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Third of Luxembourg homeowners are mortgage-free

Third of Luxembourg homeowners are mortgage-free

by Heledd PRITCHARD 3 min. 26.08.2021 From our online archive
While a third lives mortgage-free, those reimbursing the bank spend more than third of disposable income on mortgage
Apartments in the Cloche d'Or area of Luxembourg City
Apartments in the Cloche d'Or area of Luxembourg City
Photo credit: Lex Kleren

A third of Luxembourg homeowners do not have a mortgage despite sky-high property prices in the country, the finance and housing ministers said on Wednesday.

A total of 33% of people who owned a house or a flat in 2018 were mortgage-free, another 33% payed a mortgage, 25% were tenants and the remainder were in social housing, Pierre Gramegna and Henri Kox said in response to a parliamentary question.

The figures come from a study carried out by Luxembourg’s housing research body, Observatoire de l’Habitat, and are the latest to date. People without a mortgage spend just €362 a month on average on charges related to housing, while those repaying a mortgage fork out close to €2,000, the study shows.

While a third lives mortgage-free, those who do have a loan on their property are spending, on average, more than a third of their disposable income on their mortgage, Luxembourg’s financial watchdog, the CSSF, said earlier this month.  

"It appears that on average around 39% of the annual disposable income is dedicated to debt repayment", the report stated.

People were taking out mortgages to cover nearly 78% of their property's price in the first semester of 2020 - an increase of more than 4 percentage points in one year, the CSSF said. A third of all new loans taken out during that period reached above 90%, the report noted based on surveys. 

Sore point

Luxembourg’s property prices have become an increasingly sore point as some residents are forced to move over one of the three borders to be able to get a foot on the property ladder. Housing costs in the Grand Duchy are 70% higher than the European Union average, the EU’s statistics office said in June, after prices had risen by almost 17% last year. This was the steepest annual increase across the bloc, with an EU average growth of 6.1%.

The trend has been on the up for a few years in Luxembourg, growing by 7% in 2018 and 10% in 2019. Property prices have almost doubled in the decade between 2010 and 2020, Eurostat said last year.

Much of the speculation comes from the fact that land which could be built on stands empty because the owners do not want to sell, knowing it is a safe investment. Although Luxembourg has enough land to build the between 50,000 and 80,000 housing units, most of it is owned by private individuals, who hold 65% of the constructible land and 75% of the surface area that only needs a simple building permit. Of the buildable land that is owned by private individuals, 16,000 private owners hold close to three-quarters of the total. 

A total of 71% of people in Luxembourg own their home and more than half live in a detached or semi-detached house, Eurostat said. Those without a mortgage are, on average, at least 65 years old whereas those still paying their debt are on average 50 years or younger, the Observatoire de l’Habitat study shows.

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