Luxembourg with Highest Housing Prices in European Union Sees Downturn
Housing prices in Luxembourg have made a sharp downturn in the second quarter of 2023 after the Central Bank of Luxembourg announced an increase in interest rates for mortgage and consumer loans to 3.9%. The data shows a serious trend reversal in one of Europe’s most unaffordable housing markets. As the growth rate of the price of property started slowing at the end of 2022 and turned into negative digits this year, the local housing market started experiencing a boom in prices for rental. Although this trend may be related to the Grand Duchy’s reforms from October, most analysts point to interest rates as the driver of the shift. Luxembourg has one of the highest housing prices in the European Union – a condition that has created a lot of problems for the small landlocked country. One of the issues is that almost half of Luxembourgish workers actually commute from France, Belgium and Germany every day. This situation has created so-called housing refugees, as a lot of these workers are Luxembourgish nationals, who have been priced out of their home country. In turn, however, this movement of people looking for housing has caused a spill over effect in border regions of neighbouring countries. The report shows that, in the second quarter of 2023, average apartment prices have gone down by 7.3% while with houses that number is 5.5%. This followed a growth slowdown that started in the middle of 2022, as the war in Ukraine intensified and the EU started spiralling into a cost of living and energy crisis. However, the Luxembourgish housing market came down from a record high, as property prices frequently grew in double-digit numbers over the pandemic years. In the first quarter of 2022, apartments and houses saw more than a 10% rise in value. The trend only turned at the start of 2023. In the West region, the drop was the most dramatic, as apartments devalued by 14.1%, while houses dropped by 5.6%. In the central region, holding the city of Luxembourg, apartment prices fell by 4.2%, while the price of houses dropped by 13.9% and the average price came to around 1,041 million. In contrast, average rent prices have continued to rise steadily through the last two years, starting off at a modest 2.7% for apartments and 2.4% for houses at the beginning of 2022. That number changed dramatically in the latter half of last year, which saw a 14.2% and 12.8% increase in the third and fourth quarters. 2023 has not managed to bring much relief for renters as the first trimester with atHome.lu registering an 8.3% increase for apartments and 11.8% for houses. The average rent in central Luxembourg is now a staggering 2,118 euros, closely matched by the rents in the Western region.
Tags : housing prices Luxembourg downturn Central Bank of Luxembourg mortgage consumer loans trend Europe unaffordable housing markets growth rate property