Trends in the Luxembourg real estate market
A price per m² still on the rise
Luxembourg continues to attract an active population in search of places to live, but also a high-end clientele. They are looking for a privileged and secure living skeleton. If the average price of an old apartment was around 5.000€/ m ² at the end of 2017, we exceed today the 10.400 euros to the m2 in national average of housing. After having been quoted at 6.300€/ m ² for the new agreements, one arrives today at prices beyond 15.000 euros/ m2. In Luxembourg, parking lots cost around 90,000 euros, and even more than 130,000 euros in certain areas of the city center.
Location, a key factor
There are of course disparities in real estate prices in the Grand Duchy. The Canton of Luxembourg remains without question the most expensive. The average budget for the purchase of a house is more than 1,000,000 euros, which is twice as much as for a fellowship in the north of the territory. The further away from the city of Luxembourg, the more affordable the prices.
The prices per square meter in the canton of Luxembourg are on average 9.203€/sqm in new and 8.495€/sqm in old. These are to be compared with the prices in the north of the country at 5.227€/ m ² in the new and 4.424€/ m ² in the old. Between the two, prices decrease between the region of Capellen/Mersch, the eastern region and the region of Esch-sur-Alzette.
Regarding the houses, it will be necessary to count on average 1.207.225€ to acquire a house in the canton of Luxembourg, 848.777€ on Capellen/ Mersch and 563.470€ in the north, that is to say less than the half by fellowship to the capital.
Differentiated prices according to the type of housing sought
The surface or the type of housing are determining elements for the prices. Overall, prices per square meter decrease with the size of the property. It is true that the small shells play the game of the investors who pull the market upwards.
An apartment under construction is subject to a 15 to 20% premium compared to an old apartment of equivalent size and located in the same area. However, we note today in 2022, that investors are beginning to lose interest in new properties in favor of older ones. The returns are indeed more interesting and the delays of availability of the goods less long. With Covid, construction sites are experiencing delays that are difficult to resolve due to a lack of raw materials.
Land prices have clearly contributed to the rise in new home prices. This increase is all the more important in urban areas. On average, the price of housing has increased by between 2010 and 2019, while the price of building land has seen an annual addition over the same period.
The government is currently looking for new measures to give oxygen to a real estate market lacking in supply.
Crops are now being grown to increase the share of multi-family buildings or two-family homes versus single-family homes. Only 15 out of more than 100 cultures have a majority of their housing stock in apartments. Among them, the top triad with the city of Luxembourg 80 apartments, Esch-sur-Alzette and Hespérange. Specifically, the stock of single-family homes, largely represented with buildings with residential operations in 2019, is depressed. The share of apartment buildings in total housing construction is increasing. They now represent more than 16% of the housing stock since 2001, compared to less than 7% before 1919.
But when we talk about a population of more than 1 million people in 2060, what are the prospects for the future?
In order to prepare the country for these new residents, depression of housing size could be considered to increase the number of offerings. Legislation could also evolve to allow for higher occupancy rates, such as the placement of unoccupied rooms.
But today it is mainly a question of seducing owners to free up land, while they have no interest in seeing prices fall. According to a recent study by the Observatoire de l’habitat, 84% of potentially buildable land is owned by about 50 individuals and private companies. The next finance laws should be made in this sense.