Real estate prices in Luxembourg are finally coming down

Researchers say that in turn, rental prices are rising. Home prices in Luxembourg fell sharply in the second quarter of 2023 after Luxembourg's central bank announced it was raising interest rates on mortgages and consumer loans to 3.9%. The data comes from atHome.lu, one of the largest real estate websites in the country, and shows a major trend change in one of Europe's most unaffordable housing markets.

As the pace of real estate price growth began to slow in late 2022 and turned negative this year, the local real estate market began to experience an uptick in rental prices. While this trend can be attributed to the Duchy of October reforms, most analysts point to interest rates as the driving force behind the shift. Luxembourg has some of the highest housing prices in the European Union, a condition that has created many problems for this small inland country. One of the problems is that almost half of Luxembourg's workers move in daily from France, Belgium and Germany. This situation has created what are known as housing refugees, as many of these workers are Luxembourg citizens who have been displaced from their home country. In turn, this movement of people looking for housing has led to an overflow effect in the border regions of neighboring countries.

Buying Prices The report shows that in the second quarter of 2023, the average value of apartments fell by 7.3%, while for houses the number was 5.5%. This followed a slowdown that began in mid-2022 as the war in Ukraine escalated and the European Union began to plunge into a living standards and energy crisis.

Rental Prices In contrast, average rental prices have continued to rise steadily over the past two years, starting at a moderate 2.7% for apartments and 2.4% for homes in early 2022. That number changed dramatically in the second half of last year, with increases of 14.2% and 12.8% in the third and fourth quarters. 2023 didn't bring much relief for renters, as atHome.lu recorded increases of 8.3% for apartments and 11.8% for homes in the first trimester. The average rent in central Luxembourg now stands at a staggering €2,118, almost comparable to rents in the western region, which stand at €2,005.