One year after the Frieden government made housing and support for the construction sector a national cause, the situation on the ground remains stalled. It’s hard to get things moving again, particularly in the new-build market. The six-month extension of housing subsidies “so as not to break the momentum,” announced at the end of a cabinet meeting on 6 December 2024, bears witness to the fact that the patient remains on a drip.
How has the property market evolved over the past year? At the end of 2023, the increase in the price of real estate had reached 120% over 10 years and that of rents 107%. This growth was reputed to be infinite. But with the help of the covid pandemic and Russia’s full-scale war against Ukraine, the economy has already turned the corner. According to the Housing Observatory, from the third quarter of 2022 to the third quarter of 2023, the number of sales fell by 31.9% for existing flats, 47.3% for existing houses, 56.4% for building land and finally 59.9% for flats under construction.
At the same time, the national statistics bureau Statec reported a 13.6% fall in sales prices over the period across all segments of activity: -7.7% for flats under construction, -12.3% for existing flats and -18.7% for existing houses.
A stabilisation rather than a recovery
A little over a year later, at the end of the fourth quarter of 2024, the Housing Observatory reported an upturn in activity on the existing housing market and a stabilisation in selling prices. On the existing homes market, the number of transactions involving existing homes is returning to pre-crisis standard levels (2017-2021). Over one year, the increase in transactions reached 108.2%. The increase for existing homes was 77.2%. In this segment, we are approaching the pre-crisis level of 2022.
Whilst activity is returning to normal, the market for flats under construction (vente en l’état futur d'achèvemen, VEFA) is still lagging behind. Although activity rose by 272.6% over the year, the number of transactions was barely half the average pre-crisis level. This increase was driven by sales of 395 units in the fourth quarter. For the year as a whole, there were 789 sales.
This market remains dependent on public purchasing programmes. Initially endowed with a budget of €170m, the government’s VEFA project acquisition programme has been allocated a further €480m for the period 2024-2028 to acquire a total of 980 homes. By the end of September 2024, 152 homes had been acquired through this programme, according to finance minister 
Although prices are stabilising, they are stabilising at a high level. According to athome.lu, the average price per square metre in sales ads in the fourth quarter of 2024--nationwide--was €5,707 for existing houses, €7,783 for existing flats and €9,696 for new flats.
The Frieden government’s three fronts
Whilst refusing to commit to a quantified target in terms of housing per year in order to absorb demographic flows and--ultimately--make housing affordable, prime minister 
According to the Chambre des métiers, the construction sector remains in a delicate situation, as can be seen by looking at the trend in the number of bankruptcies and employment. According to the national statistics bureau Statec, the crisis has cost the sector 2,000 jobs. For Creditreform, a company specialising in credit risk, the rise in insolvencies is set to continue over the long term, with the number expected to increase by 2025.
Land still in short supply
Regarding land availability, the issue of taxing unused land remains a hot topic. The Bettel government tabled a bill to this effect in October 2022. The bill aimed to combine property tax reform with combating the housing shortage by imposing heavier taxes on land held for speculation. The Frieden government decided to start from scratch on the issue, following the advice of the Council of State, which, in an opinion, deemed the submitted bill inconsistent and imprecise. During the State of the Nation address on 12 June 2024, the prime minister indicated that a bill would be presented to MPs by the end of the year. To date, MPs have not yet been notified.
They have, however, been referred to bill 7139A on ministerial reparcelling. The idea is to avoid blocking construction projects by being able to offer owners of building land an exchange rather than having to expropriate them if they block a project for a new neighbourhood or housing estate. This exchange could take place either amicably or following the intervention of the home affairs minister. Expropriation would then be reserved for public infrastructure projects.
Simplification and acceleration of procedures: first reforms
Simplification and acceleration are often-repeated demands from the construction sector. The government has responded to this demand by presenting an initial series of measures carried by three ministers: 
The government is expected to introduce further measures in the course of 2025. These include the introduction of the “co-living” concept; new national building regulations; revised procedures for general development plans (PAG) and special development plans (PAP), as well as the digitisation of procedures for general development plans and special development plans. Will this be enough to halt the decline in building permits? They have been falling steadily since 2021. The government has extended the life of these permissions from one to two years, renewable once.
