RTL Today – Housing Observatory: Existing house prices are falling sharply
The Luxembourg real estate market continues to see price declines, albeit with varying degrees of impact across different sectors.
The latest data from the Housing Monitor, published on Tuesday, highlights these ongoing trends.
It is worth noting that the largest decline in prices was observed in the category of existing homes. During the second quarter of 2023, the Housing Observatory recorded a significant decline of 13.6% in existing house prices.
Conversely, existing apartments saw a more moderate decline, with prices falling by 4.5%.
A surprising turn of events was observed in the new apartment category, where prices managed to rise despite a sharp decline in activity (-63.2%), equivalent to an increase of 2.2%.
According to the Housing Observatory, “the majority of developers would rather wait and not sell their planned properties than reduce prices.” This strategic approach has contributed to higher prices in the new construction market. However, the overall hedonic index of house sale prices in the Grand Duchy saw a decline of 6.4%.
It should be noted that these price trends relate to notarized deeds registered in the second quarter of 2023, with most signed before the end of April 2023. As a result, these numbers may not necessarily reflect the current status of property prices. market.
Real estate sales are declining significantly
Between May and August, a total of 869 apartments were sold, representing a significant decrease in sales volume. When looking at transactions for all apartments, including existing properties and those currently under construction, the volume saw a significant decline of 43.4%. This trend, as shown in the report, has been continuing over the past two years but has intensified since early 2023.
Several factors may contribute to this decline, most notably high interest rates. It seems that investors are reducing their investments in new apartments due to the impact of high interest rates. At the same time, high interest rates also pose challenges for landlords. In addition, there is still a sense of uncertainty regarding construction costs, which further affects market dynamics.
The downward trajectory in sales extends beyond apartments, affecting homes as well. Specifically, there was a sharp 46.8% decline in home sales compared to the second quarter of 2022. During these four months, a total of 421 homes changed hands. In contrast, before the COVID-19 pandemic, the average number of home sales during this period was 942, more than doubling.
The decline in sales figures also extends to construction land, where only half the number of transactions were recorded in the second quarter of 2023 compared to the same period in 2022.
After a series of successive increases, the rental market seems to have found some stability in the second quarter of 2023. According to Housing Observatory calculations, there was a modest rise of 0.2% compared to the previous quarter.
However, a broader perspective over the course of a year reveals a different story. When comparing current rents with those of the previous year, the increase goes from almost stagnant to a more significant percentage of +6.7%.
This, of course, may pose challenges for anyone planning to rent an apartment or house in the Grand Duchy in the coming months, especially since the situation is unlikely to change until the sales market improves.