apartments, compared to 40% single-family homes. This trend has accelerated through 2025.

For those weighing options, our analysis of old property renovation versus new construction helps evaluate the costs and benefits of each approach in the current Luxembourg real estate market.

Impact of Public Policies

Public policies play a crucial role in the Luxembourg real estate market evolution. The government has implemented various measures to promote housing access, including:

• Increasing housing budget, which reaches €500 million in 2025
• Developing affordable and social housing
• Increasing individual housing assistance through various subsidy programs
• Administrative simplification, including extending building permit validity from 1 to 2 years

Mid-2025 Policy Changes

Significant policy changes occurred in mid-2025 that affect the Luxembourg real estate market:

Registration Fees: The temporary 50% reduction (from 7% to 3.5%) expired June 30, 2025. Standard 7% registration fees now apply to all property purchases from July 1, 2025 onwards.​

Bëllegen Akt Tax Credit: Excellent news—the tax credit was made permanent at €40,000 per person (€80,000 for couples) effective July 1, 2025, providing ongoing support for primary residence buyers without time pressure. Understanding hidden costs when buying property helps buyers factor in the net impact of these fees and credits.​

Investor Incentives: The Bëllegen Akt Investisseurs (€20,000/person for rental properties) ended December 31, 2024, and the 6% accelerated depreciation ended September 30, 2025.​

These changes have influenced H2 2025 Luxembourg real estate market activity, with the permanent Bëllegen Akt providing stability while the return to 7% registration fees increased upfront acquisition costs.

Economic and Financial Factors

The economic and financial situation strongly influences the Luxembourg real estate market. After high inflation (5.4% in 2022, 3.8% in 2023), it has stabilized at moderate levels (2.6% in 2024). Interest rates, after sharp increases in 2022-2023, have declined through 2025, making mortgage credit more accessible.​

Luxembourg’s economic performance in 2025 has supported the real estate market recovery, with positive growth following the contraction in 2023. This economic improvement has bolstered both residential and commercial real estate demand.

For buyers seeking optimal financing and mortgage options, the current interest rate environment presents favorable conditions despite the return to standard registration fees.

Current Trends and Market Dynamics (December 2025)

Price Evolution and Transaction Volume

The Luxembourg real estate market has experienced robust recovery through 2025. After the correction phase of 2023-2024, transaction volumes surged 49% in 2024, indicating strong market rebound.​

Prices have stabilized, with Q2 2025 showing €8,670/m² average (up 1.9% Q-o-Q, down 1.5% Y-o-Y), suggesting the market has found equilibrium after the 2022-2023 correction.​

Supply constraints pose ongoing challenges for the Luxembourg real estate market. Construction output has nearly halved since 2021, raising concerns about future housing supply and potential continued upward price pressure despite current stabilization.​

New Housing Trends

The health crisis and societal changes have modified expectations of buyers and tenants in the Luxembourg real estate market. Growing demand exists for:

• More spacious housing with dedicated home office space
• Outdoor spaces (balcony, terrace, garden)
• Locations in periphery or outside city centers
• New housing forms: co-living, common spaces, intergenerational cohabitation
• High energy efficiency standards (A or B ratings)

Average apartment size has evolved significantly, reflecting changing lifestyle priorities. Understanding when to sell your property can help homeowners capitalize on these shifting preferences.

Commercial and Office Real Estate

The office segment of the Luxembourg real estate market continues undergoing transformation. While demand remains strong, workspaces are being redesigned to adapt to new practices (teleworking, flex office). Companies seek more flexible offices promoting employee well-being and meeting environmental requirements.

Commercial real estate (retail) faces challenges related to inflation and e-commerce competition, but consumption continues recovering. There is also development of logistics buildings on the periphery to support online commerce.

Challenges and Opportunities for the Future

Sustainability Issues and Energy Transition

Energy transition and environmental requirements represent both challenge and opportunity for the Luxembourg real estate market. New constructions must comply with strict energy standards (AAA mandatory since 2017), while existing stock requires significant renovations.

With 65% of new Luxembourg real estate market listings carrying Class A ratings, the transition to sustainable building is well underway. This shift influences land use planning, architecture, and construction methods, with emphasis on low-carbon buildings and sustainable materials.​

The Klimabonus subsidy program continues supporting energy efficiency improvements, covering up to 62.5% of renovation costs for buildings older than 10 years, making sustainability upgrades financially accessible.​

Accessibility and Affordable Housing

Housing accessibility remains a major challenge for the Luxembourg real estate market. Despite the 2023-2024 price correction, housing costs represent a significant portion of household budgets. Tenants in the private market can spend up to 37-40% of income on rent, well above the 30% threshold generally considered reasonable.

Development of affordable and social housing is a priority, with objectives to neutralize land costs allowing housing access for low and middle-income households. Understanding rental deposit requirements and rental charges and costs helps tenants navigate the market.

Innovation and Digitalization

Digitalization is transforming the Luxembourg real estate market sector, with development of new technologies for construction, property management, and marketing. Virtual tours, BIM (Building Information Modeling), and intelligent building management solutions are becoming widespread.

According to OECD data, Luxembourg’s digital infrastructure supports these innovations, contributing to improved sector efficiency and meeting consumer expectations for transaction transparency and simplicity.

For sellers, understanding home staging presentation secrets and following a comprehensive property sale checklist helps maximize property appeal in this digital-first environment.

Conclusion: Luxembourg Real Estate Market Outlook

The Luxembourg real estate market has transitioned through correction to strong recovery during 2025, after several years of exceptional growth. Transaction volumes surged 49% in 2024, prices stabilized at €8,670/m² in Q2 2025, and buyer confidence has returned, supported by declining interest rates and permanent homeownership incentives.​

Challenges remain numerous in the Luxembourg real estate market, particularly regarding:

• Housing accessibility and affordability
• Supply constraints (construction output halved since 2021)
• Environmental sustainability requirements
• Adaptation to new resident expectations

However, Luxembourg has important assets: a resilient economy, an attractive framework (permanent €40,000/person Bëllegen Akt), and political will to address housing challenges.

The Luxembourg real estate market remains attractive for investors and homebuyers in December 2025. Structurally high demand, linked to demographic and economic growth, should continue supporting the market medium and long-term, while promoting new housing forms better adapted to contemporary challenges.

Looking ahead to 2026, the Luxembourg real estate market outlook remains positive, with supply constraints likely supporting continued price stability or modest growth, while the permanent Bëllegen Akt credit provides ongoing accessibility support for primary residence buyers.

For personalized guidance on navigating the Luxembourg real estate market, including detailed analysis and professional support throughout your buying, selling, or investment journey, contact zeas.immo. Our expertise in the Hesperange area and broader market ensures you receive the insights needed for successful real estate decisions.