The development of this indicator once all the bills and regulations mentioned above have been passed will be a key element in determining whether the Frieden government’s administrative simplification policy has borne fruit in the housing sector.
€505m
This is the amount of credits allocated to housing in the 2025 budget. A boost that follows that of the 2024 budget, i.e., €363.9m to which should be added the reduction of fiscal income of €130m due to the support measures for the construction sector announced on 31 January. Affordable housing is a sensitive point: it will be granted an envelope of €2bn over the period 2025-2028.
Rising rents
At the end of Q3 2023, Statec estimated rent increases at 4.1% for apartments and 4% for houses. These levels are in line with the 4% increase in consumer prices (+4%) over the same period. Twelve months later, the trend remains upward at +3.6% over 12 months for apartments, although there has been a slowdown compared to the previous year. At the end of the fourth quarter, this slowdown continues to be felt, with a year-on-year increase of “only” 2.6%.
This increase remains significantly higher than inflation measured by the IPCN (+0.8%). As for houses, the increase reached +12.1% over 12 months at the end of the third quarter of 2024. This trend reflects a very limited market--13% of rental announcements have been for houses since 2010 in Luxembourg, says the Housing Observatory.
Demography
Evolution of the housing offer
Evolution of yields
The government’s roadmap
- Adoption by the cabinet on 31 January 2024 of a six-month extension to the “Klimabonus Wunnen.” The financial aid scheme has been revised. Published in the Official Journal on 9 December 2024.
- On 7 February 2024, the cabinet adopts the package of measures relating to the recovery of the housing market. The package of measures combines individual aid, support for tenants on the private market and support for access to home ownership, support for the construction sector--i.e., strengthening the programme for the acquisition of off-plan projects--and investment in the creation of public affordable housing. In force.
- On 20 March 2024, the cabinet validated the bill setting the initial period of validity of building permits at two years instead of just one. Published in the Official Journal on 7 November 2024.
- On 20 March 2024, the government withdraws the part relating to the reform of the rent ceiling from the draft reform of the residential lease. Remaining in the reform are the provisions concerning shared ownership, the procedure for returning rental guarantees, the fair sharing of estate agency fees, the requirement for a written lease and the abolition of the concept of luxury accommodation. Published in the Official Journal on 25 July 2024. The issue of rent caps remains unresolved.
- On 2 October 2024, approval of the package of measures designed to speed up housing creation by providing for the implementation, in urbanised areas or areas intended to be urbanised, of various administrative simplification measures mainly relating to environmental protection. Bill 8449 tabled on 16 October 2024. In committee.
- On 9 December 2024, the government extends until 1 July 2025 the temporary tax measures, initially taken only for the year 2024. The following have been extended: the temporary increase in the “Bëllegen Akt” tax credit, the new “Bëllegen Akt” tax credit for investment in rental housing, the reduction in the capital gains tax rate to a quarter of the overall rate, the increase in the rate and duration of accelerated depreciation for housing built with a view to rental, and the immunisation of capital gains on property transferred on housing used for social rental management or belonging to energy performance class A+. Bill tabled in the Chamber of Deputies on 18 December 2024, passed on 2 April 2025 and awaiting dispensation from the second constitutional vote granted by the council of state.
- On 24 January 2025, the cabinet transcribed into draft laws and grand ducal regulations additional administrative simplification measures designed to facilitate and accelerate housing construction. These include: the revision of article 29 bis with the aim of creating more housing and more affordable housing; the introduction of the “silence is worth agreement” principle in two phases; the introduction of bagatelle limits for smaller-scale works; the revision of urban planning rules for economic activity zones; and the harmonisation and simplification of environmental instruction procedures. Currently in the submission process.
Evolution of interest rates
This article was written in French for the May 2025 issue of Paperjam magazine, published on 24 April. The content is produced exclusively for the magazine. It is published on the site to contribute to the full Paperjam archive. Click on this link to subscribe to the magazine.
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