Luxembourgh Times

Housing prices continue to cool, property website says

The north of Luxembourg saw the largest price hike and was the only region to see a double-digit increase for existing buildings

New flats being built in Luxembourg

New flats being built in Luxembourg © Photo credit: Gerry Huberty

Deputy editor-in-chief  

Housing prices continued to cool between April and June, with prices increasing by 8% during that period, down from the 10.5% increase seen in the first three months of the year, property website atHome said on Wednesday.

The average cost of buying an existing property rose by just under 9% while the price of new-builds increased by 6%. The main reason for the larger increase in older property prices was the spike in the cost of existing houses, said atHome, which based its report on asking prices and transactions during the second quarter.

The north of the country saw the largest price hike at 17% for existing properties and 24% for new construction. It was the only part of Luxembourg to see a double-digit increase for existing buildings. Houses alone – excluding flats – increased by 19% in the north.

In and around the capital city in central Luxembourg, existing buildings increased by 6% and new-builds by 0.2%.

Existing apartments are the most popular among first-time buyers and the price of such property increased the most in the west of the country, by 16% on average, atHome data showed.

The cost of newly built houses and apartments varied hugely according to the region. New flat prices increased 13% in the south and 3% in the centre but fell -7% in the east. The price of new houses decreased in the centre but increased 21% in the west and 30% in the north.

Searching outside the capital

Many buyers are now searching outside the capital, in particular areas which will be accessible by tram or which have a better road link than in the past, real estate experts previously told the Luxembourg Times.

People have become more picky since the pandemic because they spend more time at home and are willing to compromise on location and be further away from their place of work in exchange for more square metres and outside space, Robby Cluyssen, residential director at real estate agency JLL, said previously.

Housing prices have increased by around 12% to 15% every year since 2018, reaching a maximum of 17% in 2020. House prices jumped by more than 10% in the first quarter of this year compared to 2021, according to figures published last month by the Observatoire de l’Habitat, which carries out housing research for the government.

Real estate agents and property developers have predicted an annual rise of between 3% and 5% this year, atHome said in a separate prediction in April.

Many people have stopped looking for a home to buy and some have had to reconsider their budget as a result of mortgage rate rises, Yann Gagéa, head of mortgage brokers at atHomeFinance, said in a press release on Wednesday.

Covid and the war in Ukraine are key drivers behind the slowdown, experts said. The cost of building materials such as wood and steel has soared since the start of the Covid-19 outbreak and risen even further since the war broke out, with materials costing up to 20% more than before the pandemic.

Inflation, mortgage rates

Inflation has accelerated in recent months at its fastest pace in decades around the world, leading central banks to raise interest rates and making mortgages more expensive.

Compared with the beginning of January, people now have to spend €875 more each month on a fixed-rate 30-year mortgage of €800,000, Gagéa said.

Homeowners in Luxembourg are eager to put their properties on the market sooner rather than later as they fear prices could slow over the coming years, real estate experts have said.