Subsidised housing is also becoming unaffordable

Buyers are even shying away from houses and apartments put up for sale by the affordable housing builders SNHBM as high interest rates mean potential buyers are unable to take out expensive mortgages, the organisation said on Thursday.

SNHBM (Société Nationale des Habitations à Bon Marché) completed the construction of 289 homes in 2022, compared to 300 in 2021. From these finished dwellings, over a third - or 102 - are still on the market, the organisation said.

Rising construction costs have made housing more expensive. While a standard flat for sale cost an average of €4,233 per square metre last year, prices are now topping €5,000 per square metre, SNHBM representatives said at a press conference on Thursday.

High interest rates to combat soaring inflation, however, mean that potential buyers cannot afford the expensive mortgages required to pay for the dwellings.

Despite almost 9,000 interested buyers, some of the affordable housing did not sell, "which we have never seen before", said SNHBM director Guy Entringer on Thursday.

However, anyone who signs a purchase contract for a flat with SNHBM will not be subject to a price increase, said Annick Rock, president of the board of directors, during the press conference. "Rising construction or material costs are borne by SNHBM," Rock added.

Over the past few years property prices have been ballooning by double digits and Luxembourg has become a notoriously expensive place to become a home owner. The cost of buying a property jumped by 17% in 2020 alone and prices grew by an average of 11.4% in each year between 2017 and 2021.

As fewer people can afford to buy in Luxembourg, more are looking for a place to rent, which has pushed up rental prices across the country. The sharpest increase was in the central region of the country, an area which includes Luxembourg City, which saw a 10.6% rise in the first quarter of 2023 over a one-year period.

SNHBM is increasing its investments in rental housing up to 40% per project at the request of politicians, Rock said.

(Translation and additional reporting by Gabrielle Antar)

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