Property prices in Luxembourg are finally starting to decline.

Researchers say that, in turn, rental prices are rising. Housing prices in Luxembourg sharply decreased in the second quarter of 2023 after the Central Bank of Luxembourg announced an increase in interest rates on mortgage and consumer loans to 3.9%. The data came from a report by one of the largest real estate websites in the country, atHome.lu, and shows a significant shift in trends in one of the most unaffordable housing markets in Europe.

Since the pace of real estate price growth began to slow down at the end of 2022 and turned negative this year, the local housing market has started to experience a rental price boom. Although this trend may be linked to the Grand Duchy's reforms since October, most analysts point to interest rates as the factor that triggered the shift. Luxembourg has some of the highest housing prices in the European Union, a condition that has created many problems for this small sovereign country. One of the issues is that nearly half of Luxembourg's workers commute daily from France, Belgium, and Germany. This situation has led to so-called "housing refugees," as many of these workers are Luxembourg citizens who have been forced to leave their home country due to high housing prices. In turn, this movement of people seeking housing has caused a spillover effect in the border regions of neighboring countries.

Prices for purchase

• The report shows that in the second quarter of 2023, the average price of apartments decreased by 7.3%, while the price of houses fell by 5.5%. This followed a slowdown in growth that began in mid-2022, when war broke out in Ukraine and the European Union started to plunge into a cost of living and energy crisis.

Rental prices

• In contrast, average rental prices have continued to rise steadily over the past two years, starting with a modest 2.7% for apartments and 2.4% for houses at the beginning of 2022. This figure changed dramatically in the second half of last year, with increases of 14.2% and 12.8% in the third and fourth quarters, respectively. The year 2023 has not brought much relief for tenants, as atHome.lu reported an increase of 8.3% for apartments and 11.8% for houses in the first quarter. The average rent in central Luxembourg now stands at a staggering €2,118, which is almost comparable to rental prices in the western region, which are €2,005.